Nasdaq 100: Nvidia Earnings Key to Sustaining Tech Rally in Volatile Market

Market Holds Steady Ahead of Nvidia’s Crucial Earnings Report

U.S. stock indexes remained steady on Wednesday as investors awaited Nvidia’s quarterly earnings announcement, a pivotal event for gauging the sustainability of the broader tech and AI market rally.

At 13:55 GMT, the Dow Jones Industrial Average is trading 41340.34, up 89.84 or +0.22%. The S&P 500 Index is at 5621.93, down 3.87 or -0.07% and the Nasdaq 100 Index is trading 17668.65, down 86.17 or -0.49%.

Nvidia in Focus

Nvidia, set to report after market close, has seen its stock surge 159% in 2024. Investors are particularly interested in the company’s delivery schedule for its Blackwell chips and updates on AI demand. Despite the optimism surrounding Nvidia, some analysts, like Erin Browne from Pimco, suggest there’s still potential for upside surprises.

Mixed Results Across Sectors

 

While tech takes center stage, other sectors show mixed performance:

• Nordstrom advanced 3.9% after beating second-quarter earnings expectations.
• Ambarella jumped nearly 15% on positive revenue guidance.
• PVH, owner of Calvin Klein, slumped over 7% due to a disappointing outlook.
• Foot Locker dropped more than 5% following lackluster Q2 results.

Options Market Signals

Goldman Sachs analysis indicates that options traders expect a significant move in Nvidia’s stock post-earnings, with implied volatility suggesting a +/- 10% swing. This expectation exceeds the company’s four-quarter average of 7%.

Broader Market Considerations

Beyond Nvidia, several factors are influencing market sentiment:

• Warren Buffett’s Berkshire Hathaway sold over 24 million Bank of America shares.
• Lego reported a 13% revenue increase, outperforming publicly traded rivals.
• Piper Sandler advised caution, noting low trading volume could increase volatility.

Market Forecast

The market outlook remains cautiously optimistic but highly dependent on Nvidia’s performance. A strong earnings report from Nvidia could further fuel the tech-led rally, potentially pushing the S&P 500 higher given the company’s significant index weighting.

However, mixed results across other sectors suggest a more complex economic picture. Retail, in particular, shows both strengths and weaknesses, indicating uneven consumer spending patterns.

Investors should closely monitor Nvidia’s earnings, particularly its forward guidance, as it could set the tone for tech stocks in the near term. Additionally, upcoming inflation data and potential shifts in Federal Reserve policy will be crucial in determining overall market direction.

In the short term, we maintain a bullish outlook, primarily driven by the anticipated positive impact of Nvidia’s earnings. However, this optimism is tempered by the need for broader market participation and improvement in sectors beyond tech to sustain long-term growth.

Technical Analysis

The near-term direction of the E-mini Nasdaq-100 Index hinges upon trader reaction to the 50-day moving average at 19657.39.

Overtaking this intermediate-term trend indicator will be a sign of strength. The minor top at 20025.25 is a potential trigger point for an acceleration to the upside with 20983.75 the next major target.

On the flipside, a sustained move under 19657.39 will signal the presence of sellers. The minor pivot at 19167.50 is a potential trigger point for the start of a steep sell-off. The 200-day moving average at 18404.65 is the critical downside target.