Stocks Week: Nvidia Shock, S&P 500 Up 2.5%
Weekly review: S&P 500 +2.5%, chip stocks under pressure, US yields above 5%. Nvidia reports earnings on Tuesday.
Key Takeaways
- The S&P 500 closes the week up about 2.5 percent despite Nvidia turmoil.
- The SOX semiconductor index is down 15.2 percent since October 28.
- Ten-year US yields climb above 5 percent; the Fed is likely to hike in December.
Two markets, one week: while the broad US index gains, the chip sector sheds substantial value. Behind the contrast are a leadership change at Nvidia and sharply rising bond yields. The next test comes Tuesday, when Nvidia reports quarterly results.
Yields climb, the Fed moves closer
The bond market set the tone. Ten-year US Treasuries yielded roughly 4.82 percent on November 6 and now yield 5.13 percent. Two-year notes moved from 4.46 to 4.855 percent. According to Finanzmarktwelt, Bloomberg strategists see room for further losses.
Finanzmarktwelt points to stubborn inflation as the driver. October consumer prices surprised to the upside, and Fed official Christopher Waller even called a 50-basis-point hike conceivable. Futures markets put the odds of a December move at about 89 percent. Friday's producer prices changed little: +0.3 percent month over month against an expected +0.4 percent, and in line with forecasts at the core level. Year over year, prices remain up 6.5 percent.
Europe fared better. The DAX (Germany's main blue-chip index) set a record high of 27,001 points on Thursday and closed at 26,816. According to Finanzmarktwelt, capital is rotating out of richly valued American tech stocks into industrials; Siemens added strong results.
How Nvidia drags chip stocks along
Midweek, Jensen Huang announced his departure from Nvidia's helm after reports about his closeness to an alleged Chinese spy had increased the pressure. Colette Kress is leading the company on an interim basis. At Thursday's US open the stock slid from $173.73 to below $149, a discount of 14.2 percent. Retail investors stepped in and pushed the price back to $166 within hours; Vanda Research cites $111 million in net purchases in the first half hour.
Friday brought a second wave of selling. The SOX fell 6.1 percent, Nvidia 4.4 percent, Broadcom 6.9 percent and Intel 6.3 percent. AMD was hit hardest at minus 10.3 percent, since Lisa Su is seen as a candidate for Huang's job. In addition, House Speaker Mike Johnson is calling for tighter chip export controls toward China. Measured against the October high of $243, Nvidia is far off; since October 28 it has lost 26.6 percent.
Money keeps flowing, Goldman sees room
Retreat looks different: in Germany, 49.8 billion euros flowed into equity ETFs in the first three quarters, about half again as much as a year earlier. Worldwide, Bank of America counts $1.4 trillion of inflows into equity funds, $656 billion of it into American ones. Hartnett's team concludes that many investors are only skeptical in sentiment, and hardly anyone is actually betting on falling prices.
Goldman Sachs expects the S&P 500 at 8,700 points in twelve months, which would be a 14 percent gain. The Nasdaq 100 trades about 9 percent below its October peak, and by Goldman's reading the large cloud companies are attractively valued. At the same time, earnings growth for S&P companies is expected to flatten from 36 to 11 percent. Seeking Alpha ranks the weekly gain of 2.5 percent as the strongest week since August. The picture: the overall market is holding, the risk sits in AI stocks.
What momentum says
Momentum signals a bearish state for Nvidia (NVDA) on the daily timeframe at a price of $162.85, and likewise on the weekly timeframe. No data is available for the hourly and four-hour charts.
Outlook
Nvidia reports results on Tuesday, the first test after the change at the top. Investors will focus mainly on the outlook and any comments about China.