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The latest quarterly earnings from AI darling Nvidia, and
Key inflation numbers in the euro area and Australia
Those two updates should keep global financial markets busy:
Gold's relentless climb to record highs and
A U.S. dollar under pressure as U.S. rate cut speculation build
Those are also in investors' sights.
Next are Reuters’ five world market themes, reordered for equity traders—
(1) Nvidia’s earnings will be the stock market highlight.
Investor enthusiasm for artificial intelligence could be tested when chipmaker Nvidia (NVDA - Free Report) reports earnings on Aug. 28th.
Nvidia’s chips are seen as the gold standard in the AI-space and its shares are up around 150% this year, helping to power the S&P 500 to record highs.
But the stock's stunning, multi-year run and the AI-mania have also drawn comparisons to the dot-com craze that imploded more than two decades ago.
Investors’ reaction to disappointing results from mega-cap names such as Alphabet (GOOGL - Free Report) and Tesla (TSLA - Free Report) last month suggests markets may not be in a forgiving mood, especially when valuations for many companies in the sector are stretched.
Data highlights meanwhile include Friday's U.S. Personal Consumption Expenditures (PCE) price index, a key inflation gauge tracked by the Federal Reserve.
(2) On Friday, the latest Eurozone inflation numbers come out.
August Eurozone inflation numbers on Friday will be key to European Central Bank policymakers deciding whether (or not) to cut rates in September.
The data, preceded by national releases starting on Thursday, follows a small but unexpected rise in July, highlighting a bumpy last mile in curbing inflation.
Headline inflation may ease as oil prices have fallen, but focus will remain on the core figure and the dominant services sector, where price growth remains stickier.
Any upside surprises may warrant caution, as traders have ramped up ECB rate cut bets in recent weeks. Focus has turned to growth risks, but Eurozone business activity showed surprising strength in August.
Traders fully price in another 25 basis point rate cut on Sept. 12, and see a high chance of two more moves after that by year-end.
(3) On Wednesday, Australia’s July inflation numbers land. Japan’s land Friday.
The stakes are high for the Reserve Bank of Australia (RBA), which has insisted that interest rates need to stay restrictive for an "extended period" since underlying inflation remains too high for comfort.
Wednesday's July inflation numbers could show headline inflation diving back into the RBA's 2-3% target band for the first time in three years.
And any signs that inflation pressures are abating could pile pressure on the central bank. It has become an outlier globally with a reluctance to lower rates while many peers look to kick off — or have already begun — easing cycles.
Investors are also hoping that Wednesday's data could provide some relief to consumer sentiment, which has taken a hit from the weight of steep borrowing costs.
Elsewhere, Tokyo's August inflation report on Friday potentially offers further clues on Japan's rate outlook.
(4) Where does the Euro go from here?
The euro is at its highest this year against the dollar, benefiting from recent ructions in global markets.
Diverging U.S. and euro area rate expectations are behind its gains. Traders price around 100 bps of Fed rate cuts by year-end, up sharply from before the latest U.S. payrolls data, while only fully pricing two more 25 bps ECB cuts.
The question is whether the euro, also at its highest on a trade-weighted basis on record, can sustain its momentum.
Germany's business activity contracted by more than expected in August, a negative sign for Europe's economic engine, while Eurozone wage growth slowed last quarter, supporting the case for an ECB September cut.
Euro bulls are a shy bunch, price action in recent years suggests. They may need more convincing of the euro's rebound before coming out in force.
(5) Gold prices remain a focus.
Gold has hit consecutive records since 2022, and has surged over 20% so far this year. Now $3,000 an ounce beckons.
The stars have aligned for the precious metal used primarily to preserve wealth during periods of heightened security risks and political and economic turmoil.
Russia's war on Ukraine triggered gold's rally in February 2022. Soaring commodity prices in the aftermath fueled inflation, which erodes the value of monetary assets.
Middle East tensions and uncertainty from the fast-approaching U.S. Presidential election have spurred further gains.
Reinforcing the buy bullion trade is the prospect of U.S. interest rate cuts, pressuring the U.S. currency and boosting gold's appeal. It has a negative relationship with the dollar.
But gold bulls should bear in mind the old adage that "nothing goes up in a straight line" because markets typically "buy the rumor, sell the fact.”
Zacks #1 Rank (STRONG BUY) Stocks
Here are three large-cap stocks, with a Zacks Growth score of A or D.
(1) JD.com (JD - Free Report) : This is a $27 a share Mainland China internet commerce stock, with a market cap of $42B. I see a Zacks Value score of A, a Zacks Growth score of A and a Zacks momentum score of A.
Image Source: Zacks Investment Research
JD.com, Inc. operates as an online direct sales company in China. The company, through its Website www.jd.com and mobile applications offers a selection of authentic products.
It offers computers; mobile handsets and other digital products, home appliances; automobile accessories; clothing and shoes; luxury goods including handbags, watches and jewelry, furniture and household products; cosmetics and other personal care items; food and nutritional supplements; books, e-books, music, movies and other media products; mother and childcare products; toys, sports and fitness equipment; and virtual goods.
JD.com, Inc. is based in Beijing, China.
(2) Royal Caribbean Cruises (RCL - Free Report) : This is a $163 a share leisure services stock, with a market cap of $40.6B. I see a Zacks Value score of A, a Zacks Growth score of A and a Zacks momentum score of B.
Image Source: Zacks Investment Research
Royal Caribbean is a cruise company.
It owns and operates three global brands: Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises. Additionally, it has investment in a joint venture with TUI AG, which operates the brand TUI Cruises and interest in the Spanish brand Pullmantur along with interest in the Chinese brand SkySea Cruises.
The company's cruise brands primarily serve the contemporary, premium and deluxe segments of the cruise vacation industry, which also includes the budget and luxury segments.
(3) Howmet Aerospace (HWM - Free Report) : This is a $97 a share engineering R&D stock, with a market cap of $39.4B. I see a Zacks Value score of F, a Zacks Growth score of B, and a Zacks momentum score of D.
Image Source: Zacks Investment Research
Howmet Aerospace Inc. engages in providing engineered solutions for customers in the transportation, gas turbine and aerospace (both defense and commercial) industries world wide.
It offers forged wheels under the Alcoa Wheels brand & surface treatment under the Dura-Bright brand. It also provides aerospace fastening systems, components used in jet engines and structural parts made of titanium used in defense and aerospace applications.
It has 4 reportable business segments:
Engine Products engages in manufacturing & providing investment castings including seamless rolled rings & airfoils as well as structural and rotating parts.
Fastening Systems manufactures & markets fasteners, fluid fittings, bearings, latches and installation systems.
Forged Wheels manufactures and markets forged aluminum trailer, truck and bus wheels, etc.
Key Global Macro
On Monday, U.S. durable goods orders for July come out. +4% m/m is expected. Ex-transports? That data should be up +0.1% m/m, down from +0.5% m/m in the prior reading.
On Tuesday, the U.S. Case-Shiller Home Price Index for June should be up +6.5% y/y, down from +6.8% y/y in the prior reading.
On Wednesday, EIA gas and crude oil stocks get updated.
Australia’s latest consumer inflation numbers come out.
On Thursday, Germany’s preliminary inflation rate comes out. +2.3% y/y was the prior reading.
U.S. initial jobless claims should be +242K, up from +232K the prior week.
The 2nd estimate for U.S. GDP in Q2 should be +2.8% y/y, above Q1’s +1.4% y/y number.
On Friday, the Euro Zone flash inflation rate for August comes out. +2.6% y/y was the prior reading.
Conclusion
Here is what Zacks Research Director Sheraz Mian wrote on NVDA on Aug. 23rd:
Nvidia is expected to bring in $0.63 in EPS on $28.2 billion in revenues, representing year-over-year gains of +133.3% and +109%, respectively.
Nvidia shares were hit hard in the market’s recent down draft, but have effectively recouped most of those losses. The stock has more than doubled this year and handily outperformed the Zacks Tech sector, the broader market, and the Mag 7 stocks.
The biggest driver of the stock’s performance from here onwards will be management guidance for the current and upcoming quarters, as well as the market’s assessment of the company’s ability to ramp up production of the Blackwell chips.
There have been speculations in the market that Nvidia is faced with production snags that can delay the product’s delivery schedule.
With the stock up more than +150% this year alone, most investors will assume that valuation must be really stretched already. The actual ground reality is not that simple.
Nvidia shares are currently trading at 40.2X forward 12-month EPS estimates. This is almost double the comparable multiple for the S&P 500 index of 21.5X.
Over the last five years, Nvidia shares have traded as high as 106.3X forward 12-month estimates, as low as 26.8X, and have a 5-year median of 50.7X.
Have an excellent trading week.
Warm Regards,
John Blank, PhD. Zacks Chief Equity Strategist and Economist
See More Zacks Research for These Tickers
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Nvidia, Nvidia, Nvidia: Global Week Ahead
In the Global Week Ahead:
Those two updates should keep global financial markets busy:
Those are also in investors' sights.
Next are Reuters’ five world market themes, reordered for equity traders—
(1) Nvidia’s earnings will be the stock market highlight.
Investor enthusiasm for artificial intelligence could be tested when chipmaker Nvidia (NVDA - Free Report) reports earnings on Aug. 28th.
Nvidia’s chips are seen as the gold standard in the AI-space and its shares are up around 150% this year, helping to power the S&P 500 to record highs.
But the stock's stunning, multi-year run and the AI-mania have also drawn comparisons to the dot-com craze that imploded more than two decades ago.
Investors’ reaction to disappointing results from mega-cap names such as Alphabet (GOOGL - Free Report) and Tesla (TSLA - Free Report) last month suggests markets may not be in a forgiving mood, especially when valuations for many companies in the sector are stretched.
Data highlights meanwhile include Friday's U.S. Personal Consumption Expenditures (PCE) price index, a key inflation gauge tracked by the Federal Reserve.
(2) On Friday, the latest Eurozone inflation numbers come out.
August Eurozone inflation numbers on Friday will be key to European Central Bank policymakers deciding whether (or not) to cut rates in September.
The data, preceded by national releases starting on Thursday, follows a small but unexpected rise in July, highlighting a bumpy last mile in curbing inflation.
Headline inflation may ease as oil prices have fallen, but focus will remain on the core figure and the dominant services sector, where price growth remains stickier.
Any upside surprises may warrant caution, as traders have ramped up ECB rate cut bets in recent weeks. Focus has turned to growth risks, but Eurozone business activity showed surprising strength in August.
Traders fully price in another 25 basis point rate cut on Sept. 12, and see a high chance of two more moves after that by year-end.
(3) On Wednesday, Australia’s July inflation numbers land. Japan’s land Friday.
The stakes are high for the Reserve Bank of Australia (RBA), which has insisted that interest rates need to stay restrictive for an "extended period" since underlying inflation remains too high for comfort.
Wednesday's July inflation numbers could show headline inflation diving back into the RBA's 2-3% target band for the first time in three years.
And any signs that inflation pressures are abating could pile pressure on the central bank. It has become an outlier globally with a reluctance to lower rates while many peers look to kick off — or have already begun — easing cycles.
Investors are also hoping that Wednesday's data could provide some relief to consumer sentiment, which has taken a hit from the weight of steep borrowing costs.
Elsewhere, Tokyo's August inflation report on Friday potentially offers further clues on Japan's rate outlook.
(4) Where does the Euro go from here?
The euro is at its highest this year against the dollar, benefiting from recent ructions in global markets.
Diverging U.S. and euro area rate expectations are behind its gains. Traders price around 100 bps of Fed rate cuts by year-end, up sharply from before the latest U.S. payrolls data, while only fully pricing two more 25 bps ECB cuts.
The question is whether the euro, also at its highest on a trade-weighted basis on record, can sustain its momentum.
Germany's business activity contracted by more than expected in August, a negative sign for Europe's economic engine, while Eurozone wage growth slowed last quarter, supporting the case for an ECB September cut.
Euro bulls are a shy bunch, price action in recent years suggests. They may need more convincing of the euro's rebound before coming out in force.
(5) Gold prices remain a focus.
Gold has hit consecutive records since 2022, and has surged over 20% so far this year. Now $3,000 an ounce beckons.
The stars have aligned for the precious metal used primarily to preserve wealth during periods of heightened security risks and political and economic turmoil.
Russia's war on Ukraine triggered gold's rally in February 2022. Soaring commodity prices in the aftermath fueled inflation, which erodes the value of monetary assets.
Middle East tensions and uncertainty from the fast-approaching U.S. Presidential election have spurred further gains.
Reinforcing the buy bullion trade is the prospect of U.S. interest rate cuts, pressuring the U.S. currency and boosting gold's appeal. It has a negative relationship with the dollar.
But gold bulls should bear in mind the old adage that "nothing goes up in a straight line" because markets typically "buy the rumor, sell the fact.”
Zacks #1 Rank (STRONG BUY) Stocks
Here are three large-cap stocks, with a Zacks Growth score of A or D.
(1) JD.com (JD - Free Report) : This is a $27 a share Mainland China internet commerce stock, with a market cap of $42B. I see a Zacks Value score of A, a Zacks Growth score of A and a Zacks momentum score of A.
Image Source: Zacks Investment Research
JD.com, Inc. operates as an online direct sales company in China. The company, through its Website www.jd.com and mobile applications offers a selection of authentic products.
It offers computers; mobile handsets and other digital products, home appliances; automobile accessories; clothing and shoes; luxury goods including handbags, watches and jewelry, furniture and household products; cosmetics and other personal care items; food and nutritional supplements; books, e-books, music, movies and other media products; mother and childcare products; toys, sports and fitness equipment; and virtual goods.
JD.com, Inc. is based in Beijing, China.
(2) Royal Caribbean Cruises (RCL - Free Report) : This is a $163 a share leisure services stock, with a market cap of $40.6B. I see a Zacks Value score of A, a Zacks Growth score of A and a Zacks momentum score of B.
Image Source: Zacks Investment Research
Royal Caribbean is a cruise company.
It owns and operates three global brands: Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises. Additionally, it has investment in a joint venture with TUI AG, which operates the brand TUI Cruises and interest in the Spanish brand Pullmantur along with interest in the Chinese brand SkySea Cruises.
The company's cruise brands primarily serve the contemporary, premium and deluxe segments of the cruise vacation industry, which also includes the budget and luxury segments.
(3) Howmet Aerospace (HWM - Free Report) : This is a $97 a share engineering R&D stock, with a market cap of $39.4B. I see a Zacks Value score of F, a Zacks Growth score of B, and a Zacks momentum score of D.
Image Source: Zacks Investment Research
Howmet Aerospace Inc. engages in providing engineered solutions for customers in the transportation, gas turbine and aerospace (both defense and commercial) industries world wide.
It offers forged wheels under the Alcoa Wheels brand & surface treatment under the Dura-Bright brand. It also provides aerospace fastening systems, components used in jet engines and structural parts made of titanium used in defense and aerospace applications.
It has 4 reportable business segments:
Engine Products engages in manufacturing & providing investment castings including seamless rolled rings & airfoils as well as structural and rotating parts.
Fastening Systems manufactures & markets fasteners, fluid fittings, bearings, latches and installation systems.
Engineered Structures manufactures & markets mill products, titanium ingots, titanium forgings, extrusions forming, aluminum forgings, aluminum machined components and other products.
Forged Wheels manufactures and markets forged aluminum trailer, truck and bus wheels, etc.
Key Global Macro
On Monday, U.S. durable goods orders for July come out. +4% m/m is expected. Ex-transports? That data should be up +0.1% m/m, down from +0.5% m/m in the prior reading.
On Tuesday, the U.S. Case-Shiller Home Price Index for June should be up +6.5% y/y, down from +6.8% y/y in the prior reading.
On Wednesday, EIA gas and crude oil stocks get updated.
Australia’s latest consumer inflation numbers come out.
On Thursday, Germany’s preliminary inflation rate comes out. +2.3% y/y was the prior reading.
U.S. initial jobless claims should be +242K, up from +232K the prior week.
The 2nd estimate for U.S. GDP in Q2 should be +2.8% y/y, above Q1’s +1.4% y/y number.
On Friday, the Euro Zone flash inflation rate for August comes out. +2.6% y/y was the prior reading.
Conclusion
Here is what Zacks Research Director Sheraz Mian wrote on NVDA on Aug. 23rd:
Nvidia is expected to bring in $0.63 in EPS on $28.2 billion in revenues, representing year-over-year gains of +133.3% and +109%, respectively.
Nvidia shares were hit hard in the market’s recent down draft, but have effectively recouped most of those losses. The stock has more than doubled this year and handily outperformed the Zacks Tech sector, the broader market, and the Mag 7 stocks.
The biggest driver of the stock’s performance from here onwards will be management guidance for the current and upcoming quarters, as well as the market’s assessment of the company’s ability to ramp up production of the Blackwell chips.
There have been speculations in the market that Nvidia is faced with production snags that can delay the product’s delivery schedule.
With the stock up more than +150% this year alone, most investors will assume that valuation must be really stretched already. The actual ground reality is not that simple.
Nvidia shares are currently trading at 40.2X forward 12-month EPS estimates. This is almost double the comparable multiple for the S&P 500 index of 21.5X.
Over the last five years, Nvidia shares have traded as high as 106.3X forward 12-month estimates, as low as 26.8X, and have a 5-year median of 50.7X.
Have an excellent trading week.
Warm Regards,
John Blank, PhD.
Zacks Chief Equity Strategist and Economist