The market rally this year, powered by enthusiasm over artificial intelligence’s application to business and the economy, could get a boost in the week ahead if Nvidia’s quarterly results suggest the future remains bright for tech stocks geared to AI. Next week will also bring fresh comments from Federal Reserve Chairman Jerome Powell, who makes his annual address at the central bank symposium at Jackson Hole, Wyoming. Investors will parse through his comments for insight into the Fed’s view of its inflation fight and future monetary policy. The week ahead will “revolve around three things,” Infrastructure Capital Management CEO Jay Hatfield remarked on the week ahead. “Nvidia’s earnings, Nvidia’s earnings and, to a lesser degree, Jackson Hole.” The major averages posted another losing week on Friday. The Dow Jones Industrial Averages notched its worst week since March. Meanwhile, the S & P 500 and the Nasdaq Composite each fell for a third straight week. The S & P posted its longest weekly slide since February, while for the Nasdaq it’s the longest since December. Higher bond yields and continued weakness out of China weighed on investors during what is a historically lackluster time of year for markets. This week, the 10-year U.S. Treasury yield touched its highest since 2008 as some investors fretted over the Treasury’s $1 trillion funding requirement this quarter, this month’s downgrade of the U.S. credit rating at Fitch and the chance the Federal Reserve may raise rates once more in 2023. Higher yields weighed especially on interest rate-sensitive equities such as tech, utilities and REITs. “If that continues, I think it causes some disruptions in the market as people try to reposition for what looked to be just a higher trading range than they’d anticipated,” BMO Wealth Management’s Yung-Yu Ma said. Nvidia earnings Many investors expect Nvidia will beat expectations for the second quarter when it reports results next Wednesday . In May, Nvidia forecast revenue of about $11 billion, plus or minus 2%, in the second quarter or more than than 50% above analysts’ expectations of $7.15 billion. Nvidia shares are already higher this year by roughly 200%. Even so, analysts have been increasingly bullish on the leading AI beneficiary ahead of its results. This week, Rosenblatt Securities’ analyst Hans Mosesmann hiked his price target on the stock to a Street high $800 , representing roughly 84% upside from where Nvidia closed Friday. In fact, of the 51 analysts who have ratings on Nvidia, 44 consider the stock either a buy or a strong buy, according to CNBC’s analyst consensus tool. More important for investors will be Nvidia’s guidance for third quarter numbers. According to Infrastructure Capital Management’s Hatfield, a surprisingly strong forecast could boost the stock and other tech names, and further brighten enthusiasm. “The guide is going to be kind of 98% of what drives the stock and the markets,” Hatfield said. More commentary from Jackson Hole If Nvidia is the key microeconomic event next week, Jackson Hole will dominate macroeconomic discussion. Powell delivers his address at the annual central bank forum hosted by the Kansas City Fed next Friday morning. In the past, the symposium has been where Powell could signal a shift in tone. Last year, for example, he highlighted the “pain” that higher rates would inflict on the economy and reinforced the Fed’s tighter policy. Many investors expect the same this year. After the release this week of the surprisingly hawkish Fed meeting minutes from July, few traders are expecting anything out of the ordinary from Powell. Much of this year’s stock market rally, “is underpinned on the idea that we’re close to peak Fed, and that they’ll pivot at some point here,” said Baird’s investment strategy analyst Ross Mayfield. “And if they push back on that next week, which is possible, given what the minutes implied, that could be a pretty major event for markets.” The July Fed meeting minutes indicated central policy makers were mulling over still more interest rate hikes this year. At the moment, traders are giving only a 9.5 chance that the Federal Reserve will hike in September, but a 32.4% chance the central bank will raise rates by 25 basis points in November, according to the CME FedWatch Tool. A basis point is 1/100th of a percent. Infrastructure Capital Management’s Hatfield expects the central bank is done hiking rates, citing signs of a cooling labor market that he forecasts will continue to show evidence of softening over the next several months. In fact, he said that the last two labor reports showed the majority of increases in jobs came from the medical sector instead of from more cyclical sectors. “We think that the labor market is decelerating. And so, when November comes around, the Fed will pause but they don’t know that yet,” said Hatfield, adding, “They only look at lagging indicators. And the labor market is a lagging indicator but it will come out.” Powell is scheduled to deliver the speech Friday, Aug. 25 at 10:05 a.m. ET. ‘Goldilocks’ economic data In economic releases, traders will watch the latest purchasing manager index numbers, set to release Wednesday and forecast to show a downward trajectory in manufacturing. Existing home sales data is due out Tuesday, while new home sales are released Wednesday, both of which will come amid gloomy homebuilder sentiment and as mortgage rates surgeuilder sentiment. Credit Suisse expects existing home sales will decline slightly, by 0.1% month-over-month, a second consecutive decline. The bank expects new home sales rose in July by 1.5%, reversing June’s decline. “Elevated mortgage rates are likely to keep housing activity under pressure, and a near-term rebound to the prepandemic trend appears unlikely,” Credit Suisse’ Ray Farris said in a Thursday note. Meanwhile, durable goods data are also set for release, and earnings season continues to wind down with Lowe’s out Tuesday, and Dollar Tree on Thursday. Week ahead calendar Monday August 21 No economic data Tuesday August 22 10 a.m. Existing home sales (July) 10 a.m. Richmond Fed Index (August) 2:30 p.m. Fed Governor Bowman at the Fed Listens event hosted by the Federal Reserve Bank of Chicago Earnings: Lowe’s Wednesday August 23 8 a.m. Building Permits (Final) 9:45 a.m. PMI Composite Preliminary (August) 9:45 a.m. Markit PMI Manufacturing Preliminary (August) 9:45 a.m. Markit PMI Services Preliminary (August) 10:00 a.m. New Home Sales (July) Earnings: Advance Auto Parts , Bath & Body Works , Analog Devices , Autodesk , NetApp , Nvidia Thursday August 24 8:30 a.m. Chicago Fed National Activity Index (July) 8:30 a.m. Continuing Jobless Claims (8/12) 8:30 a.m. Durable Goods Orders 8:30 a.m. Initial Claims (8/19) 11 a.m. Kansas City Fed Manufacturing Index (August) Jackson Hole symposium starts. Earnings: Dollar Tree , Intuit, Ulta Friday August 25 10 a.m. Michigan Sentiment Final (August) 10:05 a.m. Federal Reserve Chairman Jerome Powell scheduled to speak at Jackson Hole, Wyoming — CNBC’s Michael Bloom contributed to this report.
