Stock market news today: Stocks rally before Fed decision as Nvidia surges

US stocks rallied on Wednesday amid a tech revival that sent the Nasdaq surging, as investors prepared for the Federal Reserve’s decision on whether to cut interest rates.

The S&P 500 (^GSPC) rose by 1.5% while the tech-heavy Nasdaq Composite (^IXIC) soared more than 2%. The Dow Jones Industrial Average (^DJI) rose a modest 0.1%.

Tech stocks are in the ascent again after taking a battering in recent days. The first earnings from “Magnificent Seven” megacaps stirred fears the AI boost would prove a bust, after falling short of high hopes.

A swath of positive news is spurring a pre-market comeback for chip stocks, with AMD (AMD) shares getting a boost from an AI-driven earnings beat. Nvidia (NVDA) climbed over 7%, regaining ground lost in a steep drop on Tuesday in the halo of the results.

Also on Wednesday, Morgan Stanley noted that the recent 25% drawdown in Nvidia stock presented a “good entry point,” marking a sentiment shift in what’s been an otherwise tough July for the AI leader.

Elsewhere, Dutch chip gear giant ASML’s (ASML, ASML.AS) stock surged after Reuters reported the US will exempt some foreign allies from new China curbs.

As that pressure eases, the spotlight is turning to the Fed, which is expected to hold interest rates steady but signal a cut is in the pipeline when it ends its July policy meeting later Wednesday.

The market is overwhelmingly convinced a Fed pivot is coming in September — the debate now is whether rates will go down by 0.25% or 0.5%, according to the CME FedWatch tool. Chair Jerome Powell’s post-meeting comments will be closely followed for hints that recent inflation and labor data could support a deeper cut.

Meanwhile, more earnings are set to roll in, Meta’s (META) results due later will be scrutinized for signs that the Facebook parent’s AI spending is paying off — the big question for megacaps this season.

In commodities, oil jumped after the killing of Hamas’ political leader in an airstrike stoked geopolitical tensions. Brent crude (BZ=F) futures, the global benchmark, rose 3% to top $80 a barrel. US benchmark West Intermediate crude futures (CL=F) climbed to $77.31 a barrel, a 3.5% gain.

Live8 updates

Wed, July 31, 2024 at 8:22 AM MDT

Tech is having its best day since February

The Nasdaq Composite (^IXIC) is up more than 2.4% on Wednesday and pacing for its best day since February.

The revival in tech stocks began late Tuesday night after chip giant AMD (AMD) surprised Wall Street to the upside with its second quarter earnings showing stronger-than-expected revenue, largely driven by the company’s AI efforts. Shares in AMD rose more than 7% in early trade Wednesday.

The report sparked a rally among chip stocks. The PHLX Semiconductor index (^SOX) rose more than 5%. The largest chip stock, Nvidia, rallied more than 10% following the report as Morgan Stanley released fresh research noting the recent 25% drawdown in the stock presents “a good entry point,” and listed the stock is a “top pick.”

Source: Yahoo Finance
Wed, July 31, 2024 at 8:00 AM MDT

Pending homes sales jump in June

Rising inventory is shifting the housing market in buyers’ favor.

Pending home sales, a forward-looking indicator of home sales based on contract signings, rose 4.8% in June from the month prior, according to the National Association of Realtors. Economists polled by Bloomberg had expected a 1.5% monthly increase.

“The rise in housing inventory is beginning to lead to more contract signings,” NAR chief economist Lawrence Yun said in a press statement. “Multiple offers are less intense, and buyers are in a more favorable position.”

The jump in buyer activity suggests that more is likely to follow.

“Even more inventory is expected to come onto the housing market in the upcoming months ahead of the normal, seasonal declines in the winter,” added Yun. “The Northeast’s small gain in contract signings is due to the ongoing housing shortage situation in that region, leading to stronger home price gains. It is a good time to list.”

Mortgage rates have been a point of distress for homeowners to sell, as many were locked in at ultra-low rate during the pandemic. But rates have come down since they topped 7% earlier this summer.

However, some buyers are still waiting on the sidelines as home prices reach new highs. Applications for a mortgage to purchase a home fell 2% from the prior week on a seasonally adjusted basis, the Mortgage Bankers Association reported Wednesday.

“Borrowers may be waiting for signs that mortgage rates will drift lower as the Federal Reserve begins to cut short-term rates,” Mike Fratantoni, MBA’s SVP and chief economist, wrote in a statement.
Wed, July 31, 2024 at 7:35 AM MDT

Nvidia roars at the open amid broader tech rally

US stocks rallied on Wednesday amid a tech revival that sent the Nasdaq surging, as investors prepared for the Federal Reserve’s decision on whether to cut interest rates.

The S&P 500 (^GSPC) rose by 1.5% while the tech-heavy Nasdaq Composite (^IXIC) soared more than 1.8%. The Dow Jones Industrial Average (^DJI) rose about 0.1%.

Tech stocks are in the ascent again after taking a battering in recent days. The first earnings from “Magnificent Seven” megacaps stirred fears the AI boost would prove a bust, after falling short of high hopes.

A swathe of positive news is spurring a pre-market comeback for chip stocks, with AMD (AMD) shares getting a boost from an AI-driven earnings beat.

Nvidia (NVDA) climbed over 7%, regaining ground lost in a steep drop on Tuesday, in the halo of the results. Also, on Wednesday, Morgan Stanley noted that the recent 25% drawdown in Nvidia stock presented a “good entry point,” marking a sentiment shift in what’s been an otherwise tough July for the AI-leader.
Wed, July 31, 2024 at 6:34 AM MDT

ADP employment falls short of expectations

The US economy added fewer private payroll jobs than expected in July.

The latest data from ADP showed 122,000 private payroll jobs were added in July, falling short of consensus expectations for 150,000 additions.

Also out Wednesday morning, ADP’s latest pay insights showed that the median year-over-year pay increase for job switchers fell to 7.2% in July, down from 7.7% in June. Pay gains for job stayers grew at a 4.8% pace in July, its lowest late in about three years, per ADP’s chief economist Nela Richardson.
Wed, July 31, 2024 at 3:24 AM MDT

Keep an eye on the tax discussion

I would be paying attention to how CEOs and CFOs discuss the outlook for taxes on their earnings calls for the balance of the year.

Taxes play an integral part in if companies undertake a project, a deal or more hiring. Best believe management teams and boards are running through scenarios if the Trump tax cuts aren’t extended in 2025.

Here’s Procter & Gamble (PG) chair and CEO to me on Yahoo Finance yesterday on the 2017 Trump tax cuts:

On their impact: The tax cuts have been “incredibly impactful. And you know, that element of the dialogue is going to increase as we get through the election and start talking about 2025 when some of the tax provisions that were passed in 2017 sunset. But if you just look at our investment in the US pre- and post- the 2017 act, it’s up significantly, our employment is up significantly, and, importantly, our taxes — the taxes we’re paying to the US government — are up significantly. So it’s really led to significant economic activity in this country.”

On if the tax cuts aren’t extended: “It will certainly have an impact. Every decision that we make is based on the present value of discounted cash flow. And that’s on an after-tax basis. And so it begins favoring on a comparative basis, other locations for investment. So yes, it will have an impact.”
Wed, July 31, 2024 at 3:19 AM MDT

Key post-earnings call out on AMD

Shares of Advanced Micro Devices (AMD) are back in the good graces of Wall Street this morning after earnings last night, with the stock up 9% in the pre-market.

I think the Street is locking in on AMD’s upwardly revised guidance on demand for its new AI chip.

A key call-out by Citi analyst Chris Danely:

“AMD raised its MI300 sales guidance from over $4.0 billion to over $4.5 billion in calendar year 2024 given demand strength. We continue to expect more upside throughout the year and would note Microsoft (MSFT), AMD’s largest AI customer, raised its capex forecast.”
Wed, July 31, 2024 at 3:16 AM MDT

A good point on Microsoft

Microsoft (MSFT) shares are rallying back a bit in the pre-market after initially dropping 6% last night following earnings, in part because of a surprise slowdown in Azure growth. As of this writing, shares are down about 3%.

The company guided to another quarter of slower Azure growth, but then things improving over the next twelve months.

Good point by Guggenheim analyst John Diffucci on this rosy Azure outlook:

“We understand that this management team has earned investors’ (and our) respect over time, but we believe investors should ask themselves a simple question: How can they trust management to predict what will happen 6-12 months from now if they have trouble forecasting the next 0-2 months (given F4Q Azure came in at the low end of the range)?”
Wed, July 31, 2024 at 3:11 AM MDT
Why Starbucks stock is rising after a dreadful quarter

Starbucks (SBUX) shares are up 3% pre-market post a horrendous quarter last night.

To illustrate how horrendous:

US same-store sales down 2%, with transactions down 6% (Citi is calling this “alarming”).

China same-store sales plunged 14%, and missed consensus.

International same-store sales fell 7%.

So why the stock pop?

Well, Starbucks CEO Laxman Narasimhan hopped on his earnings call and shared a bunch of obscure stats suggesting sales and margin trends would improve in a few quarters. He also teased a potential cost-savings action in China, likely through inking a joint venture deal.

Be careful chasing any Starbucks enthusiasm. This is a management team with a credibility problem with investors, and is dealing with deeply rooted issues such as unions and poor value perception among customers. The end-game on the new battle with activist Elliott Management is also wildly unknown.