Michael M. Santiago
U.S. stocks gave back some of their gains amid an afternoon selloff on Thursday, as chip giant Nvidia's (NVDA) post-earnings rout intensified.
Sentiment had been boosted earlier by data showing a more robust expansion in the economy in the second quarter than previously estimated.
The Nasdaq Composite, with a strong technological component, (COMP:IND) had changed course and was the last -0.27% at 17,509.23 points. The benchmark S&P 500 (SP500) index had also fallen below the flat line, -0.05% at 5,589.66 points. The Dow Jones, the benchmark stock market index, closed 2010 up 1.2%.DJI) was still green, +0.56% to 41,322.01 points.
On Wednesday, the spotlight was on Nvidia (NVDA). Its highly anticipated results showed that fiscal second-quarter revenue more than doubled from a year earlier amid continued demand for artificial intelligence (ai) chips from data centers. Analysts also praised the performance, saying it was proof that the ai craze was very real.
However, for market participants accustomed to exaggerated results and forecasts, Nvidia's (NVDA) latest forecasts fell short of the highest expectations.
Additionally, the company confirmed some production delays for its highly anticipated Blackwell line of graphics processing units, though Chief Executive Officer Jensen Huang said samples were currently being shipped to partners and production was expected to begin in its fiscal fourth quarter. This combination sent Nvidia (NVDA) shares tumbling and wiped some $202 billion off the company’s market cap.
“For all the talk today about 'post-earnings volatility' at Nvidia, over half of the stock's daily moves this month have been greater than +/-3.4%,” Bespoke Investment Group noted on x (formerly twitter).
On Thursday, attention returned to economic growth, a topic that has been on investors' minds since the US non-farm payrolls report earlier this month raised recession concerns and led to a 3% drop in the S&P 500 (SP500).
The US Bureau of Economic Analysis said in the morning that real gross domestic product (GDP) rose at an annual rate of 3% in the second quarter, higher than the first estimate of +2.8%. In addition, the core personal consumption expenditures (PCE) price index – widely considered the Federal Reserve's preferred inflation gauge – was revised down to +2.8%.
“Consumer spending powered the economy to a 3.0% annualized growth rate in the second quarter, an upward revision that beat expectations. A rebound in earnings growth recouped all of the prior quarter's decline and then some to restore earnings to a record level,” said Tim Quinlan of Wells Fargo.
The second estimates of second-quarter GDP and core PCE come just a day before the July reading of the Fed's favorite inflation gauge.
“Analysts who calculate the CPI and PPI in the PCE expect a moderate figure in July, with the core reading (0.15%) annualizing around 2%. This would lead to a large drop in the 6-month annual rate, as the January reading of 0.5% m/m will fall. The 12-month rate would remain stable around 2.6%,” the report said. The Wall Street JournalFederal Reserve watcher Nick Timiraos said on x.
The GDP figures also indicate that the economy remains strong and keep the Fed on track to ease monetary policy.
“With this release and Q3 tracking around 2%, the economy appears to be in good shape overall. The Fed should cut anyway because, as Powell said, the unemployment rate is higher than it should be. But unless there is an (unlikely) urate hike in August, there is no compelling reason for a 50 basis point cut,” Jason Furman, professor of the practice of economic policy at Harvard, told x.
In fixed-income markets, US Treasury bond yields rose on Thursday.
View live data on how Treasury yields are behaving across the curve on Seeking Alpha's bond page.
Among active stocks, Best Buy (BBY) was the biggest percentage gainer in the S&P 500 (SP500), after the consumer electronics retailer raised its annual earnings guidance.
In contrast, Dollar General (DG) was the S&P's top percentage loser, after the discount retailer cut its full-year same-store sales growth forecast.
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