U.S. stocks opened mixed on Tuesday, with investors waiting for Nvidia’s (NVDA) results looking to retail earnings and FedSpeak for clues about the economy.
The benchmark S&P 500 Index (^GSPC) fell by approximately 0.1%, and the Dow Jones Industrial Average (^DJI) remained almost unchanged. Meanwhile, the tech-heavy Nasdaq Composite Index (^IXIC) fell about 0.4% after ending Monday at a record high.
In the absence of top-level economic data, investors are looking to companies for clues.
The focus is firmly on NVIDIA’s highly-anticipated earnings report on Wednesday, which is expected to cause big swings in the company’s stock price and energize the stock more broadly. Rising prices for AI chipmakers pushed the Nasdaq Composite Index to a record high on Monday.
Meanwhile, investors receive a flood of quarterly reports from retailers, scrutinizing the direction of consumer spending and the health of the economy.
Lowe’s (LOW) sales fell less than expected as cash-strapped Americans continued to spend on small repairs, but Macy’s (M) stock declined as the department store chain’s profits exceeded low standards. has risen. AutoZone (AZO) and Urban Outfitters (URBN) are also participating in the plan.
With a lack of economic data giving fuel to the interest-rate cut debate, investors are also tuning in to hear from Federal Reserve officials. Tuesday’s lineup includes Cleveland Fed President Christopher Waller.
read more: How does the labor market affect inflation?
Policymakers have reinforced their message in recent days that inflation may not have cooled enough to lower interest rates from their current historically high levels. The May Fed meeting minutes, released on Wednesday, are expected to include further insight and an important test of optimism about rate cuts.
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Nvidia’s great rating by EvercoreISI
An interesting phenomenon has emerged with Nvidia (NVDA).
The AI chip king’s stock may actually be cheap, EvercoreISI suggested in a note this morning.
“Slowing revenue growth and rising competitive concerns have pushed NVIDIA’s relative P/E ratio to the low end of its 10-year range, creating a scenario in which dividend growth could be expected to exceed healthy expectations. [on earnings Wednesday] This will lead to higher stock prices in the near term… and we expect a healthy beat-and-raise,” analyst Mark Lipacis said.
To illustrate the finer points, take a look at his graph below.
Keep in mind that from a pure valuation perspective, Nvidia stock isn’t actually that cheap. The company’s stock trades at a P/E ratio of nearly 40 times forward earnings, while the S&P 500 trades at about 20.7 times forward earnings.
All of Nvidia’s key valuation metrics from Yahoo Finance can be found here.
Nvidia’s stock price has taken a breather as its valuation expands. (Evercore ISI) -
Nvidia’s advantage in one graph
Nvidia (NVDA) is one week in and hasn’t even reported earnings yet (this was Wednesday evening).
At Dell’s Las Vegas conference yesterday, CEO Jensen Huang seemed surprised, and Dell itself hinted at the possibility of Nvidia’s entry into CPUs.
Continuing our homework on Nvidia ahead of tomorrow’s report, a new chart from Goldman Sachs provides perspective on the AI chip darling.
Nvidia’s advantage is shown in one graph. (Goldman Sachs)
