• Fed speakers and Nvidia earnings will be the focus this week.
• Nvidia is a buy with another huge beat-and-raise quarter on deck.
• The objective is a sale against a background of declining sales and gloomy prospects.
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U.S. stocks closed lower on Friday, with the S&P 500 and Nasdaq posting their biggest overnight losses in two weeks, as the post-election rally ended and investors worried about the path in interest rates.
This week, the S&P 500 fell 2.1%, while the tech-heavy Nasdaq Composite fell 3.1%. The blue-chip Dow Jones Industrial Average lost 1.2% during the period.
Source: Investing.com
The coming week is expected to be an eventful one as investors continue to assess the outlook for the economy, inflation, interest rates and corporate earnings.
On the economic calendar, flash PMI figures for the manufacturing and services sectors will draw attention on Friday, along with updates on the housing market.
That will be accompanied by a large list of Fed speakers, including district governors Jeffrey Schmid, Lisa Cook, Michelle Bowman and Beth Hammack all set to make public appearances.
Weekly economic events
Source: Investing.com
Expectations for a 25 basis point rate cut at the Fed’s December meeting were at 63% on Sunday morning, according to the Investing.com Fed Monitor Tool.
Elsewhere, on the corporate earnings front, Nvidia’s (NASDAQ:NVDA) results will be the most important update of the week as the third-quarter reporting season winds down. Other notable names lining up to report earnings include Walmart (NYSE:WMT), Target (NYSE:TGT), TJX Companies (NYSE:TJX), Ross Stores (NASDAQ:ROST), Lowe’s (NYSE:LOW) ), Palo Alto Networks ( NASDAQ:PANW ) and Snowflake ( NYSE:SNOW ).
Regardless of which direction the market moves, below I highlight one stock that is likely to be in high demand and another that could see new downside. However, remember that is my time frame just now for the coming week, Monday November 18 to Friday November 22.
Nvidia is poised for significant gains this week as the tech giant prepares for another quarterly earnings report amid rising demand for its AI chips.
The Santa Clara-based company will report its third-quarter results after the market closes at 4:20 PM ET on Wednesday, with high expectations for another record performance. A call with CEO Jensen Huang is scheduled for 5:00 PM ET.
Market participants expect a significant swing in NVDA stock post-IPO, as evidenced by the options market, with a possible implied move of 9.8% in either direction.
Nvidia earnings page
Source: InvestingPro
Investor sentiment is overwhelmingly bullish, as evidenced by 30 upward earnings revisions in the past 90 days, according to InvestingPro. Nvidia has consistently exceeded expectations and become a bellwether for the technology sector as growth prospects in artificial intelligence remain strong.
Consensus expectations call for Nvidia to post earnings per share of $0.74, up 85% from earnings per share of $0.40 in the same period a year ago. Meanwhile, revenue is expected to rise 82% annually to $33.1 billion, underscoring the company’s unparalleled dominance in the AI chip market.
Of particular note are the guidance for the current quarter, which marks the debut of Nvidia’s next-generation Blackwell AI processor. CEO Jensen Huang has described demand for Blackwell as “insane,” paving the way for better-than-expected forecasts.
NVDA shares ended Friday’s session at $141.98, just below the all-time high of $149.65 on Nov. 12. Shares are up 186.7% in 2024, making Nvidia one of the best-performing S&P 500 stocks of the year. At current levels, Nvidia has a market capitalization of $3.48 trillion, making it the most valuable company trading on the US stock exchange.
It’s worth noting that InvestingPro’s AI-powered quantitative models rate Nvidia with a solid ‘Financial Health Score’ of 3.7 out of 5.0, underscoring its solid profitability and promising growth trajectory.
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In stark contrast, Target faces a much more challenging outlook. The major retailer is struggling with high operating costs, shrinking margins and fierce competition from rivals such as Walmart.
Volatile traffic trends, seasonal weather challenges and uncertainties about the impact of the election are exacerbating the retail giant’s problems.
Target — the seventh-largest brick-and-mortar retailer in the U.S. — is expected to release its third-quarter earnings report ahead of the opening bell at 6:30 a.m. ET on Wednesday.
According to the options market, traders are pricing a swing of about 9% in either direction for TGT stock after the IPO.
Target Earnings page
Source: InvestingPro
Wall Street expects earnings of $2.30 per share, up 9.5% from $2.10 a year earlier. Sales are expected to grow marginally 2% to $25.9 billion, highlighting weak consumer demand for luxury goods such as home furnishings and apparel.
Looking ahead, CEO Brian Cornell will likely provide cautious guidance for the all-important holiday quarter due to a tough business environment, competitive landscape and continued discount activity. External headwinds such as weather disruptions and broader economic uncertainty have further complicated the outlook.
With disappointing third-quarter results and a cautious holiday outlook ahead, the stock’s downside risks outweigh the potential upside. Investors should avoid Target in this challenging retail landscape.
TGT stock closed at $152.13 on Friday. The shares have underperformed the S&P 500 by a wide margin this year, with a gain of 6.8%. At current valuations, the Minneapolis-based retailer has a market cap of $70 billion.
It should be noted that Target currently has a below-average InvestingPro ‘Financial Health Score’ of 2.6 out of 5.0 due to continued concerns about weakening profit margins and weak sales growth.
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Revelation: As of this writing, I am long the S&P 500 and the Nasdaq 100 through the SPDR® S&P 500 ETF and the Invesco QQQ Trust ETF. I am also long the Technology Select Sector SPDR ETF (NYSE:XLK).
I regularly rebalance my portfolio of individual stocks and ETFs based on ongoing risk assessments of both the macroeconomic environment and companies’ financial condition.
The views expressed in this article are solely the opinions of the author and should not be construed as investment advice.
Follow Jesse Cohen on X/Twitter @JesseCohenInv for more stock market analysis and insight.
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