U.S. stocks opened mixed on Tuesday as investors awaiting Nvidia ( NVDA ) results looked to retail earnings and Fedspeak for clues on the economy.
The benchmark S&P 500 (^GSPC) fell about 0.1%, while the Dow Jones Industrial Average (^DJI) hovered near the flat. Meanwhile, the tech-heavy Nasdaq Composite (^IXIC) fell about 0.4% after ending at a record high on Monday.
Investors look to companies for a signal in the absence of top-level economic data releases.
The focus is firmly on Nvidia’s highly anticipated earnings report on Wednesday, which is expected to cause a big move in the share price and boost the shares more broadly. A rise in the AI chipmaker’s price helped the Nasdaq Composite to a record high on Monday.
In the meantime, investors are getting a wave of quarterly reports from retailers looking at whether they can steer consumer spending and the health of the economy.
Sales of Lowe’s (LOW) fell less than expected as cash-strapped Americans continued to spend on minor repairs, while shares of Macy’s (M) rose after the department store chain’s profits hit record lows. AutoZone (AZO) and Urban Outfitters (URBN) are also on the docket.
Investors are also listening intently to speeches from Federal Reserve officials as a lack of economic data clouds the fuel rate cut debate. Tuesday’s lineup includes Cleveland Fed President Christopher Waller.
Read more: What influence does the labor market have on inflation?
In recent days, policymakers have doubled down on the message that inflation may not yet be cool enough to cut rates from their current historic highs. More insight – and a key test of optimism about austerity – will follow from Wednesday’s release of the minutes of the May Fed meetings.
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Good rating point for Nvidia from EvercoreISI
An interesting phenomenon has appeared on Nvidia (NVDA).
The AI chip king’s stock could be cheap, EvercoreISI suggested in a note this morning.
“The combination of slowing revenue growth and increased competitive concerns has driven Nvidia’s relative price-to-earnings ratio to the lower end of its 10-year range, creating a scenario where a healthy beat-and-raise [on earnings Wednesday] will lead to a near-term rise in the stock… and we expect a healthy beat-and-raise,” said analyst Mark Lipacis.
His graph below to put a finer point on it.
I want to note that Nvidia stock isn’t exactly super cheap from a pure valuation perspective. It trades at almost 40 times the estimated price-to-earnings ratio for forward earnings… the S&P 500 trades at about 20.7 times.
All key valuation metrics on Nvidia from Yahoo Finance can be found here.
Nvidia shares are taking a breather in their valuation. (EvercoreISI) -
Nvidia’s dominance in one graph
Nvidia (NVDA) has a week, and hasn’t even reported earnings yet (that’s Wednesday evening).
CEO Jensen Huang seemed impressed by Dell’s (DELL) Las Vegas conference yesterday, with Dell itself hinting at a possible move into CPUs by Nvidia.
As you continue to do your homework on Nvidia ahead of tomorrow’s report, a new chart from Goldman Sachs offers perspective on the AI chip darling.
Nvidia’s dominance in one graph. (Goldman Sachs)
