Today was a tale of two mega caps: Strength in Tesla (TSLA) helped fuel major indexes even while weakness from Nvidia (NVDA) limited gains.
After some early wavering when the benchmark 10-year Treasury note yield touched 4.5%, stocks staged a comeback led by mega caps minus Nvidia. A slight retreat in yields helped advancing shares stretch their lead over decliners to around two-to-one in heavier-than-normal volume, and Tesla provided a spark on news that the incoming administration might create a federal framework for self-driving cars.
Concerns surrounding server overheating problems with Nvidia's new Blackwell graphics processing units for AI took some wind out of the company's sails ahead of its Wednesday earnings results. Management said these types of challenges are normal.
Stepping away from Nvidia, today's broader gains might reflect a certain amount of "buy the dip" sentiment following last week's decline, according to Briefing.com. By late Monday, all 11 S&P 500® sectors traded above Friday's closing levels, which suggests widespread buying interest.
Today was light on data, but the week ahead features retail earnings, housing reports, and an inflation update from Canada. Walmart (WMT) and Lowe's (LOW) get things off with a bang early tomorrow.
This week's data likely have less rate impact than the trio of jobs, inflation, and retail sales that grabbed headlines earlier this month. Still, caution is elevated after Federal Reserve Chairman Jerome Powell and other Fed speakers sang a more hawkish tone last week about next steps on rates.
"The tone of Powell’s speech last week was one of caution," said Cooper Howard, director of fixed income strategy at the Schwab Center for Financial Research. "The destination for the Fed remains rate cuts, but they will be cautious in moving rates lower."
Here's where the major benchmarks ended:
• The SPX was up 23.00 points (0.4%) to 5893.62; the Dow Jones Industrial Average® ($DJI) fell 55.39 points (0.1%) to 43,389.6; and the Nasdaq Composite® ($COMP) was up 111.69 points (0.6%) to 18,791.81.
• The 10-year Treasury note yield fell one basis point to 4.41%.
• The Cboe Volatility Index® (VIX) eased to 15.57.
Stocks on the move
Of the major U.S. indexes, only the Dow Jones Industrial Average ($DJI) slid Monday, pulled down by names like Nike (NKE), Nvidia, and Goldman Sachs (GS). Nike has struggled most of the year thanks partly to strong competition and weakness in China, but Goldman Sachs' drop today diverged from what's been a roaring financial sector. Other big banks also faltered, perhaps a sign of profit taking after the election-related rally.
The small cap Russell 2000 (RUT) index, which dove Friday as Treasury yields ticked higher, barely got its head above water today despite a slight pullback in yields. The PHLX Semiconductor Index (SOX), however, managed a 1% gain today—despite Nvidia’s tumble—after last week's sharp decline.
Sector-wise, energy led today with a 1.2% increase, due in part to a 3% rise in the price of WTI Crude Oil (/CL) following increased tensions in Ukraine. Crude remained below $70 per barrel, however, near the low end of its long-term range.
The following companies had stock price moves driven by analyst ratings, quarterly earnings, or other news:
Nvidia lost 1.29% on the Blackwell issue. The challenge is preventing the units from overheating when connected with the customized server racks the company has designed.
Tesla climbed 5.62% as Bloomberg reported that the incoming Trump administration would try to create a federal framework for self-driving cars. Normally, this is done by states, Barron's noted. A federal framework could make it easier to obtain self-driving licenses and let autonomous cars drive across state lines.
Super Micro Computer (SMCI) rose 15.93% even as it faces a possible Nasdaq delisting. The company is trying to extend the time before that happens and has seen inflows from some large investors recently. A planned filing to avoid delisting is awaited.
Netflix (NFLX) rose 2.8% after getting robust ratings for its recent boxing match broadcast.
Technically, the 20-day SPX moving average of 5,862 held today on an early test of support near that level.
The market braces for this week's parade of earnings reports from major retailers. Recent data, including last Friday's retail sales, point to possible improvement in third-quarter retail earnings, while guidance for the current holiday quarter could provide clues into consumers' confidence approaching year-end.
Home Depot (HD) results appeared to impress its investors last week, which could bode well for Lowe's. Walmart also impressed its last time out and cited a strong consumer.
Same-store sales at Walmart—which rose 4.2% year over year the prior quarter for stores open a year or more—is a key metric. So is the online business, which rose 22% last time it was reported. Lowe's and Home Depot have been burdened by falling housing demand and high interest rates that kept renovation projects on the back burner for many. Lowe's cut guidance last quarter.
Nvidia's earnings, however, are the market's prime focus. The AI chip giant's regular pattern of beating Wall Street's estimates suggests the market continues to grow even faster than analysts project. The question is whether Nvidia can deliver another positive outlook surprise Wednesday afternoon.
The Blackwell issue likely becomes a topic Wednesday, too. If it persists, it could delay shipments and the opening of new data centers for Alphabet (GOOGL), Microsoft (MSFT), or Meta Platforms (META), PC Magazine reported.
Earnings season is 93% done, and 75% of S&P 500 companies have outperformed analysts' earnings per share expectations, research firm FactSet said. Only 61% have outperformed on revenue. Year-over-year EPS growth for the third quarter is seen at 5.4%, above the 4.2% estimate at the start of earnings season.
Awaiting housing updates
Housing data starts with tomorrow's October housing starts and building permits reports followed by Thursday's October existing home sales. Tight housing supplies contribute to inflation and helped consumer price growth remain "sticky" last month.
Analysts expect October housing starts to drop slightly to a seasonally adjusted annual rate of 1.34 million, down from 1.35 million in September, according to Briefing.com. Permits are seen at 1.441 million on a seasonally adjusted annual basis, up from 1.428 million. The data are due before the opening bell.
October leading indicators from the Conference Board, weekly initial jobless claims, and final November University of Michigan Consumer Sentiment are other data to watch in coming days.
Watch tomorrow for the latest update on gross domestic product (GDP) from the Atlanta Fed's GDPNow indicator. It last stood at 2.5% for the fourth quarter, down from the government's estimate of 2.8% growth in the third quarter. However, recent solid economic data hint that the indicator could rise this week, and that could support Treasury yields.
Even as inflows of cash into equities flared this month, Treasuries – which move the opposite direction of yields – saw less buying interest. This is particularly true with money from overseas, which in recent decades often kept pressure on yields. Perhaps some of that cash is flowing instead to the U.S. dollar, which flirts with two-year highs on strong U.S. economic data and protectionist policy plans from the incoming administration.
A strong dollar, unlike firm Treasuries, isn't necessarily helpful for stocks. It can make U.S. products more expensive abroad, hurting profits for multinational U.S. firms that dominate sectors like tech, health care, and industrials. However, the strong dollar has also pressured commodity prices lately, which can provide a tailwind for consumer discretionary, tech, and industrial stocks.
As of late today, traders see 62% chances rates will fall 25 basis points at the conclusion of the Federal Open Market Committee (FOMC) meeting December 17–18 and a 38% chance of no move, based on the CME FedWatch Tool. Chances of a cut touched 80% last week before Powell's cautious words.
Rate cut odds for next year are also rolling back in futures trading. The market projects three to four 25-basis point cuts in 2025, taking rates to below 4% but likely above the last Fed projection of 3.4%. The Fed updates its "dot plot" of rate projections next month.