Stock indices opened sharply lower for the second consecutive session on Monday, led by small caps and technology stocks. Caution is brewing ahead of Fed Chairman Jerome Powell’s Jackson Hole speech on Friday as investors hope Nvidia (NVDA) Wednesday’s second-quarter report isn’t “as bad as feared.”
The Dow Jones Industrial Average was down 1.3% in the first hour while the S&P 500 was down 1.6%. The Nasdaq composite is even harder hit, falling 1.7%. The Russell 2000 fell 1.5%.
Volume on the NYSE and Nasdaq fell by double-digit percentages, compared to the first hour on Friday.
The S&P Volatility Index jumped more than 10%, topping 23 for the first time since Aug. 3. Gold fell to a four-week low while the 10-year Treasury yield hit 3.0%.
Crude oil is falling like a rock again this morning, down 4.2% to $86.80 a barrel. Natural gas rose towards the psychological level of $10, up 3.9% so far. The Natgas futures contract has not traded in double digits since 2008.
European markets are also trading lower, down more than 1.5%.
Meme stocks continued to show volatile moves.
Bed bath and beyond (BBBY) is trading up 2.6% after nearly completing a two-week round trip of 42 points. Bloomberg reports that some suppliers have halted deliveries to the retailer due to unpaid invoices.
CMA (AMC) sold 31%, but registered shareholders just received a Preferred Equity Unit, or APE, for each common share.
netflix (NFLX) fell 5.2% after being downgraded to sell to boutique company CFRA Research. The analyst warned that NFLX stock could underperform the S&P 500 index for the rest of the year.
Speech by President Powell Jackson Hole on Friday
Federal Reserve Chairman Jerome Powell delivers his annual address at the Jackson Hole Economic Symposium on Friday.
There is huge hype ahead of the speech, but Fed governors have spoken with one voice since the July meeting. Their message is simple and unambiguous: the economy is still too hot and it will take several rate hikes to bring inflation back to the target level of 2%.
Stock market watchers worry that the summer rally will ignore this message, but that’s probably not true.
Technical conditions reached extremely oversold levels in June, triggering the powerful mean reversion force. We see this in play now, with major indices reaching and reversing at the 200-day moving average resistance. Oversold readings declined at the same time, perhaps allowing more aggressive sellers to take control of the ticker in September.
Still, everyone in the financial world will be watching the speech closely, looking for subtle hints of policy shifts.
Deutsche Bank analyst Tim Wessel summed up the event at Barron’s on Monday, noting that “Powell’s remarks are one of the key events that may shake US policy expectations from their recent range, with the inflation and employment data prior to September”. [Fed decision on rates].”
Nvidia’s earnings after Wednesday’s close
Nvidia is trading down more than 3%. The chip powerhouse reports second-quarter results after Wednesday’s close, with FactSet forecasting earnings of just 50 cents per share.
On Aug. 8, the company lowered its second-quarter revenue forecast from $8.1 billion to $6.7 billion, citing “lower gaming product sales.” It fell 6.3% after the news and failed in an attempt to recoup those losses last week.
NVDA stock is currently down 42% in 2022 and has not touched the 200-day moving average since breaking support in April. The cryptocurrency crash amplified this loss, reducing demand for graphics hardware used solely to mine digital assets.
However, there are some signs that Nvidia is approaching a long-term bottom.
For starters, the earnings per share rating climbed to a very bullish 97 after four quarters beating expectations. Additionally, the pristine “A” SMR rating indicates a highly profitable tech giant that sadly fell out of favor in 2022.
Monday Stock Market Highlights
No. 36 on IBD 50, You’re here (TSLA) is trading down 3.1% after announcing a price hike for its self-driving software. TSLA stock is expected to split 3-for-1 on Thursday.
No, 32 Arista Networks (ANET) is down 2.5%. On Friday, ANET stock posted a blue dot of the weekly relative strength line, after a relentless 46% rise since mid-June. ANET stock was featured in the August 17 IBD 50 Stocks To Watch.
island (PODD) rose within 6% of the buy point of 275.93 from a 196-day double bottom base.
The company has just received approval for Omnipod 5, a treatment for children aged two and over with type 1 diabetes. PODD shares are trading down 1% on Monday morning.
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