Nasdaq hits record, S&P ticks higher with Nvidia results eyed

Nvidia remains all the craze as Wall Street anxiously awaits their numbers come Wednesday, which has shot the Nasdaq up to a new record, but as tech goes usually safe haven industrials go the opposite so the Dow fell nearly 200. Everything started in the black but then went south after about 1 pm. Perhaps that’s when Fed officials made their statement that no changes are foreseen. 

This is  something that shouldn’t have been a surprise to anyone but, on the other hand, this market is being driven by every whisper from the Fed. There is a concern about stock valuations what with the S&P’s p/e at 20.8 vs an average of 15.9.  But there has been a solid earnings season and inflation may be cooling.  Today the odds of a September cut stand at 63.3%, down from 70% last week, and volume was above average at 12.3 billion. 

Nasdaq hits record, S&P ticks higher with Nvidia results eyed

By Chuck Mikolajczak

Mon May 20, 2024 4:47 PM

DJ: 40,003.59  +134.21      NAS: 16,685.97  -12.35         S&P: 5,303.27  +6.17       5/17

DJ: 39,806.77  -196.82       NAS: 16,794.87  +108.91      S&P: 5,308.13  +4.86       5/20

NEW YORK, May 20 (Reuters) - The Nasdaq closed at a record high on Monday while the S&P 500 gained slightly as technology stocks advanced ahead of Nvidia's highly anticipated earnings and investors gauged the timing of an interest rate cut by the Federal Reserve.  The S&P 500 technology index (.SPLRCT), opens new tab led gains among the 11 major S&P sectors, rising 1.32%, helped by chipmakers such as Nvidia, which advanced 2.49% ahead of its quarterly results on Wednesday.  Investors will look for evidence in Nvidia's earnings that the AI chip leader can maintain its explosive growth and stay ahead of rivals.  At least three brokerages lifted their Nvidia price targets, while peer Micron Technology (MU.O), opens new tab climbed 2.96% after Morgan Stanley upgraded the memory chipmaker to "equal-weight" from "underweight." The PHLX semiconductor index (.SOX), opens new tab rose 2.15%.

"If they surprise to the upside Nvidia could spark a mini fury, although everything's kind of expensive, so it's hard to see a big move up about it," said Stephen Massocca, senior vice president at Wedbush Securities in San Francisco. "If the Fed starts to lower rates, that would really spark a rally but it doesn't seem like the data supports that yet." 

The Dow Jones Industrial Average (.DJI), opens new tab fell 196.82 points, or 0.49%, to 39,806.77. The S&P 500 (.SPX), opens new tab gained 4.86 points, or 0.09%, at 5,308.13 and the Nasdaq Composite (.IXIC), opens new tab rose 108.91 points, or 0.65%, to 16,794.87.

The Dow was weighed down by a 4.5% drop in JPMorgan (JPM.N), opens new tab shares after CEO Jamie Dimon said he was "cautiously pessimistic" and said the company would not buy back its stock at current prices.  A solid earnings season and signs inflation may be starting to cool again have reignited hopes for Fed rate cuts this year, pushing major averages to record levels. The blue-chip Dow (.DJI), opens new tab closed above 40,000 points for the first time last week.  Comments from Fed officials on Monday did little to alter expectations for cuts by the central bank, as they were reluctant to say inflation pressures were easing and several stressed the need for caution.

Minutes of the Fed's latest monetary policy meeting are scheduled to be released on Wednesday. Markets are pricing in a 63.3% chance for a cut of at least 25 basis points (bps) at the September meeting, the CME's FedWatch Tool, opens new tab showed.  The recent rally has started to raise concerns about stock valuations, with the S&P 500 trading at a forward price-to-earning ratio of 20.8, well above its historic average of 15.9, according to LSEG data.

Deutsche Bank raised its 2024 year-end S&P 500 target to 5,500 from 5,100 points, the highest among major brokerages, while Morgan Stanley forecast it would hit 5,400 by June 2025.  Norwegian Cruise Line (NCLH.N), opens new tab surged 7.56% after lifting its annual profit forecast.

Advancing issues outnumbered decliners by a 1.14-to-1 ratio on the NYSE. On the Nasdaq, declining issues outnumbered advancers by a 1.01-to-1 ratio.  The S&P 500 posted 58 new 52-week highs and four new lows while the Nasdaq recorded 222 new highs and 101 new lows.

Volume on U.S. exchanges was 12.31 billion shares, compared with the 11.82 billion average for the full session over the last 20 trading days.