S&P 500 Weekly Report: NVIDIA's Earnings to Shape Market Sentiment

NVIDIA's earnings as pivotal factor in shaping market sentiment this week

NVIDIA’s earnings will no doubt be the single risk event this week. Given its heavy weightage in both the S&P 500 and Nasdaq, its results may single-handedly determine a make-or-break for global markets. Expectations heading into its results continue to run high, with previous string of significant outperformance making investors wary of going against the trend and are leaning for longs.

What to expect for NVIDIA’s earnings

NVIDIA’s Q3 2024 revenue is expected to grow 82.9% to US$33.1 billion versus the US$18.1 billion a year ago. While this may mark a slowdown from the triple-digit growth over the past four quarters, a 82.9% growth from the world’s most valuable company is still significant, attesting to the strong demand for artificial intellifence (AI) GPUs, particularly from cloud service providers and enterprises adopting accelerated computing for AI applications. Earnings per share (EPS) is expected to grow 85.6% to US$0.75, up from the US$0.40 a year ago.

Focus will likely revolve around whether NVIDIA’s guidance can continue to impress. Just last month, its CEO Jensen Huang’s mentioned that demand for its new Blackwell AI chips is “insane”. Earlier guidance also mentioned about demand outstripping supply well into 2025, so eyes will be on whether the growth momentum can last for the foreseeable future to justify its lofty valuation.

S&P 500: Back to retest previous resistance-turned-support

The touch of the key psychological 6,000 level for the S&P 500 last week triggered a bout of profit-taking, which saw the S&P 500 retreated more than 2% from its record high. Market participants seem to find fault with the upmove in US Treasury yields, fuelled by a less dovish rhetoric from the Federal Reserve (Fed) Chair. That said, we believe that the broader upward trend for the index may likely persist, with economic data validating soft-landing expectations, positive year-end seasonality and Fed’s easing process to continue albeit at a more gradual pace.

Interaction with the previous resistance-turned-support level at 5,861 saw the stepping-in of buyers to try to form a new higher low, as its daily relative strength index (RSI) at its mid-line offers a near-term technical reset. Should the 5,861 level fail to hold, we may expect a deeper retracement towards the 5,674 level next, where its 100-day moving average (MA) in confluence with its daily Ichimoku Cloud zone will be on watch to offer stronger support.

Sector performance

Sector performance over the past week leaned predominantly to the downside, as the Trump-induced rally in Wall Street saw some rollover amid the pressures from rising Treasury yields. The US 10-year yields briefly topped the 4.5% level for the first time since May this year, triggering a bout of market volatility at the key psychological threshold as valuation for rate-sensitive growth stocks are brought into question. The S&P 500 index ended the week lower by 2.1%, with only two sectors (financials, energy) in the green. The former benefits from a pullback in rate cut bets into 2025, while the latter manages to cut back some of its year-to-date underperformance on optimism around deregulation under Trump and the expansion of US energy dominance. The Magnificent Seven stocks were broadly lower, apart from Apple’s 1.7% gain. Tesla and NVIDIA were down more than 3%, while Meta was down more than 5%.