Nvidia Earnings Drive Market Volatility: UK Stock Updates
The UK stock market opened with little change on Wednesday, with investor attention focused on the upcoming earnings report from semiconductor giant Nvidia. While the FTSE 100 remained relatively flat, several individual companies saw notable pre-market moves.
Retailers Report Mixed Results:
Abercrombie & Fitch shares fell by over 9% despite reporting a 21% rise in revenue for the second quarter. The company's bullish guidance for the current period failed to impress investors. In contrast, Nordstrom saw its stock climb by more than 1% after exceeding earnings expectations and raising the lower end of its full-year outlook. J M Smucker, on the other hand, saw a decline of around 4% after lowering its full-year guidance.
Nvidia Earnings Anticipation:
Analysts at Goldman Sachs anticipate Nvidia's earnings report to cause significant stock movement, predicting a potential fluctuation of +/- 10%. This prediction is based on analysis of the options market, which suggests traders are expecting a larger-than-usual impact from the report.
Berkshire Hathaway Sheds More Bank of America Shares:
Warren Buffett's Berkshire Hathaway continued its selling spree of Bank of America shares, offloading a further 24.7 million shares for a total of £981.9 million. This latest round of sales reduces Berkshire's stake in the bank to 11.6%. The conglomerate has now disposed of over £5 billion worth of Bank of America stock since mid-July.
UBS Forecasts Further Gains for Nvidia:
UBS analysts are bullish on Nvidia's long-term potential, particularly in the AI space. Despite the recent rally, they predict a further sharp stock move following the company's earnings results. While AI stocks have seen a surge in recent weeks, UBS cautions that future gains may be more gradual due to potential macroeconomic headwinds.
JPMorgan Downplays Hindenburg Report's Impact on Super Micro:
Following a report from Hindenburg Research alleging accounting manipulation, shares of Super Micro Computer dropped by nearly 3%. However, JPMorgan dismissed the report, stating that it offered "limited evidence" of wrongdoing. They believe the company's recent growth and increased demand for AI servers warrant improvement in corporate governance and transparency but do not necessarily indicate misconduct.
Foot Locker Disappoints with Q2 Report:
Foot Locker shares plummeted by over 5% in pre-market trading after the company reported lackluster second-quarter results. While the retailer recorded same-store sales growth for the first time in six quarters, it missed revenue expectations and reported a loss of 5 cents per share.
Nvidia Dominates Trading Activity:
Data from Interactive Brokers shows high trading activity surrounding Nvidia ahead of its earnings release. Over 460,000 orders were placed on the stock, with significant interest in both options and equities. This activity highlights the significant impact Nvidia's earnings are expected to have on the wider market.
Citi Strategist Emphasises Nvidia's Importance:
Citi's Scott Chronert highlights the importance of Nvidia's earnings report, noting its significant influence on the S&P 500. While the report itself is important, he believes the focus will be on the company's guidance for the future, as investors seek further evidence of the AI spending and productivity tailwind.
Retailers Show Strong Full-Price Sales:
Nordstrom and PVH, the parent company of Tommy Hilfiger and Calvin Klein, both reported strong earnings beats, exceeding analysts' expectations. Both companies attributed their success to robust full-price sales, suggesting that consumers are willing to spend on higher-priced items.
Piper Sandler Urges Caution Despite Light Volume:
Piper Sandler advises investors to remain vigilant despite the expected light trading volume in the week leading up to Labor Day. They highlight the potential for market volatility driven by upcoming earnings reports, including those from Nvidia, Salesforce, and CrowdStrike.
After-Hours Moves:
Nordstrom continued its upward trajectory, gaining 7% after exceeding earnings estimates. Ambarella surged by 20% following strong revenue guidance. Box also saw a 4.3% increase after beating on both top and bottom lines.
The coming days will be crucial for the UK stock market, with Nvidia's earnings report likely to set the tone for the rest of the week. Investors will be closely watching the company's performance and its outlook for the future, particularly in the context of the rapidly evolving AI landscape.
