US stocks pared early session gains Thursday as investors weighed mixed economic data against Nvidia Corp.’s strong forecast and the risks that Federal Reserve Chair Jerome Powell could take a hawkish tone at his speech Friday in Jackson Hole, Wyoming.
(Bloomberg) — US stocks pared early session gains Thursday as investors weighed mixed economic data against Nvidia Corp.’s strong forecast and the risks that Federal Reserve Chair Jerome Powell could take a hawkish tone at his speech Friday in Jackson Hole, Wyoming.
The S&P 500 Index dipped 0.3%, as of 10:33 a.m. in New York, while the Nasdaq 100 Index shed 0.6%, even after Nvidia hit its highest level on record and the Philadelphia Semiconductor Index was up more than 1.5%. The Dow Jones Industrial Average was just below flat. The policy sensitive two-year Treasury yield hovered near 5%.
Shares of Boeing Co. and its biggest supplier, Spirit AeroSystems Holdings Inc., fell after the planemaker disclosed improperly drilled holes in a component that helps maintain cabin pressure within the 737 Max jet. Meanwhile, Nvidia shares surged after the chipmaker at the forefront of an industry-wide artificial intelligence race delivered a third-straight sales forecast that surpassed Wall Street estimates.
With just a few days left in the month, the S&P 500 and Nasdaq 100 are on track for their worst month of the year. Though, coming off of Nvidia’s blowout results, the Nasdaq 100 has a chance to shift course and suppress worries that tech valuations have fallen out of sync with reality.
“Nvidia is the stock market’s new Tesla, where the market blindly assigns a ridiculously high and unrealistic valuation,” David Trainer, chief investment officer of New Constructs wrote in a note to clients. “We’re not denying that Nvidia is a great company, but we are pointing out that its valuation is beyond lofty and unjustifiable.”
Applications for US unemployment benefits fell to the lowest level in three weeks, suggesting demand for workers is still healthy. Initial claims decreased by 10,000 to 230,000 in the week ended Aug. 19, according to Labor Department data out Thursday. The median estimate in a Bloomberg survey of economists called for 240,000 applications.
Former Federal Reserve Bank of St. Louis President James Bullard said a pickup in economic activity this summer could delay plans for the Fed to wrap up interest-rate increases. While Bullard no longer serves as a central bank policymaker, the market still largely values his insights on the state of the economy.
Meanwhile, the Fed’s Jackson Hole symposium kicks off on Thursday and will feature appearances from various central banker leaders, including Fed Chair Jerome Powell on Friday morning. Investors are anxiously awaiting his remarks and hoping that his speech will allay fears that the central bank has longer to go in its interest-rate hiking cycle.
SECTORS IN FOCUS:
- Semiconductor and artificial intelligence stocks jumped after Nvidia forecast revenue for the third quarter that far exceeded the average analyst estimate.
- Shares of Boeing Co. and its biggest supplier, Spirit AeroSystems Holdings Inc., fell after the planemaker disclosed improperly drilled holes in a component that helps maintain cabin pressure within the 737 Max jet.
- Dollar Tree fell after the retailer provided a 3Q profit forecast that widely missed expectations. Second quarter gross margin came in shy of estimates.
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