Stocks Rally Ahead Of Nvidia's Earnings; Treasury Yields Plunge On Soft Data: What's Driving Markets Wednesday?

Stocks were rallying during midday trading, driven by the tech sector’s advances as investors eagerly await the quarterly earnings report from Nvidia Corp. NVDA, scheduled to be unveiled after the market close.

A backdrop of lower-than-anticipated Purchasing Managers’ Index (PMI) data and downward revisions in payroll projections, down by 306,000 for the year leading up to March 2023, has set the tone for the session, easing concerns about potential future rate hikes by the Federal Reserve.

Both Treasury yields and the dollar are trending downward, providing the long-awaited relief sought by the market. Notably, the 10-year Treasury yield has declined by 11 basis points, settling at 4.20%.

Cues From Wednesday’s Trading:

The S&P 500 surged 1%, while the Nasdaq 100 index soared 1.5%. Blue chips stocks in the Dow Jones Industrial Average edged 0.4% higher, while small caps in the Russell 2000 index rallied 1.1%.

US Index Performance On Wednesday

Index	Performance (+/-)	Value
Nasdaq 100	+1.54%	13,147.08
S&P 500 Index	+1.01%	4,441.16
Dow Industrials	+0.42%	34,438.13
Russell 2000	+1.06%	1,875.11

Analyst Color:

The current pullback could be limited in depth and duration, said LPL Financial Chief Technical Strategist Adam Turnquist. The analyst attributed the view to the lack of damage to the market depth amid the pullback and the composition of leadership underneath the surface.

“At a high level, while there has been some technical damage, it has not been severe, and overall breadth is holding up relatively well,” Turnquist said. The measure the analyst used to quantify market depth was the percentage of S&P 500 stocks trading above their longer-term 200-day moving average.

“The higher the percentage of stocks above their 200-dma, the more widespread the buying pressure is —implying the market's advance is likely sustainable,” he said.

The technical strategist noted that over half of the index was still holding up above its 200-DMA, with cyclical or more offensive sectors outperforming.

Chart Courtesy of LPL Financial

Wednesday’s Trading In Major US Equity ETFs

• The SPDR S&P 500 ETF Trust SPY was 1% higher to $442.51
• The SPDR Dow Jones Industrial Average ETF DIA rose 0.5% to $344.50
• The Invesco QQQ Trust QQQ rose 1.6% to $369, according to Benzinga Pro data.

• All S&P 500’s sectors traded in the green today, with the sole exception of the Energy Select Sector SPDR Fund XLE down 0.5%.
• The Technology Select Sector SPDR Fund XLK was the best performer, up 1.8%.
• The Communication Services Select Sector SPDR Fund XLC was the laggard, down 0.9%.

Latest Economic Data:

The S&P Global US Manufacturing PMI dipped from 49 in July to 47 in August 2023, falling short of market forecasts of 49.3.

The S&P Global US Services PMI fell from 52.3 the previous month to 51 in August 2023, falling short of market forecasts of 52.2 and reflecting the slowest growth in the U.S. services sector in six months.

Sales of new single-family houses increased by 4.4 percent to a seasonally adjusted annualized rate of 714,000, the highest level since February 2022 and exceeding the market consensus of 705,000.

See also: Futures Vs. Options

Stocks In Focus:

• Nvidia added about 2% ahead of its quarterly results due after the market close.
• Foot Locker, Inc. FL fell over 30%, following the company’s second-quarter results and weaker outlook.
• Apellis Pharmaceuticals, Inc. APLS soared 31%, after the company released a comprehensive update regarding its Syfovre (pegcetacoplan injection) treatment for geographic atrophy (GA) secondary to age-related macular degeneration (AMD).
• Williams-Sonoma, Inc. WSM rose 12% in reaction to its earnings.
• Peloton Interactive, Inc. PTON fell 25% after missing EPS estimates.
• Nike Inc. NKE fell for the tenth session in a row, the worst losing streak on record for the retailer.
• Companies reporting after the close include Autodesk, Inc. ADSK, Splunk, Inc. SPLK, Nvidia, Guess?, Inc. GES and Snowflake, Inc. SNOW.

Commodities, Bonds, Other Global Equity Markets:

Crude oil fell 0.8%, with a barrel of WTI-grade crude trading at $79. The United States Oil Fund ETF USO was 0.9% lower to $71.6.  

Treasury yields were lower, with the 10-year yield down by 12 basis points to 4.20% and the two-year yield down by 10 basis points to 4.95%. The iShares 20+ Year Treasury Bond ETF TLT was 1.7% higher for the day. 

The dollar fell, with the U.S. dollar index, which is tracked by the Invesco DB USD Index Bullish Fund ETF UUP, down 0.2%. The EUR/USD pair, which is tracked by the Invesco CurrecyShares Euro Currency Trust FXE, was 0.2% higher to 1.0860.

European equity indexes closed in the green. The SPDR DJ Euro STOXX 50 Etf  FEZ rose 0.5%. 

Gold gained 1.1% to $1,918/oz. The SPDR Gold Trust GLD was 1.1% higher to $178. Silver rocketed 3.8% to $24.29, with the iShares Silver Trust SLV up 3.8% to $22.30. Bitcoin BTC/USD was 1.6% higher to $26,444.

Staff writer Piero Cingari updated this report midday Wednesday. 

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