Stock Markets Down Ahead of Nvidia Earnings
Earlier today, stock markets showcased a vibrant mix of advances and retreats across various sectors during the European and early U.S. trading sessions, creating a complex landscape for traders. However, as the U.S. session neared its end and anticipation built around Nvidia’s earnings data release, stocks began to pull back due to concerns over potential outcomes. Nvidia shares dropped by over 5%, while the Nasdaq followed suit with a decline of around 1.5%.
Nvidia Pre-Earnings Market Impact
The options market was predicting a 10% movement in Nvidia shares once earnings are announced after the U.S. session closes, which could easily result in a 1-3% swing in the Nasdaq tomorrow. Nvidia’s stock experienced a significant decline of over $50 from early June to early August, driven by deteriorating sentiment. However, this downward trend eventually halted as risk sentiment improved across financial markets. Throughout this month, Nvidia shares have been mostly on the rise. On the daily chart, the price surged above all moving averages, with the 50-day SMA (yellow) turning into a key support level. The stock has remained above this moving average for over a week as traders and investors await Nvidia’s earnings report.
Nvidia Chart Daily – The 50 SMA Acting As Support
The Nasdaq is down nearly 1.7% as investors anxiously await Nvidia’s earnings report, with chipmakers also at the lows, as traders expect that they will trade in line with Nvidia tomorrow, which suggests that the sector is bracing for the impact of Nvidia’s results. A concerning trend has emerged: even megacap stocks that have met or exceeded earnings expectations have pulled back during this earnings season. While part of this reaction may be attributed to the macroeconomic backdrop in early August, it serves as a reminder of the high stakes involved.
In the case of Nvidia, the market consensus often fails to accurately predict stock price action, indicating that investor sentiment may not always align with fundamental performance. The current stock market rally is not only based on the hope of a smooth economic landing but also on the anticipation of significant long-term growth. Given these heightened expectations, there is a real risk of disappointment. If Nvidia’s earnings do not meet the high bar set by the market, it could trigger a broader sell-off, reflecting the delicate balance investors are trying to maintain between optimism and caution.
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