U.S. Stocks May Regain Ground Despite Negative Reaction To Nvidia Results

After ending the previous session mostly lower, stocks are likely to move back to the upside in early trading on Thursday. The major index futures are currently pointing to a higher open for the markets, with the S&P futures up by 0.4 percent.

Stocks may rebound following the tech-led weakness on Wednesday amid ongoing optimism about the outlook for interest rates.

The Dow is likely to benefit from a surge by shares of Salesforce (CRM), as the business software maker is jumping by 4.4 percent in pre-market trading after reporting better than expected fiscal second quarter results and raising its full-year profit forecast.

On the other hand, a slump by shares of Nvidia (NVDA) may limit the upside for the markets, with the AI darling tumbling by 3.1 percent in pre-market trading.

The drop by Nvidia comes even though the company reported fiscal second quarter results that exceeded analyst expectations and forecast fiscal third quarter revenues above estimates.

“It looks like investors might not have taken the average of analyst forecasts to be the benchmark for Nvidia’s performance, instead they’ve taken the highest end of the estimate range to be the hurdle to clear,” said Dan Coatsworth, investment analyst at AJ Bell. “The top end was $0.71 earnings per share compared to the $0.68 earnings per share which the company achieved.”

“Another disappointment for investors was the pace of earnings growth,” he added. “Even though Nvidia is still making more money each quarter than the previous one, the growth rate is slowing. That has triggered alarm bells in the market that the AI gravy train might be losing power.”

In U.S. economic news, the Labor Department released a report showing first-time claims for U.S. unemployment benefits edged slightly lower in the week ended August 24th.

The report said initial jobless claims slipped to 231,000, a decrease of 2,000 from the previous week’s revised level of 233,000.

Economists had expected jobless claims to come in unchanged compared to the 232,000 originally reported for the previous week.

The Commerce Department also released a report showing the U.S. economy unexpectedly grew by more than previously estimated in the second quarter.

The report said the surge by gross domestic product in the second quarter was upwardly revised to 3.0 percent from the previously reported 2.8 percent. Economists had expected the pace of GDP growth to be unrevised.

With the upward revision, the pace of GDP growth in the second quarter showed an even faster acceleration compared to the 1.4 percent jump in the first quarter.

Shortly after the start of trading, the National Association of Realtors is due to release its report on pending home sales in the month of July. Pending home sales are expected to increase by 0.4 percent in July after surging by 4.8 percent in June.

Stocks moved mostly lower during trading on Wednesday, with weakness in the tech sector weighing on the broader markets. With the downward move on the day, the Dow pulled back off the record closing high set on Tuesday.

The major averages climbed well off their worst levels in the latter part of the session but remained in the red. The tech-heavy Nasdaq slumped 198.79 points or 1.1 percent to 17,556.03, the S&P 500 slid 33.62 points or 0.6 percent to 5,592.18 and the Dow fell 159.08 points or 0.4 percent to 41,091.42.

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Thursday. Japan’s Nikkei 225 Index closed just below the unchanged line, while China’s Shanghai Composite Index fell by 0.5 percent and South Korea’s KOSPI declined by 1.0 percent.

Meanwhile, the major European markets have moved to the upside on the day. While the U.K.’s FTSE 100 Index is up by 0.4 percent, the French CAC 40 Index and the German DAX Index are both up by 0.7 percent.

In commodities trading, crude oil futures are climbing $0.56 to $75.08 a barrel after slumping $1.01 to $74.52 a barrel on Wednesday. Meanwhile, after falling $15.10 to $2,537.80 an ounce in the previous session, gold futures are inching up $5.60 to $2,543.40 an ounce.

On the currency front, the U.S. dollar is trading at 145.32 yen versus the 144.59 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1074 compared to yesterday’s $1.1120.