Nvidia earnings optimism drives futures higher

Cam White | August 22, 2023

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(Reuters) – U.S. stock index futures advanced on Tuesday as optimism around a keenly-awaited earnings report from Nvidia kept megacap growth stocks on a strong footing, while a slide in the 10-year government bond yield also boosted equities.

After sharp losses in the previous week on worries over higher-for-longer interest rates, U.S. equities regained some ground on Monday due to a rally in Nvidia and other technology-related stocks ahead of the chip designer’s second-quarter earnings on Wednesday.

Shares of Nvidia climbed 1.7% in premarket trading on Tuesday after adding nearly 9% in the previous session.

Other big technology and growth stocks also rose, with Tesla advancing 3.7% after logging its biggest one-day percentage gain since March in the previous session.

“The AI hype train continues to push Nvidia higher ahead of its results,” said AJ Bell investment director Russ Mould.

Focus will be on whether Nvidia’s forecast could meet the high expectations set by market participants following a blockbuster report last quarter that fuelled a blistering rally in stocks driven by a frenzy around artificial intelligence.

“A very high bar is being set for the chipmaker and the disappointment could be amplified if it falls short of heightened expectations,” Mould said.

Meanwhile, helping keep the pressure off equities, the yield on the 10-year Treasury note slipped from a 15-year high of 4.35% and was last at 4.31%.

The recent selloff in bonds was driven by evidence of a strong U.S. economy, which dampened hopes of the Federal Reserve easing monetary policy anytime soon.

A meeting of central bankers at Jackson Hole, which starts on Thursday, will be closely monitored by investors for more cues on the direction for U.S. interest rates. Fed Chair Jerome Powell’s speech at the meeting will grab the spotlight on Friday.

Traders’ bets of a pause in rate hikes next month stand at 84.5%, while odds of a 25 basis point rate hike in November have risen to nearly 40% from about 35.8% a week ago, according to CME Group’s FedWatch tool.

At 5:28 a.m. ET, Dow e-minis were up 61 points, or 0.18%, S&P 500 e-minis were up 14.25 points, or 0.32%, and Nasdaq 100 e-minis were up 66.75 points, or 0.45%.

Among other stocks, shares of Zoom Video Communications rose 4.2% in premarket trading after the video-conferencing platform forecast third-quarter profit above Wall Street estimates.

Activision Blizzard gained nearly 1% after Microsoft offered to sell the “Call of Duty” maker’s non-European streaming rights to Ubisoft Entertainment to get the deal past British regulators.

(Reporting by Amruta Khandekar; Editing by Shinjini Ganguli)