What do you know this week

The last full week of August will bring two major events for investors – Nvidia (NVDA) earnings and the Federal Reserve’s annual conference call in Jackson Hole.

The Jackson Hole Economic Symposium will kick off Thursday, with Fed Chair Jay Powell’s speech Friday morning serving as the highlight of the event.

Powell’s commentary on the path forward for interest rates, the general health of the economy, and any inflationary pressures that indicate a rethink of the Fed’s current targets will be in focus.

On the corporate front, Nvidia is leading the earnings story this week as the company is set to report quarterly results that prompted the chipmaker to raise its revenue forecast by 50%.

Elsewhere on the company’s calendar, Lowe’s (LOW), BJ’s Wholesale Club (BJ), and Peloton (PTON) are also expected to report next week.

August is so far shaping up to be the worst month of the year for stocks.

All three major averages closed lower last week as a dovish reading of the July Federal Reserve meeting minutes sent stocks lower and Treasury yields higher in the back half of the week.

Powell is set to speak as economic data continues to come out stronger than expected.

Last week, the retail sales report for July showed that sales grew 0.7% for the month, double what economists had expected. The report sent AtlantaFed’s now GDP forecasts higher, with the tracker now estimating that third-quarter GDP growth will reach an annualized rate of 5.8%, the fastest pace since the fourth quarter of 2021.

Another sign that, in some experts’ view, the economy may be too strong for the Fed’s satisfaction.

“Powell should look less level-headed in Jackson Hole in our view, because the latest data raises the risk of a new surge in inflation,” Bank of America’s economics team wrote in a note on Friday.

The inflation rate has decreased significantly since last year Jackson Hole speechPowell said that interest rates would rise until the “mission” to bring down inflation was done. As recently as July, Powell noted that inflation remains “well above” the Fed’s long-term target of 2%.

Importantly, Powell’s speech comes ahead of the release of PCE inflation data on August 31 and the August jobs report on September 1.

“We don’t see Powell giving much direction on the direction of policy at next week’s Jackson Hole meeting,” Michael Feroli, chief US economist at JP Morgan, wrote on Friday. “Probably the only thing he could say that would have the committee’s support is that policy will remain restricted as long as it takes undue inflationary pressures to be squeezed out of the economy.”

Federal Reserve Chairman Jerome Powell arrives for a press conference at the William McChesney Martin Jr. Federal Reserve Building after the Federal Open Market Committee meeting on Wednesday, July 26, 2023 in Washington.  (AP Photo/Nathan Howard)

Federal Reserve Chairman Jerome Powell arrives for a press conference at the William McChesney Martin Jr. Federal Reserve Building after the Federal Open Market Committee meeting on Wednesday, July 26, 2023 in Washington. (AP Photo/Nathan Howard)

On the company side, all eyes will be on Nvidia. In May, the chipmaker said it expected demand for artificial intelligence to raise its sales forecast for the current quarter from about $7 billion to $11 billion. These predictions culminated in what was already a crazy spring of investor excitement around AI. The bill is due on Wednesday.

Nvidia stock is up nearly 200% over the year, though its gains have eased along with the broader market since mid-July. How the company follows up on its surprise news from May could have broader market implications.

“NVDA is literally serving as the ‘kingmaker’ as a massive wave of capital and new funding vehicles chases new AI software and specialized cloud infrastructure models while early stage companies are still grappling with access to enough capacity to build AI at scale,” he wrote. “This will likely continue well into next year,” UBS analyst Timothy Arcuri wrote in a note last week.

“Even for the most tactical investors, it’s still early to get off this train because (year-over-year) companies won’t get tough until the end of the year and the stock has rarely peaked before the companies (year-over-year) peak.”

Nvidia’s earnings report in late May also marked a shift in overall market sentiment for the year.

After stocks lifted tech names higher, Wall Street strategists are getting more candid about the stock’s outlook in 2023. Many have beefed up their year-end targets for the S&P 500, specifically citing artificial intelligence.

With this year’s rally coming to a halt in August, the exuberance around artificial intelligence seems to have lost some of its luster.

And the way to get the market back for mojo, according to Evercore ISI’s Julien Emmanuel, will be Nvidia shares to start a new rally higher.

“As the public has begun to sell off stocks in recent weeks in a difficult (seasonal) period, we would expect anything other than a decisive breakout (in NVDA stock) towards $500 as neutral to negative for the broader market, while maintaining a view of uncertainty,” Emanuel wrote in a blog post. Note on Friday.

Weekly calendar

Monday

Earnings: Zoom (ZM)

economic data: No notable economic data.

Tuesday

Earnings: BJ’s Wholesale Club (BJ), COTY (COTY), Dick’s Sporting Goods (DKS), Lowe’s (LOW), Macy’s (M), Toll Brothers (TOL), La-Z-Boy (LZB), Urban Outfitters (URBN)

economic news: Existing Home Sales, July (4.15M forecast, 4.16M previously); Existing Home Sales MoM, July (-0.2% forecast, -3.3% prior); Richmond Fed Manufacturing Index, August (previously -9)

Wednesday

Earnings: Advanced Auto Parts (AAP), Bath and Body Works (BBWI), Foot Locker (FL), Kohl’s (KSS), Nvidia (NVDA), Snowflake (SNOW), Williams-Sonoma (WSM)

economic news: US S&P Global Manufacturing PMI, Preliminary Read, August (49 expected, 49 prior); S&P Global US Services PMI, preliminary read, August (52 forecast, 52.3 previously); New Home Sales, July (707,000 expected, 697,000 previously)

Thursday

Earnings: Confirms (AFRM), Burlington Stores (BURL), Dollar Tree (DLTR), GAP (GPS), Intuit (INTU), Marvell Technology (MRVL), Nordstrom (JWN), TD Bank (TD), Workday (WDAY), Ulta Beauty (ULTA)

economic news: Initial Jobless Claims, Week Ending Aug 19 (239,000 Previous), Durable Goods Orders, July (-4.0% expected, +4.6% prior)

Friday

Earnings: There are no noticeable profits

economic news: University of Michigan Consumer Confidence, August Final Reading (71.2 expected, 71.2 prior); Federal Reserve Chairman Jerome Powell speaking in Jackson Hole.

Josh Shaffer is a correspondent at Yahoo Finance.

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