Wall Street Prepares for a Crucial Week: Nvidia, CrowdStrike, and Key Economic Indicators in Focus

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Key Highlights:

As Wall Street gears up for another trading week, marking the end of the Q3 reporting season, all eyes are on NVIDIA's upcoming earnings report. The report, scheduled for Wednesday after trading hours, is expected to be a defining moment for the overall sentiment of the reporting season, particularly amidst concerns among investors about the viability of continued investments in artificial intelligence (AI) stocks.

NVIDIA Earnings Expectations and Market Impact

Analysts anticipate NVIDIA to report revenues of approximately $28.5 billion, more than double compared to the corresponding quarter in 2023. Earnings per share (EPS) are projected to be around 65 cents per share, a significant increase from the previous year. Much of NVIDIA's revenue is attributed to the "Magnificent Seven" string, with Microsoft alone accounting for about 20% of NVIDIA's revenue.

However, there are concerns about whether NVIDIA's stock is generating too much euphoria. NVIDIA's stock has surged more than 150% this year and has been the best performer among the 500 S&P500 stocks, with its return responsible for almost a third of the entire S&P500's stock return.

Cybersecurity Stocks in Focus: Crowdstrike and Sentinel One

In addition to NVIDIA, several other companies will report their earnings this week, including Crowdstrike and Sentinel One in the cybersecurity sector. Crowdstrike will report its results on Wednesday after trading, for the first time since a major glitch last month that caused its stock to drop by 30%. In contrast, Sentinel One, Crowdstrike's main competitor, will report on Tuesday before trading and has seen its stock increase by 20% since Crowdstrike's glitch.

Retail and Consumer Goods Companies Reporting

Thursday will see earnings reports from Best Buy and Dollar General, providing further insights into the purchasing power of the American consumer following the encouraging reports from Target and Walmart. Additionally, Dell will report on Thursday after trading, having recently announced its intention to lay off 12,500 employees as part of a streamlining effort to compete more effectively against Intel in the field of servers for artificial intelligence. Ulta Beauty, Warren Buffett's new stock pick, will also report on the same day.

On the macroeconomic front, fears of a recession in the US have nearly dissipated. Despite a downward revision of employment data by more than 800,000 jobs, additional data published this month, particularly the consumer price index, indicates that the American economy continues to expand. Sales of second-hand homes increased by 1.3% in July, although this still represents a decrease of 2.5% compared to a year ago. New home sales rose by 11%.

Oktai Kabarak, a product strategist at investment company Leverage Shares, notes that positive sentiment has returned to the market due to cooling inflation, increasing company profitability, and expectations of easing monetary policy. However, warning signs from the labor market persist, with the market pricing in a 70% probability of a quarter percent interest rate cut in September.

As investors navigate the final stretch of the Q3 reporting season, it is crucial to carefully assess the earnings reports and their potential impact on market sentiment. NVIDIA's report will be a key determinant of the overall success of the reporting season, particularly in light of the ongoing enthusiasm surrounding AI stocks.

Investors should also keep a close eye on the performance of cybersecurity stocks like Crowdstrike and Sentinel One, as well as retail and consumer goods companies, to gauge the resilience of consumer spending and the broader economic landscape.

While the diminishing fears of a recession in the US provide a positive backdrop, investors should remain cautious and consider the potential risks associated with the labor market and the sustainability of the current market euphoria, particularly in the case of NVIDIA.

Other Notable Earnings Reports

Apart from the aforementioned companies, several other notable earnings reports are scheduled for this week. Foot Locker will report on Wednesday before trading, while Lululemon will report on Thursday after trading. These reports will provide further insights into the sports clothing and footwear sector, complementing the overall picture of consumer spending and market sentiment.

Conclusion

As Wall Street concludes the Q3 reporting season, investors eagerly await NVIDIA's earnings report, which has the potential to shape the overall sentiment of the market. While the diminishing fears of a recession in the US and the positive performance of the American economy provide a favorable backdrop, concerns persist regarding the sustainability of investing in AI stocks and the potential risks associated with the labor market.

Investors should carefully consider the earnings reports of key companies across various sectors, including cybersecurity, retail, and consumer goods, to make informed investment decisions. By assessing the financial performance, market trends, and potential risks, investors can navigate the current market landscape and position their portfolios accordingly.

As always, it is essential to maintain a long-term perspective and diversify investments to mitigate risks and capitalize on potential opportunities. By staying informed and adapting to the evolving market conditions, investors can make well-informed decisions and potentially benefit from the trends shaping the current reporting season and beyond.

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Please note that the article should not be considered as investment advice or marketing, and it does not take into account the personal data and requirements of any individual. It is not a substitute for the reader's own judgment, and it should not be considered as advice or recommendation for buying or selling any securities or financial products.

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