Nvidia Corporation (NVDA) is on the cusp of releasing its latest quarterly earnings report, a highly anticipated event that has generated significant buzz among market participants. Ahead of this crucial announcement, traders have exhibited an "extreme buy" sentiment, signaling strong confidence in the semiconductor giant's performance and future prospects. This heightened interest comes at a time when the broader market is navigating a complex landscape, characterized by rising Treasury yields, persistent inflation concerns, and geopolitical tensions.
U.S. equity index futures experienced a slight retreat in the trading session preceding Nvidia's earnings release, marking a third consecutive day of losses. This downward pressure was largely attributed to the upward trajectory of Treasury yields, which have been weighing on equities. The S&P 500 closed down 0.7% at 7,353, the Nasdaq 100 fell 0.6% to 28,818, the Dow 30 declined 0.7% to 49,363, and the Russell 2000, representing small-cap stocks, dropped 1% to 2,747. The surge in Treasury yields was notable across the curve, with the 30-year yield reaching its highest point since 2007, and the 10-year yield hovering near 4.7%. These movements are occurring as inflation expectations continue to edge higher, and market pricing, as indicated by CME's FedWatch tool, suggests a majority expectation of a Federal Reserve rate hike in December.
Within this market environment, Nvidia's stock (NVDA) itself saw a modest decline of 0.77% in pre-earnings trading. The weakness extended to the broader semiconductor sector, which has been under pressure. However, there were some exceptions. Micron Technology (MU) managed a gain of 2.5%, showing a small bounce after a recent sell-off, and Marvell Technology (MRVL) experienced a more significant increase of 4.4% following an upgrade from Evercore ISI, which reiterated its "outperform" rating and raised its price target. These movements highlight the sector's volatility and the specific factors influencing individual companies.
Other notable stock movements included Alphabet (GOOGL), which reversed earlier gains to close down 2.1%, despite a significant $5 billion investment by Blackstone into a new AI infrastructure company associated with Google. Home improvement retailer Home Depot (HD) posted a gain of 0.9%, buoyed by a slight beat on earnings and revenue and the reaffirmation of its full-year guidance. Conversely, cloud company Akamai Technologies (AKAM) experienced a substantial drop of 6.3% after announcing plans to offer $2.6 billion in convertible senior notes. Shake Shack (SHAK) rallied 7.4% on the back of insider purchases totaling approximately $3.2 million, including a purchase by the company's CEO. In international news, Samsung Electronics faced a downturn as a strike involving over 47,000 workers was anticipated to commence the following day.
Meme stock participants saw mixed results, with GoPro (GPRO) down 6.5%, BlackBerry (BB) down 2.7%, and Avis (CAR) up 3.3%. The cryptocurrency market also presented a mixed picture. Coinbase (COIN) gained 2.1%, MicroStrategy (MSTR) fell 1.2%, Mara Holdings (MARA) rose 2.1%, Gemini Space Station (GSS) dropped 7.8%, Bullish (BULL) increased by 1.9%, and Circle Internet Group (CRKL) saw a slight decrease of 0.4%.
Commodities markets were under pressure, particularly gold, which slid back below the $4,500 mark and a key support level. This decline is linked to the escalating U.S.-Iran conflict, which has fueled surging Treasury yields and bolstered bets on Federal Reserve rate hikes. These factors act as significant headwinds for non-yielding assets like gold, especially as the U.S. dollar has strengthened on the foreign exchange front. Silver experienced even larger percentage losses, falling into the $73 range, pushing the gold/silver ratio back above 60.
Oil prices, however, showed resilience. West Texas Intermediate (WTI) crude futures climbed back above $103 per barrel after a brief period of pressure. This recovery occurred as markets digested President Trump's renewed threat of further military action if a deal was not reached within a few days. The Strait of Hormuz remained effectively closed for the 12th consecutive week due to the ongoing conflict, with NATO reportedly considering escort operations for commercial shipping. The American Petroleum Institute's (API) weekly energy inventory data revealed a larger-than-expected draw of 9.1 million barrels for crude oil, alongside declines in gasoline (-5.8 million barrels) and distillates (-1 million barrels).
In foreign exchange and central bank news, Bitcoin struggled to recover, hovering below $77,000 amid a firmer dollar and rising real yields. Ether underperformed, briefly dipping below $2,100, causing the Ethereum/Bitcoin ratio to decline further into the 0.027s. The U.S. Dollar Index remained in the lower 99s as yields climbed. The probability of a Fed rate hike this year tilted towards a slight majority, exacerbated by elevated energy costs impacting energy-exposed currencies. The EUR/USD pair briefly fell below 1.16 again, while USD/JPY saw some turbulence as it climbed into the 159s. The People's Bank of China maintained its Loan Prime Rates (LPRs) as anticipated, with the 1-year rate at 3% and the 5-year rate at 3.5%. Federal Reserve official Paulson expressed a preference for keeping rates unchanged for the time being, stating that rate cuts would require renewed progress on inflation. He warned that inflation risks remain "super-elevated" and that it is "healthy" to consider scenarios where rate increases might be necessary. European Central Bank officials Villeroy and Nagel indicated that the central bank would need to react if the supply chain and energy price shocks stemming from the Iran conflict persist. Japanese Finance Minister Katayama stated that "if necessary, we will take decisive action."
Client sentiment data from Capital.com indicated a shift in market psychology. For indices, the Dow 30 moved further into "heavy buy" territory, rising to 68% from 65% the previous day, following a price pullback that saw more short positions unwind. Sentiment for other U.S. indices remained largely unchanged. However, the FTSE 100 fell out of "extreme buy" territory, dropping to 76% from 79%, while the Nikkei 225 moved further into "heavy long" territory, increasing to 73% from 70% as price pullbacks encouraged short covering.
In commodities, gold sentiment moved to "extreme buy" and was rising, reaching 83% from 81% the prior day. This surge in bullishness coincided with gold breaking below a key support level, prompting some short covering and new long positions. Silver sentiment also saw a slight uptick to 87% from 86%. Conversely, WTI crude oil sentiment leaned towards a majority short bias, standing at 63% from 59%, approaching "heavy sell" territory.
In the foreign exchange market, EUR/GBP sentiment shifted back into "heavy buy" territory, rising to 69% from 64% the previous day. GBP/USD sentiment moved closer to the middle ground but remained a majority long position at 56%, down from 61%. Economic data released included U.S. pending home sales for April, which rose 1.4% month-over-month, exceeding the 1.0% forecast. In the UK, the unemployment rate for March unexpectedly increased to 5.0% from 4.9%, while average earnings, including bonuses, rose to 4.1%, hotter than anticipated. However, excluding bonuses, average earnings fell to 3.4%. Canadian CPI for April rose 0.4% month-over-month, below forecasts, with the year-over-year print at 2.8%, down from 2.4%.
Looking ahead to the day of the earnings release, key events included the release of minutes from the latest FOMC meeting, weekly mortgage applications, EIA's weekly energy inventory estimates, a 20-year Treasury auction, and speeches from FOMC members. Earnings reports were also expected from Nvidia, Target, and other companies. In the UK, CPI, PPI, and RPI data were scheduled, alongside German PPI and Eurozone CPI figures.
