All Eyes On Nvidia...

Before we get into today's market analysis, a quick note:

Trading NVDA stock around earnings is extremely risky for many reasons: high volatility, unpredictable market reactions and changing sentiment can all turn on you quick. Please remember this before you do anything silly.

Now, with the Federal Reserve signaling potential interest rate cuts, increasing geopolitical tensions, and the highly anticipated earnings report from Nvidia, the markets are poised for an eventful week.

Fed's Rate Cut

The tone for the weekend was largely set by Powell’s dovish remarks on Friday, where he all but confirmed that the Fed is ready to start cutting interest rates. Powell’s comments have been seen as a clear indication that the era of tight monetary policy may be coming to an end, with the first rate cut expected as early as September.

The 10-year Treasury yield slipping by 2 basis points to 3.78%, and the 2-year yield falling by 2 basis points to 3.89%. Lower yields suggest that investors are increasingly confident that the Fed will follow through on its plans to ease monetary policy, which could make bonds less attractive compared to stocks.

Nothing major will move before NVDA earnings Wednesday so the next 2 days are basically a waiting game.

Oil Prices Surge Amid Geopolitical Tensions

While the stock market was celebrating the Fed's dovish turn, geopolitical developments in the Middle East are driving a significant rally in crude oil prices.

Crude oil futures surged after reports emerged that 100 Israeli warplanes had struck southern Lebanon, targeting Hezbollah missile launchers in a pre-emptive strike.

As a result, Brent crude prices rose above $80 per barrel, while West Texas Intermediate (WTI) crude climbed past $75 per barrel. The rally in oil prices reflects concerns that the conflict could disrupt oil production and exports from the region, which is a major source of global crude supplies.

Bottom line: 0% of oil production had been affected at the time, so this is pure speculation.

Adding to the uncertainty, Libya's eastern government declared force majeure on all oil production and export operations after its Tripoli-based rival attempted to replace the leadership of the central bank.

This move actually threatens to disrupt oil flows from the Sirte basin, which is home to most of Libya's oil reserves and export terminals. Analysts at Citi warned that these disruptions could push Brent crude prices into the mid-$80s, further straining global energy markets, but again, nothing yet beyond speculation.

Nvidia’s Upcoming Earnings: The Most Anticipated Report of the Year

As the market heads into the final days of August, all eyes are on Nvidia, the tech giant that has become a darling of the artificial intelligence boom.

Nvidia is scheduled to report its second-quarter earnings on Wednesday, and expectations are high to say the least... Jensen better deliver the fuck out of this report, or we all going to pay the price. I have a bathtub full of Vodka ready for Wednesday if that happens.

Nvidia’s stock has been one of the standout performers of 2024, driven by strong demand for its GPUs, which are essential for AI applications. In fact, some market commentators have suggested that Nvidia’s earnings report could overshadow even the Federal Reserve's recent announcements, highlighting the importance of the company’s performance to the broader tech sector.

Dan Ives said a few days ago that Nvidia’s results could be the most important tech earnings report in years and I can't say he is wrong.

Impact of Geopolitical Tensions on Global Markets

The geopolitical tensions in the Middle East and North Africa are not only affecting oil prices but also having a broader impact on global financial markets.

In Asia, the Shanghai Composite Index ended flat, while Japan's Nikkei 225 dropped by 0.7% as a stronger yen weighed on export-oriented companies. European markets were mostly closed due to a holiday in the U.K., but the overall sentiment was cautious as investors weighed the potential for further escalation in the Middle East.

The U.S. dollar, which had fallen on Friday following Powell’s comments, remained steady over the weekend. The weaker dollar provided some support to commodity prices, including crude oil and gold, which both continued to climb.

Gold, often seen as a safe-haven asset during times of uncertainty, benefited from the geopolitical tensions and the prospect of lower U.S. interest rates.

Looking Ahead - Hold on To Your Tampones Folks

As the new week begins, the focus will shift to several key economic data releases and corporate earnings reports that could further influence market sentiment.

TODAY, the July Durable Goods Orders report is scheduled for release. We expect a 4% monthly increase, driven by strong demand for transportation equipment.

The Dallas Fed Manufacturing Survey, also due today, and it will provide additional insights into the health of the U.S. manufacturing sector. Given the recent decline in manufacturing activity, any signs of stabilization or improvement could be seen as a positive for the economy.

On Wednesday, the spotlight will be on Nvidia’s earnings report, as well as results from other tech companies like Salesforce, CrowdStrike, and HP.

Finally, on Friday, August 30, the Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) Index, will be released. This report will be closely watched as it could provide further clues about the timing and magnitude of the Fed’s anticipated rate cuts.

We expect the core PCE, which excludes food and energy prices, to rise by 0.2% on a monthly basis and by 2.7% year-over-year. Any surprises in this report could lead to significant market reactions, particularly if inflation is lower than expected, giving the Fed more room to cut rates.

Conclusion

Remain fucking vigilant and don't get over confident in anything.

This is a complex market landscape, balancing the potential benefits of lower interest rates against the risks posed by geopolitical uncertainties and the possibility of disappointing corporate earnings.

With so many factors at play, the market's direction in the final days of August is far from certain, making it all the more important for you motherlovers to stay informed and prepared for whatever may come next.

Grandpa needs me to drive him to Denny's for his breakfast so I'll see everyone later.

Tom