Originally published at: This week in charts: a US special – InvestEngine Insights
NVIDIA’s record earnings – still not enough
The AI giant NVIDIA reported earnings on Wednesday night, and despite a set of excellent results, the stock still fell 8% after hours. The company more than doubled its revenue, up 122% from a year earlier, beat earnings expectations with 68 cents vs 65 cents estimates, announced $50bn in share buybacks, and even raised future guidance. Its margins are over 50% – five times the average margin for an S&P 500 company.
It was, however, not enough for a company which the market demands absolute perfection from. Investors disliked that forecasts for the current quarter weren’t raised as much as in previous quarters, and also didn’t hear enough reassurance on how quickly the company’s next-generation Blackwell chip will roll out. This is a good reminder that stock markets don’t react to “good” or “bad” news – they react to better/worse than expectations.
Despite an exceptional set of results, the bar was still set too high.
Berkshire joins the club
Warren Buffett’s company, Berkshire Hathaway, topped $1 trillion in market value this week, becoming the first US non-technology company to do so. Berkshire shares have rallied more than 28% in 2024, far above the S&P 500′s 18% gain. The $1 trillion threshold was crossed just two days before the “Oracle of Omaha” turned 94 years old.
No surprises from Powell
After Jackson Hole, the economic Policy Symposium which often features speeches from the world’s central bankers, the market reacted well to Jerome Powell’s comments on the path of US interest rates.
He reinforced the market’s current expectation that the Fed will cut rates at next month’s Federal Open Market Committee meeting: “The time has come for policy to adjust. The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”
With more inflation and unemployment data coming in for August before the next Fed meeting, the market is currently weighing up whether we’ll see one rate cut or two. The market is currently expecting US rates to end this year at around 4.3%, falling to lows of around 3% by the end of next year:
US inflation paving the way
Interest rates are due to start their descent thanks to moderating inflation, as well as higher rates now starting to have a clear impact on the US employment market. Inflation has now been brought under 3%, and with more inflation data due out later today (Friday 30th), the market will be watching for further signs of edging towards the 2% target:
Gold surging
Fueled by the prospect of lower interest rates, the US Dollar Index is now at its lowest level of the year, as discussed in last week’s post. Because more gold, which is priced in dollars, can be purchased when the dollar is weaker, the gold price tends to rise as the dollar weakens.
Lower interest rates also tend to favour gold, as the opportunity cost of owning gold (the yield on bonds) is lower. The declining dollar and the prospect of lower rates have therefore both helped to boost the price of gold, which has recently risen to an all time high, up 22% year-to-date, at over $2,500/oz:
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