Nvidia’s Jensen Huang and new inflation data may shake markets

When Federal Reserve Chairman Jerome Powell said the time had come to start cutting interest rates, you could almost hear the applause from one side of the United States to the other.

Stocks rose in reaction to Powell’s speech. Interest rates have fallen. Gasoline prices also fell, and most people ignored that oil prices rose on Friday.

It was a good day. While the atmosphere, as he said, was benign until the weekend, one could still see that things could unravel.

Related: Analysts revise stock price target estimates after earnings

To underline this, Israel attacked Hezbollah positions in southern Lebanon on Sunday morning.

Information on casualties and deaths was not available as of 12:00 PM ET Sunday. It is unclear how the attacks and other fighting could affect global markets on Monday.

The geopolitical situation is adding more tension to a continuing current of unease with layoffs coming at many companies, including in technology, and lengthening small business bankruptcy lists.

Campaigns for the US presidential and national elections will go into full gear over the Labor Day weekend. In addition to worries in the Middle East, the war between Ukraine and Russia could become more dangerous than it already is.

In the meantime, here’s what to watch this week for the markets.

Follow the PCE report

The Fed began what appeared to be an era of good feelings last week with the August 21 release of minutes from its July meeting. Normally, these are monotonous, strange documents. He made it clear that interest rate cuts were very much on the Fed’s mind.

On August 30, the Commerce Department’s Bureau of Economic Analysis will release its July report on the Price Index for Personal Consumption Expenditures. It measures price changes in goods and services bought and used by consumers. It has fewer idiosyncrasies than the Consumer Price Index, and Fed governors and staff prefer it.

In June, PCE showed the index rose 2.5 percent from a year earlier. The consensus estimate is for a change of 2.4%, perhaps slightly less. Gasoline prices are lower. So are interest rates and the prices of some foods.

If the PCE report shows a sharp jump, markets will misbehave and the ever-data-dependent Fed may have to react.

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Nvidia will dominate investor discussions

Nvidia (NVDA) the developer of graphics processing units that are at the heart of artificial intelligence applications, is the star of the week. It reports its fiscal second-quarter earnings after the close on Wednesday.

Nvidia shares are up 161.2% in 2024 based on Friday’s close of $129.37. Its market capitalization of $3.182 trillion is now second only to Apple among US companies (AAPL) Market cap of $3.45 trillion. of Microsoft (MSFT) Its market capitalization of $3.01 trillion is third.

Nvidia is expected to report 64 cents per share, up a staggering 156% from the 25 cents per share reported a year ago. Revenue is projected at $28.6 billion, up 110% from the previous year.

The reason is that everyone involved in developing applications that use AI can’t get enough of Nvidia’s Hopper GPUs and hopefully the new Blackwell family of GPUs. The difference: The average Hopper GPU has 80 billion transistors. The average Blackwell GPU has 208 billion transistors.

There’s a problem, and a risk: Blackwell GPUs were supposed to be available at the end of the year. Now, according to The Information and other sources, the products won’t be available until March 2025 due to design flaws.

The issue will affect the plans of Microsoft, Facebook’s parent meta platforms (THE TARGET) and Google-parent Alphabet (GOOGLE) . All have said they are prepared to spend billions of dollars on GPUs and related drive parts to move forward.

So far, the reports have not affected the stock price. But analysts are sure to ask about Blackwell GPUs on the conference call after the earnings report is released.

Jensen Huang, co-founder and CEO of Nvidia, shows off the robots the company helped develop at a developer conference last winter.

Bloomberg/Getty Images

Don’t forget CrowdStrike

CrowdStrike (CRWD) the big cybersecurity company, would probably prefer, if no one notices, to release their earnings literally at the same time as Nvidia.

That’s because a flawed update it sent in July to customer networks built on Microsoft software caused computer outages around the globe. Among the worst affected were the airlines, especially Delta Air Lines (DAL) which could not repair the outages for several days. Television reports showed stranded passengers camped out near Delta ticket counters at airports across the country.

So far, it’s unclear whether CrowdStrike faces any financial liability from the computer outages.

CrowdStrike is expected to report fiscal second-quarter earnings of 97 cents per share, up 31% from a year ago. Revenue is projected at $958.6 million, up 30 percent from $731.5 million a year earlier.

Between the computer outage and the market sell-off in late July and early August, stocks had a volatile summer. Shares fell 49.7% between a peak of $393.33 on July 9 and a low of $200.81 on August 5. It’s up 35% since then and up 6.4% for the year.

Despite all the volatility, only one of the 50 analysts who cover the company rates it a sell, with two giving it an underweight rating. Thirty-two rate the stock a buy. Eight rates a hold.

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Among the companies also reporting this week

Tuesday: Department store retailer Nordstrom (JWN) . Estimate: 74 cents per share, down from 84 cents a year ago.

Wednesday: Dow Salesforce component (mRCC) . Estimate: $1.73 per share, up from $1.63. HP Inc. (HPQ) . Estimate 86 cents, unchanged from a year ago. Netapp NTAP. Estimate $1.15, up from 84 cents a year ago.

Thursday: Server manufacturer Dell Technologies (della) . Estimate $1.49, up from $1.44. Marvell chip manufacturing technology (MRVL) . Estimate: 13 cents, down from 18 cents a year ago. Fashion retailer Lululemon Athletica (LULU) Estimate: Estimate 2.94, up from $2.68.

Related: Veteran fund manager sees world of pain coming for stocks