2 big tests ahead will determine if last week’s stock market excitement was
Wall Street takes back-to-back weekly gains and an overbought market into an important week featuring Nvidia earnings and the latest reading on the Federal Reserve’s favorite inflation gauge. Fed Chairman Jerome Powell on Friday gave the speech from Jackson Hole that investors wanted to hear. The S & P 500 and Nasdaq bounced back from Thursday’s losses, and each finished the week up nearly 1.5%. Powell indicated interest rate cuts are on the way, saying the “time has come for policy to adjust.” The market now expects 100 basis points, or 1 percentage point, of cuts by the end of the year. The current odds, according to the CME FedWatch tool , are for a 25-basis-point cut in September, a possible 50-basis-point cut in November, and a 25-basis-point cut in December. TJX Companies was our best-performing stock of the week, adding more than 6.5% after the off-price retailer’s strong quarterly beat and guidance raise. We increased our price target to $130 per share from $115 but kept our 2 rating, meaning we would want to see a pullback in shares before considering further buys. Shares of Palo Alto Networks were also strong on the week, gaining 4%. The cybersecurity leader delivered strong earnings and a promising outlook after Monday’s close. We kept our 2 rating but raised our PT to $380 from $360. Estee Lauder also reported earnings last week. However, we opted to boot the stock upon seeing the release because we didn’t see the progress we needed to see in the prestige beauty market. Monday’s exit got ahead of the S & P Short Range Oscillator officially tipping overbought. That came after Monday’s close and remained overbought all week. Since discipline calls for us to do some selling in an overbought market, we also trimmed Morgan Stanley and Abbott Laboratories on Tuesday. Club earnings Looking ahead, earnings season continues with what may be the most anticipated release of the season coming after Wednesday’s close when Nvidia reports. NVDA YTD mountain Nvidia YTD Nvidia is set to deliver fiscal 2025 second-quarter. Last week, we provided some thinking on Nvidia’s stock price and the overall market setup going into the report. We feel pretty good about what Nvidia will have to say about fiscal Q2 given its largest customers in their own earnings reports signaled no let-up in capital expenditure spending. Investors will be hyper-focused on Nvidia’s guidance for the current quarter (fiscal Q3). On the post-earnings conference call, commentary about the supply and demand dynamics will also be crucial, especially with indications of a short delay of Nvidia’s next-generation Blackwell artificial intelligence chip architecture. We think the Blackwell concerns will prove largely inconsequential. Growth in services will also be a key watch item as a longer-term driver of further value creation. CRM YTD mountain Salesforce YTD Salesforce on Wednesday evening also reports its fiscal 2025 second quarter. It was a brutal showing last time around as…
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