Weekly comment: Stocks edge higher

3 minute read

Weekly podcast – Market overview

This week's host, Investment Manager, Chris Scott is joined by Head of Fixed Interest Research, Richard Carter and our Equity Research Analyst, Ben Barringer. Among the topics discussed - stock cut rates, non-farm payroll numbers, UK economy and much more.

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Market overview – Richard Carter, Head of Fixed Interest Research

Last week, the MSCI All Country World Index (MSCI ACWI) edged up by 0.3% (2.6% in August, 16.3% YTD) during a period of light trading ahead of the Labour Day weekend.

Trading volumes were around their lowest levels of the year, as earnings season draws to a close and markets digest recent developments. In the US, large-cap stocks posted a solid 0.3% gain (2.4% in August, 19.5% YTD), with value stocks (1.3%) outperforming growth stocks (-0.7%) by the widest margin since July. Tech stocks struggled, dropping 0.9%, largely due to a negative reaction to NVIDIA’s earnings results despite the figures being pretty solid.

European stocks ended the week 1.4% higher (1.8% in August, 11.3% YTD), a fourth weekly gain in a row for the benchmark as sharply slower inflation supported the case for the ECB to cut interest rates. German large caps added 1.5%, France, 0.7% and Italy 2.1%. The euro depreciated versus the dollar, ending the week at 1.10.

In the UK, large-cap stocks rose by 0.6% (0.8% in August, 11.5% YTD), while mid-cap stocks fell by 0.4%. The 10-year US Treasury note yield climbed by 10 basis points to 3.90%, as expectations for a significant Fed rate cut in mid-September waned. The 2-year Treasury yield remained stable at 3.92% (down 34bp in August and down 33bp YTD). UK bonds had a mixed week, with the 10-year gilt yield rising to 4.03% and the 2-year gilt yield slightly declining to 4.10%.

NVIDIA losses despite strong revenue report

Despite revenue more than doubling in the last quarter, shares in NVIDIA fell more than 6% on Thursday.

In its latest results, the chipmaker said it anticipated US$32.5bn in revenue in the third quarter, just ahead of analysts’ consensus expectations. However, the figure underwhelmed investors who have become accustomed to the chipmaker far outstripping Wall Street’s forecasts in recent updates.

The declines took almost US$200bn off the Silicon Valley-based company’s market value, which has soared amid a boom in spending on artificial intelligence. Nvidia shares are still up about 140% since the start of 2024.

Revenue in the three months to July 28 was US$30bn, up 122% from a year ago and ahead of analysts’ forecasts of US$28.7bn. The revenue outperformance was the smallest relative to expectations in six quarters, so this wasn’t the sort of massive beat that Nvidia has often reported, and investors had seemingly expected.

NVIDIA worked to reassure investors, saying it is seeing the momentum of generative AI accelerate as well as announcing another US$50bn of scheduled purchases in its share buyback programme.