Eight and seven. Those are the weekly gain streaks the S&P 500 Index (SPX) and Nasdaq (COMP) appear to be on pace for barring some sort of major setback today.
At least early on, a setback seems unlikely. Indices got an initial boost in pre-market trading after an administration official said negotiations over the first phase of a trade agreement with China were coming down to the final stages, with the two sides in close contact. While that sounds nice, it’s probably not a good idea to get too optimistic yet. These talks go back and forth like a pendulum (see more below).
On the earnings side, the pendulum also swung for Nvidia Corporation /zigman2/quotes/200467500/composite NVDA -0.43% . The stock fluctuated between gains and losses in futures trading after the chipmaker beat analysts’ Q3 earnings and revenue estimates but issued Q4 revenue guidance slightly below Street views. Investors don’t seem to know right away what to make of its results, judging by the stock moves.
Though the company’s outlook appeared to disappoint, it did say it expects strong data center growth ahead. Artificial intelligence (AI) and gaming continue to look good. For what it’s worth, several analysts raised their NVDA stock price targets after the earnings news. It also got downgraded by another analyst. Most analysts did seem cheered by the results, however.
In other earnings news, J.C. Penney Inc /zigman2/quotes/204684963/composite JCP -4.39% looked a little more lively, and Applied Materials, Inc. /zigman2/quotes/209393259/composite AMAT -0.53% was another chip company that surprised to the upside. Across the Pacific, Chinese e-commerce company JD.com, a competitor of Alibaba Group Holding, Ltd. /zigman2/quotes/201948298/composite BABA +3.15% , swung to gains on solid results. It’s good to see the Chinese consumer looking healthy.
Looking overseas for a moment, the news from Hong Kong didn’t match Friday morning’s mostly positive vibe. Final Hong Kong gross domestic product (GDP) data for the three months ended in September confirmed the economy contracted for the second consecutive quarter—meeting the technical definition of a recession. GDP fell 3.2% on the quarter, the biggest drop since the start of 2009.
While Hong Kong is relatively small, it plays an outsize role in the Asian economy and it’s definitely not good news to see it enter a recession. There’s been major civil unrest there for a while, so maybe that played a role. Stocks in Hong Kong were flat Friday, with mixed results for other Asian markets. In Europe, stocks were solidly lower as of midday over there.
For those of you keeping score at home, retail sales bounced back in October with a 0.3% rise. That was in line with analysts’ expectations and might ease some of the concern that we saw the previous month when the data looked surprisingly weak.
We’re going into the weekend, so it wouldn’t be surprising to see a little caution today as investors position themselves for the time away.
Investors appear to be catching onto the idea that you can’t get too excited or too downhearted about every headline on the trade talks. The news this week hasn’t been as good as earlier this month, but the market continues to hold its ground and the general consensus feeling is that we’re closer to a deal now than we were a month ago.
The SPX eked out a slight gain yesterday and managed another record close despite negative trade headlines, perhaps partly because people have woken up to the fact that negotiations take a long time. We’ve said it before and might have to say it again: There’s nothing to get excited about one way or the other until a deal is signed.
It’s also possible that investors have their eyes more firmly on critical developments like earnings. We’re more than 90% of the way through earnings season, and generally the numbers have been better than most people thought they’d be. A month ago, the fear was, “recession, recession, recession.” Those recession headlines haven’t shown up in nine or 10 trading sessions. Some of that concern appears to have melted away like early November snow.
Bonds rallied this week, possibly reflecting some worries about overseas data. Weak economic news popped up around mid-week from China, Germany, and Japan. This might have gotten some investors afraid of what’s happening elsewhere and sent them back in to buy some bonds. That pushed yields way down from their peak near 2% this week for the 10-year Treasury note, and might also explain why the dollar is holding so firm.
Typically, higher bond prices might suggest dollar weakness, but in the scenario we’re in where the U.S. still looks like the best house on the block, investors might be snapping up whatever U.S. assets they can find. Other “defensive” assets like the Japanese yen and gold have also had a little run lately, and the Chinese stock market has kind of flattened out. Some overseas markets have stayed firm, though, including stocks in Germany and Japan.
Black Friday is shaping up as the next possible catalyst for U.S. stocks, even though it’s two weeks away. There’s a lot of talk about the consumer being strong despite business spending looking soft, and Walmart Inc /zigman2/quotes/207374728/composite WMT +0.28% results yesterday played into that.
One thing that could be a challenge for holiday spending, by the way, is the shorter season. Thanksgiving is later than usual this year, falling on Nov. 28 vs. Nov. 22 last year, meaning the holiday shopping period is six days shorter than a year ago. That could be something to keep in mind when comparing sales year-over-year. A straight comparison just wouldn’t reflect reality.