The Tech-Heavy Nasdaq Composite index and its Wall Street ilk kinda found a few hours of equilibrium late on Friday night in New York.

But not a lot.

There’s been a third straight week of declining US bond yields, unwelcome resilience in American economic indicators, overshadowed late in the day by a flush of new doubts around the China’s economic sanity.

It’s a question of sentiment and Wall Street is looking very emotional after a turbulent fiscal ’23.

The Dow Jones Industrial Average scraped home to end 0.07% higher at 34,500.66, while the S&P 500 missed the bell by 0.01%, or, 0.65 points – finishing at 4,369.71.

Still, the Nasdaq Composite just couldn’t make it home on time – some 26.16 points short of parity – or circa 0.2%, to end the session at 13,290.78.

For the week the Dow saw a 2.2% drop, marking its biggest decline since March.

Likewise, the S&P 500 gave up 2.1%, making a third consecutive week of losses.

The Nasdaq itself gave away 2.33%, marking its worst weekly run of outs since Christmas.

One can pin the blame on the big kids – Messrs Amazon (AMZN), Alphabet (GOOGL), Meta (META) and Microsoft (MSFT) just got worse as the week rolled on. Over the last five weeks the NYSE FAANG+ index has made a sharp turn back down the way it came, (down -13.5%).

It’s also easy to blame Apple (APPL), but the software king actually helped straighten the cart, rising to the Friday close by 0.3%, after copping an -11% slide to end Friday back where it often is – the single biggest gravitational influence on Wall Street in size, cap-weight, strength and sentiment.

US indices have now extended their combined August pullback to -8.6%.

Market Matters’ James Gerrish – also a PM at Shaw and Partners, (running circa $20 billion of AUM) – says his team will be looking at bonds and investors’ appetite for any positives out of China.

“If they hold up well it could easily provide the catalyst for buyers to return… along with NVIDIA’s result this week” (see below).

Source: Nasdaq/Bloomberg Via MarketMatters

 

US Earnings: All about NVDA

Because, really, Wall Street will be hanging all its hopes on just one company this week, and that’s Nvidia (NVDA) which shows its Q2 cards on Wednesday night our time.

As this esteemed publication foresaw many moons ago, the American AI chipmaker smashed the March quarter and wowed investors with an even more bullish June quarter guidance.

Since then, it’s been three months of merry making and high fives…

Screenshot Via Google

However, with everyone’s hands off the wheel suddenly NVDA’s Day of Reckoning is upon us.

A win could even have the same effect as a loss. Reason thusly: a poor result could send fragile Wall Street sentiment into a self-perpetuating tailspin of self-pity and AI/Big Tech revaluation.

But with NVDA stock up over 200% at the time of penning, (44% since June quarter guidance), it still makes for a handsome profit.

Bought on more than just a rumour, NVDA does look beautifully set for a major Wall Street sell-the-fact moment.

That said, Citigroup for one has maintained its Buy rating and its gobsmacking US$520 price target.

From current levels of US$417, Citi is seeing addition upside of at least another 25%.

As of Monday, the street expects Nvidia to earn US$2.07 per share (EPS) on revenue of US$11.17 billion, against this time last year, when EPS came to 51 US cents on revenue of US$6.7 billion.

 

Elon Watch

The hundreds of remaining users of the social media platform X (formerly Twitter) will no longer be able to do the one fun thing that the platform offers – block people from seeing their posts or leaving comments.

According to our Elon, the function “makes no sense.”

So here’s an unrelated distraction:

Muskenator has described himself as a free speech absolutist, inviting critics to say this is a little insane and irresponsible.

The Jerusalem Post reports, for example, that researchers have found increasing hate speech and anti-Semitic content on the platform since he took over.

That’s also not what Apple or Google are likely to think.

By removing the ability to block nasty or mean people, Elon’s X is potentially violating the terms and conditions of Apple’s App Store and Google Play.

So I guess we’ll see what happens if or when X is no longer downloadable from these two rather influential online app stores.

Meanwhile…

 

This week’s Macro Market Movers

So the other event I look forward to every year is Jackson Hole, which begins in Wyoming on Friday morning for us.

The name doesn’t even need a ‘butt’ to say it all. Every year global central bankers gather in ridiculous beauty and luxury to talk money and equality et al. This year’s Economic Symposium is entitled: “Structural Shifts in the Global Economy.”

The last few years of rates vs inflation have made the annual US Federal Reserve’s central bank love-in a breathless moment for market punters. This year seems a little milder.  Wall Street appears pretty well-vaccinated these days and The Fed’s chair J. Powell likewise seems unwilling to wake any prolonged reveries with another post-match tirade a la Henry V:

Once more unto the breach, dear friends, once more, Or close the wall up with our English dead

Naturally the big note addresses will be from Powell and fan fave central banker from the old countries, the ECB President Christine Lagarde.

The market’s not expecting anything new on the policy front, which is fairly baked in and range bound, I’m just hoping for some Brokeback Mountain shots of grizzled old bankers in saunas.
 

Will China come out to play?

What’s really on everyone’s mind again is Evergrande and its brethren of broken Chinese property giants.

Evergrande wanted to quietly file for bankruptcy in the US over the weekend, but after Country Garden flubbed on debt payments the previous weekend, there was no sneaking about.

Chinese authorities did meet to discuss their economic quandry over the weekend.

And they need to talk it out too, because China is being hit by a pincer movement of problems: the god awful property market, and a familiar gurgling we can now associate with a liquidity crisis in the shadow banking system.

This second one flows under the radar, has great potential to spread quickly, and is usually heard but not seen till it’s all a bit too late.

Throw in the emergence of a deflationary environment and the ever-lengthening list of US sanctions vs Chinese AI/Chip-making and high-tech – and we’ve a short-term problem that can only be fixed by throwing money at it.

Both Reuters and Bloomberg have quoted some of their usually reliable sources who say the PRC’s big-hitting banks have been instructed to intensify credit expansion, toss out a few bones, ‘explore new growth points for credit loans and adjust and optimise real estate credit policies.’

Whether this is smoke blowing of the upbeat kind or the first droplets of a cash cascade we’ll know soon enough. As I write the Chinese central bank (the PBoC) is (one would expect) sharpening the knives on an expansive rate cut on its key 5-Year Loan Prime Rate (LPR) and its 1-Year LPR.

It’ll be nice for sentiment, but not enough for happiness.

 

The US/Global Economic Calendar

Monday August 21 – Friday August 25

All sources from Commsec, Trading Economics, S&P Global Research, AMP, Westpac

Monday
China 5-Year Loan Prime Rate
China 1-Year Loan Prime Rate

Tuesday
US Philadelphia Fed Non-Manufacturing Activity

Wednesday
US S&P Global US Manufacturing PMI Aug
US New Home Sales
US Existing Home Sales MoM Jul
US Richmond Fed Business Conditions Aug
US Fedspeak (Goolsbee)
Japan Jibun Bank Japan PMI Composite Aug
Eurozone HCOB Eurozone Manufacturing/Services PMI Aug
United Kingdom S&P Global/CIPS UK Manufacturing/Services PMI Aug
Canada Retail Sales MoM Jun

Thursday
United States Prelim. Benchmark Revision to Establishment Survey Data
United States Initial Jobless Claims
United States Durable Goods Orders July
EU Consumer Confidence Aug
US Jackson Hole Symposium (August 24th to 26th)

Friday
Japan Tokyo CPI Ex-Fresh Food, Energy YoY
US Uni of Mich. Sentiment Aug
US Kansas City Fed Services Activity Aug
US Jackson Hole Symposium (August 24-26)

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