U.S. stocks closed the final week and the month of August with gains as optimism grew around potential Federal Reserve rate cuts, following a favorable inflation report. The Dow Jones Industrial Average rose 0.9% last week (as of Aug. 30, 2024). The S&P 500 advanced 0.2% last week, while the Nasdaq Composite lost 0.9% (read: Tech ETFs That Won Amid NVIDIA-Led Tech Rout).
NVDA Shares Slumped Despite Beating on Both Lines
Last week, Wall Street witnessed the artificial intelligence (AI) king NVIDIA’s NVDA earnings, which put off investors’ enthusiasm. NVIDIA shares were off 7.9% last week. Nvidia’s earnings, despite showing impressive growth, failed to meet the high expectations that fueled its recent rally.
The AI chipmaker’s quarterly profit and revenue guidance topped estimates, but the magnitude of the beats fell short of the lofty hopes surrounding the stock. For the third quarter of fiscal 2025, NVIDIA anticipates revenues of $32.5 billion (+/-2%), above the Zacks Consensus Estimate of $30.97 billion. Such almost in-line guidance also muted investors’ optimism.
Delayed AI Payoffs?
In any case, the tech space has been showcasing subdued performance this earnings reporting cycle as many tech biggies have indicated delayed payoffs in artificial intelligence (AI) investments. So, investors remained in two minds before getting overly enthusiastic about renewed AI trades.
U.S. Economy in Fine Fettle
Meanwhile, the U.S. economy grew in Q2 at a healthy 3% annual pace, fueled by strong consumer spending and business investment. Consumer spending, which makes up about 70% of U.S. economic activity, increased at a 2.9% annual rate last quarter, up from 2.3% in the government’s initial estimate, as quoted on CNBC. The second-quarter growth marked a sharp acceleration from a lackluster 1.4% growth rate in the first three months of 2024.
Update on Inflation: July Prices Match Expectations
Investor sentiment was somewhat bolstered by the latest update on the Personal Consumption Expenditures (PCE) index, which showed July prices meeting expectations. Core inflation, excluding food and energy, rose 0.2% month on month, in line with forecasts. The annual core inflation rate of 2.6% matched June’s level, slightly below the anticipated 2.7%.
The Federal Reserve closely monitors PCE inflation levels to gauge the need for interest rate adjustments. Following Chairman Jerome Powell’s recent remarks signaling a forthcoming rate cut in September, market expectations for a 0.5% rate cut have increased, although a 0.25% cut remains a possibility due to steady price pressures observed in July.
Best Leveraged ETFs of Last Week
Against this backdrop, below we highlight a few winning leveraged ETFs of last week.
Defiance Daily Target 1.5x Short MSTR ETF SMST – Up 19.7%
ProShares UltraShort Ether ETF ETHD – Up 19.6%
ProShares UltraShort Bitcoin ETF SBIT – Up 17.5%
GraniteShares 2x Short NVDA Daily ETF NVD – Up 15.2%
T-Rex 2X Inverse NVIDIA Daily Target ETF NVDQ – Up 15.1%
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