Following through on the numbers
- NVDA at the forefront of recent market dip
- Earnings due after the close on August 27
- Most recent earnings moves have been relatively modest
In a way, the S&P 500’s (SPX) recent pullback highlights the realities of a “narrow” market—that is, one fueled to a great degree by a handful of megacap stocks. While their strength helped pushed the SPX—and even more so, the Nasdaq 100 (NDX) tech index—to new highs this summer, their weakness over the past few days has weighed disproportionally on the major indexes.
Although we’re in the heart of the retail portion of earnings season, there is no higher-profile company reporting its numbers in the next two weeks than chipmaker NVIDIA (NVDA). And while it’s one of only three “Magnificent-7” stocks outperforming the SPX so far this year, it has also led the market to the downside during the recent pullback, slipping as much as 7.3% over the past two days.
Given the market’s near-obsession with NVDA’s earnings announcements in recent years, it may be somewhat surprising to discover the stock made just three double-digit (percentage) earnings-day moves since August 2022.
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)
In fact, the stock’s average earnings-day move over the past three years is +/-5.2%, with the stock rallying after eight of the announcements and falling after four. (Note: NVDA typically releases its numbers after the close, so its earnings-day moves reflect performance on the trading day after the announcement.)
However, as noted in “Earnings vs. guidance,” initial reactions to earnings don’t always stick. The following table compares NVDA’s earnings-day returns to its net returns over the next week (i.e., from the close of the day after the announcement to the close five trading days later):
Source (data): Power E*TRADE. (For illustrative purposes. Not a recommendation. *Return the trading day after the post-close release of earnings.)
NVDA posted a net loss in the week after its earnings announcements six out of 12 times. Of the eight times the stock rallied on earnings day, it gained additional ground over the next week in five cases. However, there was only one instance (August 2023) when the stock rallied on earnings day and posted an even larger net return over the next five trading days.
The stock was a little more consistent in following through on earnings-day declines, losing ground over the next week three out of four times. Also, in two of those cases NVDA lost more ground over those five days than it did on earnings day itself.
Today’s numbers include (all times ET): weekly jobless claims (8:30 a.m.), Philadelphia Fed Manufacturing Index (8:30 a.m.), existing home sales (10 a.m.), Leading Economic Indicators Index (10 a.m.).
Today’s earnings include: Intuit (INTU), Ross Stores (ROST), Ubiquiti (UI), Workday (WDAY), Walmart (WMT), Zoom Communications (ZM).
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