Shares of semiconductor giant Nvidia Corp. experienced significant volatility in late trading after the company’s latest revenue forecast fell short of investors’ lofty expectations. While Nvidia’s projected revenue for the current period is approximately $20 billion, surpassing the average analyst estimate of $17.9 billion, some projections had reached as high as $21 billion. The bar was set high for Nvidia, which has seen its stock price triple this year, leaving little room for error.
The rest of the stock market also showed signs of losing steam, following the S&P 500’s impressive $6 trillion rally fueled by the artificial intelligence boom, resilience in Corporate America, and anticipation of rate cuts by the Federal Reserve in the coming year. The index now stands just 5% below its all-time high.
Market strategists caution that the stock market is currently priced for perfection and warn investors to remain nimble as we approach the end of November and move into December. Matt Maley, chief market strategist at Miller Tabak + Co., notes that the market is more “overbought” now than it was three weeks ago when it was “oversold,” indicating the need for caution.
Despite the market’s recent surge, driven by the belief that the Federal Reserve has completed its hiking cycle and rate cuts are on the horizon in 2024, the Fed minutes released reiterated the central bank’s cautious approach and lack of commitment to easing policy. Quincy Krosby, market strategist at LPL Financial, highlights that the market still believes the Fed is finished with rate hikes and that rate cuts will be necessary in 2024, regardless of the Fed’s messaging.
While the short-term charts for the S&P 500 indicate a negative divergence between price action and momentum, suggesting weakening buying power, Janney Montgomery Scott’s Dan Wantrobski expects the market to face profit taking and consolidation in the near term. Wantrobski further emphasizes the potential for elevated volatility and correction within the first half of 2024.
In the world of hedge funds, concentration on US equities is at its highest level in 22 years, with major bets placed on megacap tech companies like Microsoft, Amazon, and Meta Platforms, according to data from Goldman Sachs. Savita Subramanian, strategist at Bank of America, expects the S&P 500 to reach a record high of 5,000 by the end of 2024, while BofA’s technical strategist Stephen Suttmeier sees further upside potential for US stocks if the S&P 500 can surpass the low 4,600s.
As investors navigate the current market environment, US bond managers are advising against holding excessive amounts of cash. Capital Group, DoubleLine Capital, Pacific Investment Management Co., and TCW Group all suggest that it is time to put money to work in the market. Signs of easing inflation and softer growth have contributed to a rally in the Bloomberg US Aggregate Index, which has gained 3.6% in November.
Frequently Asked Questions (FAQ)
What was Nvidia’s revenue forecast for the current period?
Nvidia’s revenue forecast for the current period is approximately $20 billion.
How does Nvidia’s forecast compare to analyst estimates?
Nvidia’s revenue forecast of $20 billion exceeded the average analyst estimate of $17.9 billion but fell short of some projections that had reached as high as $21 billion.
Why is the stock market losing steam?
The stock market is losing steam after a $6 trillion rally driven by the artificial intelligence boom, resilience in Corporate America, and expectations of rate cuts by the Federal Reserve. The S&P 500 is now just 5% away from reclaiming its all-time high.
What does it mean for the stock market to be “overbought” or “oversold”?
When the stock market is “overbought,” it means that prices have risen too far and too fast, leading to a potential reversal or correction. Conversely, when the market is “oversold,” it means that prices have fallen too far and too fast, indicating a potential rebound.
What is the outlook for US equities and the S&P 500?
Bank of America strategist Savita Subramanian expects the S&P 500 to reach a record high of 5,000 by the end of 2024. BofA’s technical strategist Stephen Suttmeier sees further upside potential if the S&P 500 can surpass the low 4,600s.