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Mercedes-Benz Group AG DE:DAII XE:MBG said Monday it plans to build up a network of 2,000 charging hubs by the end of 2024, starting with three charging stations this fall in Atlanta, Chengdu, China and Mannheim, Germany. The auto maker plans to create more than 10,000 charging points by the end of the decade. The charging stations will be open to all car brands.
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This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visit http://www.djreprints.com.
https://www.barrons.com/articles/xpeng-hong-kong-stock-price-didi-evs-ca20a71d
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Nvidia Plans to Buy Back Billions in Stock. Other Companies Could Join in Soon.
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U.S. stocks so far haven’t fared as well under President Joe Biden as they did in Donald Trump’s single term or in either of Barack Obama’s two terms.
The research team at Wilshire Indexes is pointing that out this month with the chart below, which features the FT Wilshire 5000
XX:W5000FLT,
an index that aims to reflect the performance of the total U.S. stock market.
Wilshire Indexes
Biden and his allies could be worried about how stocks
SPX
are doing, and it’s possible his administration will try to help the market somehow in 2024, according to Philip Lawlor, managing director of market research at Wilshire Indexes.
“With the 2024 election in sight, the disparity in cumulative equity return generated so far under the Biden administration compared to the superior return trajectory delivered by the Trump and Obama presidencies could cause some concern,” Lawlor wrote. “Electoral cycle logic points to the Biden administration doing its utmost to ensure that the gap closes next year.”
Biden officially launched his re-election campaign in April, and the Democratic incumbent and his cabinet officials have traveled around the U.S. in recent months to talk up their economic policies, including measures such as the Inflation Reduction Act.
When asked about the stock market’s struggles earlier this year, one White House official told MarketWatch that the administration wants to see “strong performance,” but he also noted that roughly half of Americans don’t hold stocks and highlighted other economic indicators.
“The markets are going to go up and down. The main measure that the president has about the state of the economy is, how are middle-class families doing?” said Bharat Ramamurti, deputy director of the White House’s National Economic Council.
“Do they have good-paying jobs that allow them to support themselves and their families? Are they seeing their wages go up? Do they feel like they have good opportunities to advance in their career, good opportunities to switch jobs and make more money? Or live in a better neighborhood, or whatever the case may be? By those metrics, we think that the economy is doing very, very well.”
Republican presidential hopefuls made their economic pitches at a debate on Wednesday night in Milwaukee, with Florida Gov. Ron DeSantis, who is currently running second in GOP primary polls, saying the country “must reverse ‘Bidenomics’ so that middle-class families have a chance to succeed again.” Trump, the current frontrunner in the 2024 primary, skipped the debate and instead released an interview just before the event kicked off.
Betting markets tracked by RealClearPolitics give Biden a 35% chance of winning the 2024 presidential election, while Trump is at 27% and DeSantis is at 6%.
COMP
were higher in choppy trading Friday after Federal Reserve Chair Jerome Powell warned that the central bank may need to raise interest rates even higher to temper a strong U.S. economy and quell inflation, while assuring investors that the Fed would proceed cautiously.
From MarketWatch’s archives (Dec. 31, 2022): U.S. stocks log their worst year since 2008, crushed by Fed’s rate hikes
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A new variant of the SARS-CoV-2 coronavirus has put epidemiologists around the world on alert, and the World Health Organization is asking countries to sustain early warning, surveillance and reporting systems as it works to evaluate the current COVID-19 risk level.
The BA.2.86 variant, which was first detected in Israel, was designated a new variant under monitoring by the WHO on Aug. 17, after the agency received nine sequences from five countries — three in the WHO’s European Region, one in the African Region and one in the Region of the Americas.
The variant has more than 30 mutations in the spike protein compared with the XBB variants that are currently dominant in the U.S. and around the world, namely XBB.1.16 and EG.5, which has been dubbed Eris, following the Greek-alphabet designation used for other variants.
The WHO made EG.5 a variant of interest, or VOI, earlier this month, which is an upgrade from the designation of variant under monitoring, or VUM.
But BA.2.86 is worrying experts because there is too little data to assess its potential impact.
“It is crucial to sustain early warning, surveillance and reporting, variant
tracking, early clinical care provision, administration of vaccine boosters to high-risk groups, improvements in ventilation, and regular communication,” the agency said in its latest weekly update.
That update, which reviews the state of the virus for the 28-day period through Aug. 20, contains no data from the WHO’s Region of the Americas, as reports for the period were incomplete. That’s a worry that the WHO has consistently warned about as countries pull back on their monitoring of the illness as they seek to put the pandemic behind them.
The WHO officially declared the emergency phase of the pandemic to be over on May 5 but emphasized that COVID remains a major threat. Many countries have dismantled much of their systems of oversight and greatly reduced testing and data measurement.
See also: New ‘Eris’ COVID variant is dominant in the U.S., but a shortage of data is making it hard to track
The U.S. Centers for Disease Control and Prevention offered an update this week on BA.2.86 — which it said has been detected in Denmark, South Africa, Israel, the U.S. and the U.K. — and said the multiple locations are a sign of international transmission. The CDC acknowledged the surveillance challenge.
“Notably, the amount of genomic sequencing of SARS-CoV-2 globally has declined substantially from previous years, meaning more variants may emerge and spread undetected for longer periods of time,” the U.S. agency said in its update.
The CDC also noted a current increase in hospitalizations in the U.S., although it said that’s not likely driven by the BA.2.86 variant.
“It is too soon to know whether this variant might cause more severe illness compared with previous variants,” said the CDC.
Perhaps the bigger issue is whether the new variant has greater escape from existing immunity from vaccines and previous infections, compared with other recent variants.
“One analysis of mutations suggests the difference may be as large as or greater than that between BA.2 and XBB.1.5, which circulated nearly a year apart,” the CDC said. “However, virus samples are not yet broadly available for more reliable laboratory testing of antibodies, and it is too soon to know the real-world impacts on immunity.”
Americans gearing up for what’s expected to be an annual COVID vaccine booster this fall can be confident those vaccines will be designed to protect against all subvariants of XBB, including Eris, the agency said.
The CDC said it’s likely that antibodies built up in the population through infection, vaccination or both will provide protection against BA.2.86. However, it said, “this is an area of ongoing scientific investigation.”
Eric Topol, the chair of innovative medicine at Scripps Research in La Jolla, Calif., said the ability to neutralize the virus depends on the levels of neutralizing antibodies, and those are bound to be lower against BA.2.86 than earlier variants that people have been exposed to or immunized against.
“Also to note, the burden of new mutations for BA.2.86 is not confined to the spike and is seen broadly across other components of the virus,” he wrote in commentary this week. “If BA.2.86 takes off, it will be a real test of how good our T-cell response can rev up to meet the challenge.”
Meanwhile, the CDC’s weekly projections for where Eris and other variants are circulating continue to be hampered by a shortage of data. In early August, the CDC said it would unable to publish its “Nowcast” projections because it did not have enough sequences to update the estimates.
“Because Nowcast is modeled data, we need a certain number of sequences to accurately predict proportions in the present,” CDC representative Kathleen Conley told MarketWatch at the time.
The agency had received data from just three U.S. regions. In its most recent weekly update for the week through Aug. 19, it also got data from just three regions.
Separately, the CDC reported a 21.6% increase in U.S. hospitalizations for COVID in the week through Aug. 12. Deaths rose 21.4% in the week through Aug. 19.
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3M Co.
MMM,
agreed to pay disgorgement plus prejudgment interest totaling $4.58 million and a $2 million civil penalty for charges that it violated the books and records and internal controls provisions of the Foreign Corrupt Practices Act (FCPA) in its business activities in China, the Securities and Exchange Commission said Friday. The SEC’s order found that 3M’s Chinese subsidiary paid about $1 million for at least 24 trips for Chinese government officials that included tourism activities as part of efforts to persuade them to buy 3M products, from at least 2014 to 2017. Without admitting or denying the findings, 3M agreed to cease and desist from future violations. 3M stock was up by 0.1% on Friday, while the S&P 500
SPX,
rose fractionally.
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Beer giant Heineken N.V. is the latest Western company to exit Russia, announcing Friday the sale of its Russian operations to Arnest Group for one euro.
Under the terms of the deal, all of Heineken’s
HEIA,
remaining assets, including seven breweries in Russia, will transfer to the new owners, the beer giant said in a statement. The Russian Arnest Group has also taken over responsibility for Heineken’s 1,800 employees in Russia.
Heineken began the process of exiting Russia in March 2022, following that country’s invasion of Ukraine. The company said it expects to incur a total cumulative loss of €300 million ($324.1 million) as a result of its exit.
“We have now completed our exit from Russia. Recent developments demonstrate the significant challenges faced by large manufacturing companies in exiting Russia,” Heineken CEO Dolf van den Brink said in a statement. “While it took much longer than we had hoped, this transaction secures the livelihoods of our employees and allows us to exit the country in a responsible manner.”
A number of major Western corporations, including U.S. giants Apple Inc.
AAPL,
Alphabet Inc.
GOOGL,
GOOG,
Amazon.com Inc.
AMZN,
International Business Machines Corp.
IBM,
and McDonald’s Corp.
MCD,
have left Russia in response to Moscow’s February 2022 invasion of Ukraine.
Earlier this week, DP Eurasia, the master franchiser of the Domino’s Pizza Inc.
DPZ,
brand in Turkey, Russia, Azerbaijan and Georgia, also announced its exit from Russia.
But Heineken is “no hero,” according to Mark Dixon, the founder of the Moral Rating Agency, an organization set up after the invasion of Ukraine to examine whether companies were carrying out their promises of exiting Russia. “It failed to leave Russia for a year and a half,” he told MarketWatch via email. “The explanation that it took longer than expected doesn’t hold water, because of course it’s difficult to find a buyer if you remain so long a pariah state.”
The Ukraine Solidarity Project said that Heineken’s move should increase the pressure on companies that remain in Russia, such as consumer-goods giant Unilever PLC
ULVR,
“The point here is that major companies, like @Heineken, are and have taken loses of hundreds of millions and billions in leaving the Russian market. It is possible,” the Ukraine Solidarity Project tweeted Friday. “We’re sure @Unilever can do it, too.”
Related: WeWork, Carl’s Jr., Unilever and Shell among companies slammed by Yale over operations in Russia
The Ukraine Solidarity Project recently launched a high-profile campaign urging Unilever to get out of Russia, using images of Ukrainian veterans injured in the war with Russia. Last month, activists from the Ukraine Solidarity Project held up a giant poster featuring the veterans outside Unilever’s London headquarters.
The Moral Rating Agency has also reiterated its calls for Unilever to end its Russian operations.
“We have always said we would keep our position in Russia under close review,” a Unilever spokesperson told MarketWatch earlier this month. The spokesperson also directed MarketWatch to a statement on the war in Ukraine that the company released in February 2023.
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Shares of electric-vehicle startup VinFast Auto Ltd. have surged since the company went public through a special-purpose acquisition company deal last week, taking its market capitalization to levels well beyond established automakers such as Ford Motor Co. and General Motors Co.
Shares of low-float company VinFast
VFS,
rose 16.1% Friday, after ending Thursday’s session up 32.3%, sending the company’s market cap to $231.3 billion. In comparison, Ford’s
F,
market cap is $47 billion and GM’s
GM,
is $45.2 billion, according to FactSet data. Rival EV maker Rivian Automotive Inc.
RIVN,
has a market cap of $18.6 billion. However, all of these are dwarfed by Tesla Inc.’s
TSLA,
$730.2 billion market cap.
In roughly a week, the VinFast stream on Stocktwits, a social platform for investors and traders, has racked up about 3,000 watchers, and message volume is “pretty consistent” throughout the day, Tommy Tranfo, Stocktwits’ head of community, and Tom Bruni, a senior writer for the platform, told MarketWatch Thursday.
Related: EV startup VinFast may be worth more than Ford or GM, but there’s a catch
“What everyone is discussing is whether or not the current hype in the stock is warranted given where the business is,” Tranfo and Bruni said in a statement emailed to MarketWatch Thursday, noting the company’s soaring market cap. “That’s despite the underlying business doing less than $1 billion in revenue, having negative cash flow from operations of $1.5 to $2 billion.”
In the short term, the stock is trading on momentum and hype, according to Tranfo and Bruni. “But eventually, its business results have to justify the valuation. And as we’ve seen with other startups in the space, it’s easy to say they’re going to accomplish XYZ, but harder to actually execute and produce results,” they said.
“From the community side: [We] think what we’re paying attention to the most right now is if this hype sticks,” they added.
The EV maker is a majority-owned affiliate of Vietnamese conglomerate Vingroup, one of the largest publicly traded companies in Vietnam. VinFast said that as of June 30, 2023, the company has delivered close to 19,000 EVs.
About 99% of VinFast’s shares are controlled by Vingroup chair and VinFast founder Pham Nhat Vuon, making only a small portion available to investors.
Stocktwits’ Tranfo and Bruni noted that EVs have a good track record of growing strong retail community support. “So there is reason to believe that this momentum could continue, but it may be too early to tell for sure,” they added. “Retail loves the electric-vehicle industry, so the interest is likely to continue regardless of how well the company (and stock) actually perform.”
Related: Tesla’s stock jumps 7% after Baird highlights Cybertruck, other ‘catalysts’ for the year
VinFast is importing its vehicles into the U.S. and is also ramping up its North American presence. In July, the company broke ground on an electric-vehicle manufacturing site within the Triangle Innovation Point in Chatham County, N.C. The EV startup says the plant will eventually have the capacity to make 150,000 EVs a year.
Claudia Assis contributed.
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Chinese regulators eased the nation’s mortgage requirements to let more home buyers enjoy favorable mortgage conditions that were previously limited to first-time home purchasers, the state-run Xinhua News Agency said on Friday.
China’s central bank, the Ministry of Housing and Urban-Rural Development and the National Financial Regulatory Administration jointly eased the requirements for home buyers who have already purchased homes to boost property sales as the real-estate slump continued, according to Xinhua.
Home buyers who don’t have family members with houses registered under their names can enjoy favorable terms that were previously limited to people buying their first homes, according to Xinhua.
First-home buyers are normally given cheaper mortgage rates than other buyers who have at least one apartment. First-home buyers are also required to make smaller down payments, as low as 20% of the total property value.
Write to Singapore editors at singaporeeditors@dowjones.com
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Former President Donald Trump turned himself in at Georgia’s Fulton County jail on Thursday evening, with this latest move in his numerous legal fights standing out in part because it’s expected to yield a mug shot.
See: Donald Trump’s mug shot could become ‘the most famous in the world’
Trump’s private plane landed in Atlanta around 7 p.m. Eastern, and a motorcade took him directly to the Fulton County jail in Atlanta. After about 20 minutes of processing inside the jail, the motorcade then took him back to his plane for his return to New Jersey.
Trump made a brief statement before boarding his plane, calling his indictment a “travesty of justice.”
Fulton County’s booking system recorded Trump as having “blonde or strawberry” hair, a height of 6-foot-3 and weighing 215 pounds.
Fulton County Sheriff’s Office via Getty Images
Trump was quickly released on a $200,000 bond and will now wait until an arraignment next month to enter pleas in this election-interference case. Fulton County District Attorney Fani Willis is seeking an Oct. 23 trial date for Trump and the other 18 defendants in the case, but Trump is opposing that start date.
Earlier in the day, Trump replaced his lead counsel, Drew Findling, with veteran criminal attorney Steven Sadow, who is known for defending a number of prominent rappers in high-profile criminal cases. The New York Times reported Trump used a commercial bail bondsman, Charles Shaw of Foster Bail Bonds, to post his bond, and paid him a $20,000 fee, or 10% of his bail amount.
The former president was indicted last week by a grand jury in Fulton County over his efforts to overturn Georgia’s results in the 2020 presidential election, which he lost to Democrat Joe Biden. He faces 13 criminal counts, including racketeering, filing false documents, conspiracy to commit forgery and solicitation of violation of oath by a public officer.
Thursday’s proceedings in Atlanta mark the fourth time that the 45th president has surrendered this year following an indictment.
Trump, the frontrunner in the undefined, also is dealing with a Manhattan case over hush-money payments, a Miami case over classified documents and a Washington, D.C., case over his efforts to overturn the 2020 election, including his role in the Jan. 6, 2021, attack on the U.S. Capitol.
He has denied wrongdoing and argued all of the cases are politically motivated. Many Republican voters have agreed with his take and rallied around Trump in the past few months, leaving him with 55.4% support in primary polls, according to a RealClearPolitics moving average of surveys as of Thursday.
The Fulton County prosecutor’s case was spurred in part by a recording of a Jan. 2, 2021, phone call between Trump and Georgia Secretary of State Brad Raffensperger in which Trump said Raffensperger, a Republican, should “find 11,780 votes,” or enough to erase Biden’s edge in the state.
In a post on his Truth Social platform Thursday afternoonu, Trump reiterated his assertion that the phone call was “perfect,” and he repeated his criticisms of Willis, describing her as a “Radical Left, Lowlife District Attorney.”
Willis, a Democrat, has set a Friday deadline for defendants to turn themselves, and Trump associates Rudy Giuliani and Mark Meadows are among the high-profile individuals who have met that deadline.
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The numbers: Orders for long-lasting goods rose in July for the third month in a row if recent ups and downs at Boeing are set aside, suggesting the struggling industrial side of the U.S. economy may have stabilized.
Durable-goods orders increased 0.5% in July if transportation — automobiles and planes — are excluded. Boeing
BA,
orders often seesaw in the summer months and distort the true condition of U.S. manufacturing.
Headline orders, which include transportation, sank by 5.2% last month, the government said Thursday.
Economists polled by the Wall Street Journal had forecast a 4.1% drop in July following a 4.4% spike in June. The topsy-turvy results in the past two months are almost entirely due to Boeing.
A better measure of the health of U.S. manufacturing, known as core orders, edged up 0.1% in July. That figure omits defense and transportation and is a proxy for broader business investment.
Business investment is running slightly ahead of last year’s pace, but it has weakened considerably, and many manufacturers are treading water.
Key details: Orders for commercial planes soared 71% in June and sank 44% in July, explaining the wildly divergent headline numbers in the past two months.
Orders for new cars rose 0.8% in July.
The transportation segment is a large and volatile category that often exaggerates the ups and downs in manufacturing.
Outside the transportation sector, new orders rose in most major categories.
Business investment has tapered off since last year, however, and companies have become more cautious in the face of rising interest rates, still-high inflation and a shift in consumer spending toward services.
Durable goods are items like planes, cars, appliances and computers. Orders rise in an expanding economy and shrink in a contracting one.
Big picture: Maybe the industrial side of the economy has hit bottom, and maybe it hasn’t. Getting a clear picture might have to wait until interest rates stop rising.
Higher borrowing costs typically stunt the economy and discourage businesses from hiring, spending and investing.
Looking ahead: “Businesses are showing caution amidst the higher rate environment and what it means for demand down the line,” said economist Ali Jaffery at CIBC Economics.
Market reaction: The Dow Jones Industrial Average
DJIA,
and S&P 500
SPX,
were set to open mixed in Thursday trades.
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By Adria Calatayud
Credit Suisse said it has abandoned its plan to launch an initial public offering for its Credit Suisse 1a Immo PK real-estate fund due to low trading volumes for listed Swiss real-estate funds.
The Swiss bank–now part of UBS Group–said Thursday that Credit Suisse Funds decided not to carry out the IPO, which had been planned for the fourth quarter of 2023, and that this will allow the newly formed real-estate unit within UBS Asset Management to coordinate its offer of real-estate investment services.
A fall in trading volumes on the market for listed Swiss real-estate funds would likely have meant higher volatility in the event of a listing, Credit Suisse said.
The bank last year postponed the IPO of the fund, citing market conditions and the high volatility.
Write to Adria Calatayud at adria.calatayud@dowjones.com
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Nvidia Corp. shares rallied in the extended session Wednesday after the maker of graphics processing units that is leading the AI-hardware charge reported a 141% surge in data-center sales and record results.
Nvidia
NVDA,
shares rallied 9% after hours, following a 3.2% rise in the regular session to close at $471.16, less than 1% below the stock’s record closing high of $474.94, set on July 18, according to FactSet data. A close at such levels on Thursday would mean a new record high for the stock.
The Santa Clara, Calif.-based company reported second-quarter net income of $6.19 billion, or $2.48 a share, compared with $656 million, or 26 cents a share, in the year-ago period. Adjusted earnings, which exclude stock-based compensation expenses and other items, were $2.70 a share, compared with 51 cents a share in the year-ago period.
Revenue surged to a record $13.51 billion from $6.7 billion in the year-ago quarter, driven by a 141% leap in data-center revenue to $10.32 billion.
Analysts surveyed by FactSet had forecast earnings of $2.08 a share on revenue of $11.19 billion, and data-center sales of $8.03 billion.
Nvidia forecast third-quarter revenue of $15.68 billion to $16.32 billion.
Analysts had estimated third-quarter earnings of $2.40 a share on revenue of $12.59 billion, with $9.15 billion of that from data-center sales. For the year, Wall Street, on average, expects earnings of $8.29 a share on $44.54 billion in revenue, a 71% increase from fiscal 2023’s $26.97 billion, with $32.41 billion of that in data-center sales.
“Companies worldwide are transitioning from general-purpose to accelerated computing and generative AI,” said Jensen Huang, founder and chief executive of Nvidia, in a statement. “Leading enterprise IT system and software providers announced partnerships to bring Nvidia AI to every industry. The race is on to adopt generative AI.”
Right after the report, Lopez Research analyst Maribel Lopez told MarketWatch that Nvidia’s “numbers prove just how much money there is in the AI hardware opportunity.”
“While cloud companies are selling AI services, Nvidia is walking away with a bulk of the revenue and profits,” Lopez said. “Nvidia’s minting cash with no apparent slowdown in sight.”
Nvidia shares are up more than 222% on a year-to-date basis, compared with a 42% surge in the PHLX Semiconductor Index
SOX,
a 15.5% rise by the S&P 500
SPX
and a 31% gain by the tech-heavy Nasdaq Composite
COMP
over the same span.
Nvidia, which has stood as the largest publicly traded chip maker by market cap since February, having traded that title back and forth with Taiwan Semiconductor Manufacturing Co.
TSM,
since late 2020, closed above the $1 trillion mark officially for the first time on June 14. Nvidia ended Wednesday with a valuation of $1.164 trillion, and one analyst thinks it could be the most valuable U.S. company in a few years.
Nvidia currently stands as the fifth-largest U.S. company by market cap behind Apple Inc.
AAPL,
Microsoft Corp.
MSFT,
Alphabet Inc.
GOOG,
GOOGL,
and Amazon.com Inc.
AMZN,
While all have a big stake in the future of AI, the latter three companies are scrambling to outfit their cloud-service provider data centers with new AI gear amid tight supply.
While Nvidia is considered the overwhelming leader in the AI chip market, Advanced Micro Devices Inc.
AMD,
is considered a distant second. AMD’s data-center numbers declined in the company’s recent earnings report, although the company didn’t have comparable AI chip sales in its results.
Shares of AMD and TSMC were both up more than 3% after hours Wednesday.
See also: Nvidia ‘should have at least 90%’ of AI chip market with AMD on its heels
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Foot Locker
stock plunged on Wednesday as investors kicked around a bevy of bad news. The shoe and sportswear retailer missed expectations for second-quarter sales, slashed its full-year outlook again, and paused its dividend.
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“‘You could ask who is really running the show? Jerome Powell or Jensen Huang? Amazingly, it may not be Powell, but Jensen Huang who is driving Fed expectations.’”
Those are the words of Ben Emons, a senior portfolio manager and the head of fixed income at NewEdge Wealth in New York, who identifies reasons why artificial-intelligence leader Nvidia Corp.
NVDA,
is demonstrating central-bank-like powers.
It starts with the idea that the Santa Clara, California-based chip designer — which reports fiscal second-quarter earnings on Wednesday — acts as a bellwether for AI-capital expenditures that are likely to boost productivity across the U.S. economy. And in the bond market, a surge of AI-related expectations is translating into higher real yields, which reflect inflation-adjusted growth in gross domestic product and productivity, he said.
Read: Nvidia’s stock snaps losing streak and sits 1% below record close as earnings optimism builds
Higher real yields in the U.S. are a key reason why 10-
BX:TMUBMUSD10Y
and 30-year Treasury yields
BX:TMUBMUSD30Y
climbed to multi-year highs through Monday. Real yields, as measured by rates of Treasury inflation-protected securities, offer a glimpse of how the market expects the U.S. to perform when inflation isn’t a factor.
Read: Rise in Treasury yields is almost entirely due to one factor, strategist says
“The bigger macro story behind Nvidia as the bellwether of artificial intelligence is the role it plays in the economy, which is proving to be stronger than anyone thought it would be,” Emons said via phone on Tuesday. “People connect AI to productivity and productivity leads to growth, and to some extent this is impacting interest-rate expectations today.”
Amid growing anticipation over Nvidia’s upcoming earnings announcement and Friday’s speech by Federal Reserve Chairman Jerome Powell in Jackson Hole, Wyo., “the probability of a rate hike is creeping higher,” the senior portfolio manager wrote in a note this week. “With each additional dollar increase of NVDA EPS estimates, the probability of a hike by November goes up. NVDA is gaining Fed-like power.”
Need to Know: Nvidia may be the AI stock for now, but here are the picks for later, says Goldman Sachs
A chart provided by Emons shows how the median estimate of analysts for Nvidia’s earnings-per-share in the fiscal second quarter has been rising alongside the market-implied probabilities of a November Fed rate hike.
In addition, the yield on one of Nvidia’s own corporate bonds, issued in 2020 and maturing in April 2040, has been rising in relation to the 10-year TIPS or real yield “because of the company’s broader effect on the economy,” Emons said.
As University of Pennsylvania Wharton School finance professor Jeremy Siegel explained in a separate interview with MarketWatch, real interest rates track real growth. Improving productivity and stronger growth “mean the Fed won’t be able to cut rates as much as it would otherwise be able to.”
On Tuesday, Treasury yields finished mixed, while Nvidia’s shares closed down by 2.8%, as traders and investors await the company’s earnings report on Wednesday followed two days later by Powell’s remarks.
Analysts expect Powell to address what’s known as the real neutral rate of interest — or the inflation-adjusted level which is likely to prevail when the economy is operating at full strength and price gains are stable — as a way of justifying the higher-for-longer theme in U.S. interest rates.
See also: How higher-for-longer rates are playing out as 10-year yield hits 15-year high
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