Dow Jones futures gain as markets anticipate stronger earnings from Nvidia
- Dow Jones futures post modest gains ahead of Nvidia’s upcoming earnings report.
- Analysts expect Nvidia to post $1.25 EPS on $54.9 billion revenue, a 56% annual increase.
- Thursday's September Nonfarm Payrolls are awaited to gain fresh guidance on the Fed outlook.
Dow Jones futures edge up 0.04% to trade near 46,200 during European hours on Wednesday, ahead of the United States (US) market open. The S&P 500 futures and Nasdaq 100 futures are also slightly higher, rising 0.09% and 0.06% to around 6,650 and 24,600, respectively, at the time of writing.
US index futures gain little ahead of Nvidia’s upcoming earnings report, which could impact the strength and sustainability of the AI rally as markets grow increasingly worried about bubble risks. Analysts expect earnings per share of $1.25 on revenue of $54.9 billion, representing a 56% increase from a year earlier. They are also projecting guidance of $61.44 billion for the next quarter, according to a news report from CNBC.
Moreover, results from major retailers TJX Companies, Lowe’s, and Target will also be eyed for indications of consumer spending trends. Quarterly updates from industrial giant Deere & Company and cybersecurity firm Palo Alto Networks will also draw close attention.
Wall Street closed lower on Tuesday’s regular session, with the Dow Jones and S&P 500 falling 1.07% and 0.83% for a fourth consecutive session of losses. The tech-heavy Nasdaq 100 dropped 1.21% amid concerns over stretched artificial intelligence valuations. AI-related stocks also slid, including Nvidia, Microsoft, AMD, Palantir, and Micron Technology.
US stocks may face challenges due to the diminishing likelihood of US Federal Reserve (Fed) rate cut in December. The CME FedWatch Tool indicated that markets are now pricing in a 49% odds of the Fed delivering a 25-basis-point rate cut at its December meeting, down from 63% probability that markets priced a week ago. Traders will likely observe the highly anticipated September Nonfarm Payrolls data due on Thursday, to gain fresh impetus on Fed policy outlook.
Dow Jones FAQs
The Dow Jones Industrial Average, one of the oldest stock market indices in the world, is compiled of the 30 most traded stocks in the US. The index is price-weighted rather than weighted by capitalization. It is calculated by summing the prices of the constituent stocks and dividing them by a factor, currently 0.152. The index was founded by Charles Dow, who also founded the Wall Street Journal. In later years it has been criticized for not being broadly representative enough because it only tracks 30 conglomerates, unlike broader indices such as the S&P 500.
Many different factors drive the Dow Jones Industrial Average (DJIA). The aggregate performance of the component companies revealed in quarterly company earnings reports is the main one. US and global macroeconomic data also contributes as it impacts on investor sentiment. The level of interest rates, set by the Federal Reserve (Fed), also influences the DJIA as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.
Dow Theory is a method for identifying the primary trend of the stock market developed by Charles Dow. A key step is to compare the direction of the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA) and only follow trends where both are moving in the same direction. Volume is a confirmatory criteria. The theory uses elements of peak and trough analysis. Dow’s theory posits three trend phases: accumulation, when smart money starts buying or selling; public participation, when the wider public joins in; and distribution, when the smart money exits.
There are a number of ways to trade the DJIA. One is to use ETFs which allow investors to trade the DJIA as a single security, rather than having to buy shares in all 30 constituent companies. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts enable traders to speculate on the future value of the index and Options provide the right, but not the obligation, to buy or sell the index at a predetermined price in the future. Mutual funds enable investors to buy a share of a diversified portfolio of DJIA stocks thus providing exposure to the overall index.
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