Where will the US stock market go? NVIDIA may hold the greatest influence!

JIN10
2024.11.19 07:34
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Bank of America Global Research pointed out that NVIDIA's quarterly earnings report will be a key factor in the recent direction of the U.S. stock market. Analysts stated that NVIDIA's performance will have a greater impact on market risk, surpassing other economic data. It is expected that NVIDIA will drive nearly a 25% increase in earnings per share for the S&P 500 index. If the earnings report is disappointing, the vulnerability risk of related stocks will increase. NVIDIA is the last company among the "seven giants" of technology stocks to announce its earnings report, and the market generally expects its quarterly sales to reach $33.1 billion

Bank of America Global Research stated that chip manufacturer NVIDIA has become the focus of attention this week following its quarterly earnings report released on Wednesday, and its performance may determine the recent direction of the U.S. stock market.

The Bank of America analyst team, led by equity derivatives analyst Gonzalo Asis, noted in a client report last Sunday that "the stock market has been focused on election impacts, interest rate fluctuations, and the Federal Reserve, but the options market tells us that NVIDIA's earnings remain a very important matter for the entire market."

Analysts pointed out that the chart below shows that the implied volatility of the S&P 500 index after this AI darling's earnings report aligns with NVIDIA's own implied volatility during this period.

Asis and his team also noted that the pricing in the options market indicates that "NVIDIA's performance will bring broader market risks, rather than other events that may affect the market, including the next non-farm payroll report, the Consumer Price Index (CPI) report, and even the Federal Reserve's policy meeting in December."

It is certain that NVIDIA is the "most dominant stock" in the U.S. stock market, driving approximately 20% of the S&P 500 index's returns over the past year. Bank of America analysts wrote that the company is expected to drive nearly 25% growth in earnings per share (EPS) for this large-cap index in the third quarter.

This is why Asis and his team warned that "if NVIDIA's earnings are disappointing on Wednesday, the risk of 'individual stock vulnerability' related to NVIDIA will continue to rise." They stated that "if the tech-heavy Nasdaq 100 index falls about 3% this week, put option spreads may offer 'attractive returns.'"

NVIDIA will be the last of the so-called "seven giants" of tech stocks to report quarterly earnings. Analysts surveyed by FactSet unanimously expect the chip manufacturer to report quarterly sales of $33.1 billion, a 10% increase from the previous quarter and an 83% increase from a year ago.

Investors are also looking forward to the performance of some major retailers to gauge consumer strength and the economic situation ahead of the holiday season. Walmart and Lowe's will report earnings on Tuesday, followed by Target and TJX Cos. on Wednesday

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