Major stock indexes rose solidly off their 21-day moving averages, lifted by earnings wins from Nvidia, Salesforce and CrowdStrike, while Fed Chairman Kevin Warsh's Jackson Hole speech pushed up the odds of a September rate hike. Small-cap stocks lagged, slipping toward their 50-day line.
The major indexes climbed not far from record highs this week, rebounding off their 21-day moving averages. Small caps, however, fell slightly toward their 50-day line, diverging from the broader rally.
Warsh speech lifts rate hike odds
Federal Reserve Chairman Kevin Warsh, coming off a July 29 news conference that had left Wall Street doubting his inflation-fighting credibility, turned the page at Friday's Jackson Hole address. Warsh said his perception is that the economy has strengthened, allowing the Fed to focus on its 2% inflation target, and that he would be "hard pressed to describe broad financial conditions as restrictive." The reaction lifted the odds of a Sept. 16 rate hike to 56% from around 35% on Thursday, according to CME Group's FedWatch tool.
The speech came as inflation data added pressure to strike a hawkish tone. The PCE price index topped forecasts with a 0.2% rise that kept the 12-month headline inflation rate at 3.7%, while core inflation held at 3.3%. Q2 GDP growth was unrevised at 1.5%, but the underlying measure of final real sales to private domestic purchasers was revised up to 4.2% from 3.9% initially.
Nvidia and software names power the gains
Nvidia posted a beat-and-raise fiscal second-quarter report that sent the stock jumping. Adjusted earnings surged 112% year over year while sales soared 106% to $96.2 billion, the fourth straight quarter of accelerating revenue growth. The chipmaker forecast current-quarter revenue of $108 billion, up 89%.
Software earnings drove much of the rest of the move. Salesforce's Q2 earnings popped 103% to $5.90 per share on an adjusted basis while revenue climbed 11% to $11.3 billion, with the company guiding slightly higher on current-quarter revenue. CrowdStrike's Q2 earnings climbed 35% while revenue rose 26% to $1.47 billion, and net new annual recurring revenue surged 51%. Not every chip name shared in the gains, though: negative earnings reactions to Marvell and Everpure weighed on the group.
Source: Investor's Business Daily
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