Futures subdued as markets await Nvidia test

[August 28, 2024]  (Reuters) - U.S. stock index futures were flat-to-slightly higher on Wednesday, as investors held back ahead of a crucial quarterly earnings report from AI-favorite Nvidia to gauge if the market can withstand further risk-taking in a bull rally.

Wall Street's main indexes have broadly swung between small gains and losses since the start of the week, with the Dow hovering near record highs and the S&P 500 within 1% of a record high, as investors await the chip giant's results, due after markets close.

Shares of the No. 2 most valuable company in terms of market capitalization were up 0.4% in trading before the bell. However, data from ORATS showed options traders anticipate a nearly 10% jump in its shares if it reports a doubling in second-quarter revenue as expected.

Nvidia's stock is up nearly 160% year-to-date, accounting for around a quarter of the benchmark index's 18% gain. Any disappointment in its results could hurt megacaps and other semiconductor stocks, which have led 2024's rally on the prospect of artificial intelligence integration boosting corporate profits.

Other chip stocks such as Broadcom and Advanced Micro Devices inched up, as did megacaps including Apple, Microsoft and Alphabet.

"Markets put in a subdued performance yesterday... that should soon change from today, as we've got Nvidia's earnings... which have become an important macro event in their own right over recent quarters, with reactions that rival the sort of moves taking place after surprise jobs reports or (Consumer Price Index) releases," analysts at Deutsche Bank said.

At 05:19 a.m., Dow E-minis were down 7 points, or 0.02%, S&P 500 E-minis were up 4 points, or 0.07% and Nasdaq 100 E-minis were up 26.25 points, or 0.13%

Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., July 3, 2024. REUTERS/Brendan McDermid/File Photo

On the macro front, sentiment favors the likelihood of the Federal Reserve lowering interest rates at its September meeting. Odds of a 25-basis-point reduction stand at 63.5%, while those of a 50-bps cut are at 36.5%, according to the CME Group's FedWatch Tool.

Fed Chair Jerome Powell's support for imminent policy adjustment sparked broad-based market gains in the previous week. The Personal Consumption Expenditure report for July, due on Friday, is expected to provide insight into the pace and magnitude of the central bank's rate-cut trajectory.

Comments on the economic outlook from voting member and Atlanta Fed President Raphael Bostic, due later in the day, will be closely watched.

Investors also await earnings reports from J M Smucker, Abercrombie & Fitch and Bath & Body Works before markets open.

SentinelOne raised its annual revenue forecast, sending shares of the cybersecurity company up by 1.9%, while Nordstrom jumped 7.8% after the department-store chain reported second-quarter profit which topped estimates.

(Reporting by Johann M Cherian in Bengaluru; Editing by Pooja Desai)

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