- Wall Street rallies on Nvidia earnings
- FTSE 100 looks to end five day losing streak
- Oil prices find a floor
- JD Sports continues to see weak UK trading
Matt Britzman, senior equity analyst, Hargreaves Lansdown:
“Wall Street rallied into the close, and extended the run into after-hours trading, buoyed by Nvidia’s upbeat outlook that soothed global jitters and gave investors the green light to pile back into the stock market. Whether the optimism sticks is anyone’s guess – predicting market sentiment is as futile as calling the next Fed move. Case in point, markets now lean heavily toward no change in US rates through year-end, a stark shift from just a few weeks ago and an underappreciated catalyst for the recent sell-off in risky assets. For now, fundamentals remain the anchor, and by that score, US markets are on solid ground.
Nvidia bears the weight of the world but, like Atlas, it’s standing firm under that towering mountain of expectations. Third quarter results delivered the goods and then some, a 4% beat on the top and bottom line came with a side of more good news in the form of a monster $65 billion revenue guide for the fourth quarter. While AI valuations are dominating the news feeds, Nvidia is going about its business in style. There are certainly pockets of the AI space where valuations needed to take a breather, but Nvidia is not in that camp. In fact, while shares have performed well this year, the valuation has gotten more attractive as earnings growth has raced ahead.
Looking ahead to next year, demand isn’t in question, Nvidia already has a massive backlog of orders and consensus for next year still looks far too low. What’s new is that its market dominance is facing scrutiny. Key customers are exploring viable alternatives, at least on paper, as they seek faster compute and diversification away from a single supplier. The real question is how those alternatives stack up. Designs and promises of similar performance are one thing; track record at scale is another, and no one matches Nvidia there. Its breadth remains underrated: a full data centre business spanning chips, software, networking, and more. Even if rivals can offer parts of the stack, Nvidia’s fully integrated solution will be hard to beat.
The FTSE 100 joined the global market rally, aiming to snap a five-day losing streak after plumbing a four-week low yesterday. Softer October inflation, the first slowdown since May, has markets betting heavily on a December interest rate cut, with odds now near 81%. Even so, sticky food prices keep a note of caution in the air. Earnings season is winding down but there are still key results coming through, namely JD Sports this morning, see below for Aarin Chiekrie’s first reaction below.
Oil prices edged higher in early trading, clawing back some ground after a sharp 2% drop for Brent in the prior session. The move comes as traders weigh looming sanctions on Rosneft and Lukoil, set to bite on Friday, against Washington’s push for a Ukraine peace deal that could unlock Russian exports and stoke oversupply fears. Meanwhile, US inventory data offered little clarity: crude stockpiles fell more than expected, but gasoline and distillates posted their first build in over a month.”
The author holds shares in Nvidia.
Aarin Chiekrie, equity analyst, Hargreaves Lansdown:
“JD Sports’ third-quarter performance was largely as expected, with recent acquisitions flattering performance and helping total sales rise by 8.1%. Stripping out these acquisitions, like-for-like sales continued their downward trend, moving 1.7% lower against a tough market backdrop. Trading across the UK remains particularly weak, with recent changes to employer taxes and minimum wages bringing a handful of extra costs and challenges.
Across the pond, the recent acquisition of Hibbett cemented the US as the group’s largest region by sales. Promotional activity among peers to help clear stock remains at elevated levels, weighing on JD’s performance who have chosen to stand firmer on pricing. While like-for-like sales remain in negative territory, they’ve picked up from the first half as trends here continue to improve.
Despite improving trends, JD has thrown caution to the wind regarding its near-term outlook, citing weaker macroeconomic and consumer data points as the reason for cutting its full-year profit guidance. While that’s disappointing, the longer-term opportunity ahead looks promising given its strong market position. Trading at just 6.3 times next year’s earnings, the valuation offers plenty of upside potential if it can return to growth in key markets. And if investors are patient enough to ride out some uncertainty over the next couple of years, it could prove to be a very attractive entry point.”
