Nvidia Tops Estimates Despite Miss in Key Business

0:05Welcome to the Schwab Market Update Podcast, where we prepare you for each trading day with a recap of recent news and a look at what's ahead.

0:17I'm Keith Lansford, and here is Schwab's early look at the markets for Thursday, August 28th. Shares of NVIDIA tumbled initially late yesterday after earnings and revenue only slightly exceeded analyst estimates. The market, which has grown accustomed to massive earnings growth from the chip giant, seemed disappointed, which could spill into the rest of the tech sector today. NVIDIA reported earnings per share of$1.05, topping the consensus of$1.00 and a penny, and revenues of$46.74 billion, above the consensus$46 billion. Neither came close to the types of beats NVIDIA has made in the past, though this time its quarter was burdened by lack of sales in China, which now might be coming back.

1:03Quarterly data center revenue of$41.1 billion missed the average estimate of$41.3 billion, a sore spot for NVIDIA's biggest business. Data center revenue still rose 56 % year-over-year. NVIDIA expects third-quarter revenue in a range between$52.92 billion and$55.08 billion. The Wall Street average was$53.43 billion, so the midpoint of guidance is above that. The initial drop in shares of NVIDIA after the close came following record highs for major indexes Wednesday. Other shares that could be directly affected by NVIDIA's results today include competitors' advanced microdevices and Broadcom. Also, Taiwan Semiconductor Manufacturing, which makes chips for NVIDIA, could see an impact.

1:54Before tomorrow's Personal Consumption Expenditures, or PCE Price Index, the most important data this week, investors await the government's second estimate for second-quarter gross domestic product, or GDP, growth, due before today's open. The first estimate was 3%, but that reflected a large quarterly drop in U.S. imports after they expanded in the first quarter as companies tried to get ahead of tariffs. Analysts expect no change to that previous 3 % GDP estimate according to consensus from briefing.com. Any change to the closely watched GDP deflator, the report's inflation tracker, could get attention.

2:32It was 2 % in the government's first estimate. Weekly jobless claims this morning also will get a close look after continuing claims, a measure of how difficult it is to find a job after losing one, hit a nearly four-year high above 1.97 million last week. For today's report, analysts expect initial claims of 236 ,000 about even with a week ago. Any rise in continuing claims could raise eyebrows, though the ship has sailed in terms of possible impact on next week's August jobs report, which reflects data collected earlier this month. Analysts expect a 0.2 % increase in headline PCE and 0.3 % in core PCE, which excludes food and energy.

3:18It may be hard for this data to be too surprising, considering it generally reflects what investors already learned in the consumer and producer price reports released earlier this month. With tomorrow the last day of trading before the long Labor Day weekend and U.S. markets closed Monday for the holiday, it's unclear how many market participants will be around Friday to trade the PCE news. That could mean lower-than-normal volume, which can exacerbate moves. The jobs report comes increasingly into focus once NVIDIA and then PCE are out of the way and could be pivotal in determining the Federal Reserve's next decision.

3:57There are some forecasts for jobs growth to pick up after July's bearish surprise, but more weakness in the August data might bring back ideas of a possible 50 basis point Fed rate cut in September. That's not the base case, but a very weak jobs report might generate calls for such a move. The jobs report is due Friday, September 5th. Revisions to prior reports were a big factor last time and likely will draw attention again. New York Fed President John Williams told CNBC yesterday that if data moves as he expects, it would be appropriate to lower rates over time. He also stressed the importance of Fed independence.

4:38Tonight brings remarks from Fed Governor Christopher Waller, one of two policymakers who voted to reduce rates in July. His words could be carefully watched for thoughts on inflation after last month's producer prices rose much more sharply than expected. Odds of a September rate cut reached 87 % late Wednesday, according to the CME FedWatch tool. That's up slightly from earlier in the week. Concerns about Fed independence also remain high on investors' list. President Trump attempted to fire Fed Governor Lisa Cook this week. It's unclear now how this affects the mid-September Federal Open Market Committee meeting.

5:16Cook has sued, and the issue will likely be decided in the courts. A similar situation occurred earlier this year when Trump tried to fire Federal Trade Commission or FTC Commissioner Rebecca Slaughter, but she sued, saying the firing was illegal and remains in her position. Pushed to the back burner for now is the interest in who will be the nominee to replace Fed Chairman Jerome Powell when his term ends in May of 2026, said Michael Townsend, Managing Director of Legal and Government Affairs at Schwab. There are reportedly close to a dozen candidates in the mix, and it now looks like it will take a few months for that nomination to be announced.

5:56Treasuries keep pushing higher with a corresponding drop in yields, at least on the shorter end of the curve. The 30-year bond yield remains not far from 5%, with the 10-year still range-bound, finishing down two basis points at 4.24 % Wednesday. The curve may continue to steepen with the anticipated rate cut, keeping short-term yields under pressure, while long-term ones reflect inflation and Fed independence concerns. Next week is light in terms of market-impactful U.S. Treasury auctions after strong demand for two-year notes earlier this week. Major U.S. indexes hit new record highs Wednesday before, NVIDIA reported, lifted in part by hopes for a solid earnings outing by the AI giant.

6:42The day featured many S &P 500 stocks climbing in the 1 % to 3 % range, but no major companies with sharply higher moves. The same was true on the downside, with Lyft, one of the few shares falling more than 3%. Only health care and communication services failed to register green on the sector scoreboard Wednesday, with energy and real estate among the leaders as crude prices rebounded on lower U.S. supplies and Treasury yields fell. Only energy managed a 1 % advance. Small caps continued to climb, outpacing their larger brethren and keeping alive what's been a bountiful month for the Russell 2000 Index.

7:24Hopes for rate cuts gave small caps a tailwind, and the Russell is up 7.3 % month-to-date. Looking at individual stocks, Apple and its India operations drew attention today as U.S. tariffs rose to 50 % on imports from India, a move Trump made to punish the country for importing Russian oil. The tariff doesn't affect imports of Apple's products to the U.S. from India, which account for more than one-fifth of global iPhone production, Bloomberg reported. That said, Trump has told Apple he's not happy with the company's decision to manufacture there. One concern about the punitive tariffs on India is what it might mean for Trump's policy on China, which also imports significant amounts of Russian crude.

8:11Kohl's popped after the retailer beat Wall Street's earnings and revenue expectations and increased guidance. Still, revenue fell year over year, and the company expects a net sales decrease for the fiscal year. Canada Goose jumped after CNBC reported the company had received bids to be taken private. The Dow Jones Industrial Average climbed 147.16 points Wednesday, or 0.32%, to 45 ,565.23. The S &P 500 Index added 15.46 points, or 0.24%, to 6 ,481.40, and the Nasdaq Composite increased 45.87 points, or 0.21%, to 21 ,590.14. This has been the Schwab Market Update podcast. To stay informed, visit www.schwab.com slash market update or follow us for free in your favorite podcasting app.

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9:29For important disclosures, see the show notes and schwab.com slash market update podcast.