Good Evening. U.S. equities nearly flattened out on Monday, giving up previous gains as investors prepared for a heavy week of inflation data and the end of the earnings season.
After the benchmark index registered three consecutive weeks of gains on Friday, the S&P 500 teetered into the red, ending the session down 0.12%. The Nasdaq fell by 0.10% as technology peers were affected by a Nividia (NVDA) economic warning. The Dow Jones, meanwhile, ended the day up 0.09%.
MEME STOCKS ARE AT IT AGAIN...
Shares of Bed, Bath & Beyond (BBBY), GameStop (GME), and AMC (AMC) all rose at the start of the week on no news, with renewed interest in these companies coming from the traders on Reddit’s Wallstreetbets message board, which investors first became familiar with in early 2021.
According to data from Ape Wisdom, the mentions of Bed, Bath & Beyond, GameStop, and AMC increased noticeably from Sunday into Monday. This website counts ticker mentions on Wallstreetbets forums. These three names were the most popular tickers at market open. Furthermore, all three names maintained significant gains on a day when the major averages lost momentum during the trading session and ended with little changed.
GameStop and AMC shares increased by more than 15% while Bed, Bath & Beyond stock rose to 50%. In the first few minutes of trading, shares of GameStop and AMC were both suspended due to volatility.
At market closure, shares of Bed, Bath & Beyond were up 39%, those of AMC was up 8%, and those of GameStop were up 8.5% for the week.
A SLOWDOWN IS COMING
Nvidia (NVDA) announced in the form of a warning on Monday morning, stating that revenue would fall around 17% short of expectations for the fiscal second quarter that concluded on July 31. The main area of vulnerability cited by the chip manufacturer was their video gaming division, which is mostly composed of graphics processors utilized in PC gaming rigs. Although the stock is doing better than the last time Nvidia indicated it would fall short, its shares fell by almost 8%. Following that preannouncement in January 2019, the shares dropped by roughly 14% in a single trading day.
It’s not only Nvidia either… Qualcomm, Sony Group, and Intel Corp. forecasted negative sales due to concerns about the demand for personal computers and phones.
On top of that, rumors have been circulating that the market for PCs and other chip-based products, like cellphones, is deteriorating. The two biggest game publishers, Electronic Arts, and Activision Blizzard, both announced year-over-year reductions in net bookings for the June quarter in their respective results last week, indicating that videogames are also going through a summer slowdown. Given the significant capital expenditures made by the largest cloud computing companies, data center demand has been largely consistent, but even this could decline in the coming quarters if a significant recession occurs.
THE WEEK AHEAD
We Aren’t Done Yet: At this point in the earnings season, 87% of the S&P 500 businesses have already released their financials. Disney, Bumble, and Coinbase are all featured in this week’s grand finale.
Inflation: This week’s major economic event is the release of the consumer price index report on Wednesday, which monitors inflation.