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Nasdaq Gains, Major Indices Still Negative for the Week

We started the trading day with a fork in the road between market indices that either have high-growth tech names like NVIDIA NVDA (the Nasdaq) and those that do not (the Dow). Those narratives played through to the close, thought the blue-chip index is off session lows of -213 points. The Dow closed down -35 points, -0.11%, while the Nasdaq gained +213, +1.71%. The S&P 500 finished +0.88% and the small-cap Russell 2000 ended normal trading -0.70%.

There is still no deal on the debt ceiling; apparently this game of chicken only gets fun with a week or less before Janet Yellen’s explicitly stated deadline of June 1st — one week from today. Many current members of Congress were not even in politics the last time this stunt was attempted, back in 2011; although virtually everyone decries the possibility of a U.S. default, the fear is clearly not strong enough not to weaponize the debt ceiling, even at this late date. Markets have yet to set in any manifest fears regarding this issue.

Marvell Technologies MRVL came into Q1 earnings season with a Zacks Rank #5 (Strong Sell) and a Value-Growth-Momentum grade of D, but not only beat expectations on both top and bottom lines (albeit slightly), but forecast a big upswing in A.I.-related revenues for next fiscal year expected “to at least double” full 2023 sales expectations. The company stated that while A.I. is an emerging business, it will provide a “key growth factor” for Marvell going forward. As a result, MRVL shares are up +18% on the news.

Costco COST put up mixed fiscal Q3 results after today’s closing bell, outpacing expectations on the bottom line — earnings of $3.43 per share versus $3.32 anticipated — while missing on the top: $53.65 billion missed the $54.57 billion in the Zacks consensus on relatively flat same-store sales (+0.03%). Shares are up marginally in the late session, +7% year to date.

RH (RH, formerly Restoration Hardware) outperformed expectations on both top and bottom lines this afternoon: earnings of $2.21 per share versus $2.08 estimated, on revenues of $739 million which stepped nicely beyond the expected $725 million. Even though the company anticipates markdowns on products to reduce inventory, this quarter was still a bounce-back from the previous print, which was RH’s first miss in six years.

The Gap GPS swung to a positive earnings result in its Q1 report out after the close (though barely): $0.01 per share was a big move higher from the expected -17 cents. However, revenue results came in at $3.28 billion, slightly lower than the $3.29 billion estimated, and same-store sales of -3% (Banana Republic and Old Navy were lower). That said, shares are up +16% on the earnings report, after being squeezed to single digits for most of the past three months.

Friday morning brings us Personal Consumption Expenditures (PCE) for April, with expectations up slightly month over month, flattish year over year. A big negative surprise in this data may provide a “bad news is good news” moment, in that this important inflation metric may assist the Fed to make sure not to raise interest rates at its June meeting. If not, we’ll likely continue to plod along in-range as the remainder of earnings season plays out.

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