【Market Morning】Nvidia stock surges 8% to new record, S&P 500 rises in choppy session, Gold slips

Yesterday Market Review

Gold slips as U.S. jobless claims data cements rate-hike bets

Gold prices slipped on Thursday as encouraging weekly U.S. jobless claims data strengthened bets for an earlier-than-expected rate hike by the Federal Reserve following recent strong inflation data out of the United States.

Spot gold fell 0.4% to $1,858.76 per ounce by 1:41 pm ET (1841 GMT), and U.S. gold futures settled down 0.5% at $1,861.4.

Despite the drop in prices, bullion was holding near its highest level in five months touched on Tuesday.

"One of the major reasons for this spike in gold was that rates fell off pretty hard. But then, they came bouncing back, so that's keeping the upside limited in gold," said Daniel Pavilonis, a senior market strategist at RJO Futures.

The number of Americans filing new claims for unemployment benefits fell close to pre-pandemic levels last week, data showed on Thursday. Any signs of a recovering economy reduces demand for the safe-haven metal. read more

"It just correlates with a higher probability of the Fed actually having to raise rates," Pavilonis said.

U.S. Treasury yields held near recent three-week highs , while the U.S. dollar paused for breath, slipping back from a 16-month peak. A weaker dollar makes gold more attractive for buyers holding other currencies.

Bullion, considered a hedge against inflation, has gained on surging consumer prices in the U.S. and Europe. But that has also bolstered bets for early interest rate hikes, which would increase the opportunity cost of holding non-yielding gold. read more

"At the moment, it's difficult for gold to find direction because of the uncertainty related to the dollar's performance, and the likely response of the Fed and other central banks to inflation," said ActivTrades senior analyst Ricardo Evangelista.

Elsewhere, platinum fell 0.8% to $1,048.77 per ounce, while palladium slid 2.7% to $2,129.28.

Silver slipped 0.9% to $24.82.

Dollar pauses for breath, hovers below 16-month top

The dollar hovered below a 16-month peak in Asian trade on Thursday, losing ground on the New Zealand dollar, after having fallen against the pound and yen overnight as traders assessed whether the U.S. currency’s recent surge was starting to stall.

Markets’ assessment of global central banks’ differing responses to rising inflation have largely driven currencies in recent weeks.

On Thursday, the New Zealand dollar jumped 0.38% to $0.7023 after a central bank survey showed near-term inflation is expected to rise in the fourth quarter.

The day before, sterling rose 0.5% to a one-week high against the dollar after a spike in Britain’s October inflation piled pressure on the Bank of England to hike rates at its meeting next month.

The British currency was last at $1.3502, up slightly on the day.

Against the Japanese currency, the dollar inched down to as low as 113.86 yen on Thursday but was still in sight of Wednesday’s 4-1/2-year high of 114.97.

On Thursday the euro was at $1.1327, languishing near a 16-month low.

Strong U.S. retail sales data earlier this week added fuel to the dollar’s recent rally, which started last week after a strong U.S. inflation print bolstered market bets that the Federal Reserve will have to raise rates around the middle of next year.

The dollar index, which measures the currency against a basket of six rivals, hit its highest since mid July 2020 on Wednesday at 96.226.

However, “the sustainability of the current dollar strength beyond the next few months looks far from certain,” said Luc Luyet, FX strategist at Pictet Wealth Management.

“Market expectations of the Fed are starting to be particularly hawkish, suggesting limited tailwinds for the U.S. dollar going forward from that factor.”

Oil prices rebound from their lowest levels in about 6 weeks

Oil prices finished higher on Thursday, rebounding after settling Wednesday at their lowest levels since early October. U.S. benchmark crude futures have dropped from their recent highs as energy traders appear to have mostly "priced in" the impact of a potential coordinated strategic petroleum reserve release between the U.S. and China, said Edward Moya, senior market analyst at Oanda. 

Still, the oil market deficit will remain even if the reserves are tapped, and "the next big move for prices will most likely depend on the weather." West Texas Intermediate oil rose 65 cents, or 0.8%, to settle at $79.01 a barrel Prices for the front-month contract, which expires at the end of Friday's session, settled Wednesday at the lowest since Oct. 7.

S&P 500 rises in choppy session as Nvidia leads gains in tech shares

The S&P 500 gained in a choppy session after strong earnings results from Nvidia, the world’s largest chipmaker by market value, and various retailers.

The S&P 500 was 0.3% higher to 4,704.54 and the Nasdaq Composite rose 0.5% to 15,993.71. The Dow fell 60 points, or 0.1%, dragged lower by big losses in Cisco shares. The S&P 500 fell as much as 0.3% at one point before recovering.

The markets are in a normal seasonal lull coming off earnings season, according to Jay Hatfield, CEO of Infrastructure Capital Management. Refreshed Covid concerns weighed on short-term trades too, he added, particularly in travel stocks and other reopening plays.

Even with those mixed market moves, company earnings continue to show strength and eventually pushed the major averages higher. Nvidia shares surged 8.3% after the company reported beats on the top and bottom lines and issued a bullish revenue forecast for the current quarter ending in January. The chipmaker saw a 55% gain in data center sales from the same period a year ago and a 42% increase in gaming, its biggest market. The gain brought its market value to $791 billion.

Nvidia’s strong results caused investors to buy other chipmakers. Advanced Micro Devices moved more than 2.4% higher. Qualcomm ticked up by more than 1%, and Micron Technology added 2%. Separately, GlobalFoundries saw a big pop after revealing it entered a partnership with Ford to help the automaker increase its chip supply. Its shares ended the day higher by 2.5%.

Investors also moved into tech stocks broadly as U.S. Treasury yields took a dip of roughly 2 basis points. Scott Brown, technical strategist for LPL Financial, noted the S&P 500 Information Technology sector has gained 27% in the past six months, outperforming the broader S&P 500 by more than 10%.

“The theme of 2021 has been rotation, rotation, rotation,” he said. “But technology is the only sector to recently hit a 52-week relative high and we believe that sets up a favorable outlook heading into 2022.”

In other tech moves, Apple jumped 2.9% to an all-time high after Bloomberg News reported the company is refocusing its electric vehicle efforts on self-driving capabilities. Amazon gained 4% as its first cashierless coffeeshop, which it partnered on with Starbucks, opened in New York. It also got a lift from continued positive momentum in retail, particularly in digital.

Earnings reports from big retailers continued to lift stocks. Macy’s and Kohl’s kicked the day off smashing quarterly profit and revenue estimates, much like their peers who reported earlier in the week.

Macy’s shares surged more than 21%. The company reported comparable sales growth, on an owned plus licensed basis, of 35.6%, and digital sales increased by 19%. It also teased the launch of a digital marketplace next year, and said 41% of its 4.4 million new customers in the quarter came through the digital channel.

Similarly, Kohl’s saw gains in same-store sales growth and digital. Kohl’s jumped nearly 11%. JD.com, China’s largest online retailer, advanced about 6% on strong revenue and earnings.

Shares of Bath & Body Works increased more than 5% and was the top S&P gainer behind Nvidia. Gap added 4.3% and Victoria’s Secret jumped more than 14%.

Elsewhere, CVS advanced about 2% after announcing it would close 900 stores over the next three years to roll out a more digital strategy for shoppers and turn brick-and-mortar locations into destinations for healthcare services like flu shots and diagnostic tests.

Deere got a 1% lift too after it came to a resolution with workers who had been on strike since Oct. 14.

But trading has been choppy all week with the major averages wavering at the flat line, and Thursday was no exception. The S&P and Nasdaq are still on track for a positive week and are about 0.3% from their records. The Dow is nearly 2% from its record.

“For a second consecutive session the underlying price action is a lot weaker than the headline indices make it seem with a handful of large stocks masking selling elsewhere,” according to Vital Knowledge’s Adam Crisafulli. “It seems the same worries are before are still present – COVID, the debt ceiling, Fed staffing uncertainty, the Fed will tighten too soon, the Fed isn’t tightening fast enough. Actual news is relatively bullish ... Even ‘bad’ reports, like Cisco, still have bullish implications for the underlying economy.”

Going in the other direction, Cisco Systems fell almost 6% due to weaker revenue guidance and a revenue miss.

Initial filings for unemployment insurance fell slightly to 268,000 for the week ending Nov. 13, the Labor Department reported Thursday. That was the lowest level since March 2020, and the seventh straight weekly decline. Economists polled by Dow Jones expected them to have fallen to 260,000, compared to the previous week’s adjusted 269,000 claims.