Here Comes Nvidia The trading week starts with news that President Trump has delayed tariffs on all EU products until July. Elsewhere, the news flow features earnings reports from Nvidia and Costco, and the first revision (or second estimate) of 1Q GDP and new inflation data on the economic calendar. As well, many Federal Reserve officials will speak publicly. Wall Street comes back to life following a losing week, when the Dow Jones Industrial Average and the Nasdaq both fell 2.5% and the S&P 500 shed 2.6%. So far this year, the Dow is down 2%, the S&P has lost 1%, and the Nasdaq has fallen 3%. The earnings season is winding down, but there are still a few big names this week. AutoZone reports on Tuesday; Nvidia, Salesforce, Agilent Technologies, HP, and Dick’s Sporting Goods on Wednesday; and Costco, Dell, Best Buy, and Ulta Beauty on Thursday. Some 95% of S&P 500 companies have reported so far and earnings for the quarter are up 14% from the prior-year quarter. That is far above the consensus that called for EPS growth of about 3%-8% and follows 17% growth in 4Q24 EPS and 9% growth in 3Q24, according to LSEG. For the current quarter, Healthcare is the leading sector, up 46%, and Energy is at the bottom, down 17%. On the economic calendar, Tuesday brings fresh data on Durable Goods Orders, the Case-Shiller Home Price Index, and Consumer Confidence. On Wednesday, the Minutes from the Fed’s last rate meeting will be released. On Thursday, the first revision of 1Q GDP comes out, and on Friday, the Personal Consumption Expenditures Index and Consumer Sentiment hit the tape. The Economic Call of the Week from Argus’ Chief Economist Chris Graja, CFA, is a hope that the yield on the 10-year Treasury note will remain below 5%. The 30-year Treasury rose above 5% last week. Movements in the 10-year note directly impact rates on mortgages and corporate bonds and are three-times as important to the economy as corresponding moves in the fed-funds rate. That’s according to the ‘three-to-one ratio,’ which is a Federal Reserve rule of thumb and one that Nobel Prize winner and former Fed Chairman Ben Bernanke mentions in his indispensable 2022 book ’21st Century Monetary Policy.’ The yield on the 10-year has risen from 4% at the beginning of April to 4.5% last week. That’s the unwelcome equivalent of 150 basis points of Fed tightening according to the ‘ratio.’ With our near-consensus expectation for 1Q GDP to decline 0.3% based on the updated estimate to be released on Thursday; Consumer Confidence that likely will be down about 20 points from its post-election high; and the S&P/Case-Shiller National Home Price Index likely to show decelerating growth, we do not want to see higher Treasury rates. Turning to other data, the Atlanta Fed GDPNow measure forecasts 2.4% for 2Q, following the surprise decline of 0.3% for 1Q GDP. The Cleveland Fed Inflation Nowcast forecasts a 2.4% rate for CPI in May, which is higher than the April rate. Mortgage rates inched higher again last week, with the average 30-year fixed-rate mortgage at 6.86%, according to FreddieMac. Gas prices ticked up five cents to an average of $3.17 per gallon for regular gas. Looking ahead, the next Fed rate decision is on June 18 and odds are at 6% for a rate cut, according to the CME FedWatch rate tool. After that, the next meeting is on July 30 and odds for a rate cut have fallen over the last few weeks to 25%. Argus continues to forecast two 25-basis-point rate cuts in 2025, both in the back part of the year.
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