Nvidia Options Suggesting An $11 Move After Tonight’s Earnings

Key Takeaways

• Nasdaq Leads Gains, Up 1%, With Retail Earnings Driving Market Sentiment
• Target’s Miss And Walmart’s Strength Highlight Shifting Consumer Behavior Trends
• Nvidia Earnings And Bitcoin ETF Options Dominate Today’s Market Focus

Stocks gained ground on Tuesday with the Nasdaq Composite leading the way, up over 1%. Small caps were the second-best performers, up 0.75%, followed by both the S&P 500 and Dow Jones Industrial Average, both up just under 0.5%.

Earnings season has continued this week with retailers reporting their latest quarterly results. This morning, Target is out with disappointing numbers. The main metric for retailers is same store sales growth. That measures how stores, open for at least a year, are performing (it can also include online sales). Same store sales at Target were down 1.9% and the company missed on earnings, margins and revenue forecasts. In addition, the company lowered its outlook. Shares are trading significantly lower in premarket, down 18%. That contrasts with Walmart, who reported earnings on Tuesday. In addition to same store sales being higher by over 5%, Walmart raised guidance and said they are seeing more shoppers from higher income levels.

I find the Target and Walmart earnings very interesting because we typically see a waterfall type effect when the economy begins to struggle, with shoppers trading down from stores such as Target to Walmart. I’m not entirely sure if the move to Walmart is simply a matter of shoppers finding more items they like at Walmart or if this is a potentially concerning economic sign. I have repeatedly expressed concern over yields on long-term bonds being high and how that could be a warning for the economy. Therefore, while I’m not ready to connect the dots between the trade down and interest rates, it is something I’m closely watching. The real test for Target and where we might get some answers on what’s driving people to Walmart, will be this quarter with the holiday sales.

There are some other items of note this morning. Options are expected to begin trading today on the iShares Bitcoin ETF. Bitcoin is trading well over $93 thousand in premarket and it’ll be worth watching how the options trade. The introduction of options allows investors to trade bitcoin a bit more strategically and less directionally reliant, if they want. Should the options prove liquid, it could be a significant boost for the tradability of bitcoin. Comcast shares are higher by just under 2.5%. That company is expected to announce a spinoff of its NBCUniversal cable channels. Those channels, which include MSNBC, CNBC, Bravo and more, generate around $7 billion in revenues. Last, but certainly not least, Nvidia.

After the close tonight, the Artificial Intelligence (AI) chipmaker will announce earnings. The stock has an expected move of over $11.5 by Friday, or a total expected trading range of around $23, according to tastytrade. Since 2014 Nvidia stock has gained an average of 3.75% the day after earnings and has traded higher 27 out of 43 times. The biggest gain came back in November of 2016 when the stock surged 30%, while the biggest loss was 19% in November of 2018, according to The Wall Street Journal. While past performance isn’t necessarily indicative of what will happen, I do find it interesting that the biggest move higher and lower both took place in November, so that is something worth keeping in mind. At the same time, I’m not necessarily expecting moves like we saw in 2016 or 2018 when Nvidia wasn’t quite yet on everyone’s radar.

For today, stocks are slightly higher in premarket, but I expect much of the day will be about waiting on Nvidia. There aren’t many stocks than can move the entire market, but this is one. I’m also watching the scheduled 20-year bond auction taking place later today. I already mentioned earlier that long-term rates have risen quite a bit and investor appetite for this auction could be a tell in terms of where rates are headed. On a related note, data released today in the UK shows inflation increasing at 2.3%, putting pressure on the Bank of England to hold off on any further interest rate cuts. This coincides with what Jerome Powell said last week about the U.S. economy and maybe there being less need for cuts. As always, I would stick with your investment plans and long-term objectives.

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