US stock futures are up after the Dow closed above the 40,000-point mark for the first time on Friday. Nvidia (NASDAQ:NVDA) will headline this week's corporate earnings calendar, as the maker of chips optimised for artificial intelligence is expected to post another quarter of rising revenue.
Elsewhere, several Fed members are scheduled to appear on Monday, as investors try to gauge the possible future course of the central bank's monetary policy.
Here are the five main issues to watch out for in the financial markets on Monday, 20 May.
- Futures point to the upside.
US equity futures are pointing to a generally higher open on Monday, suggesting an extension of the previous day's rally that took the Dow Jones Industrials to its first close above the 40,000 level.
At 9:48 a.m. (CET), the Dow futures contract is up 19 points or 0.1%, S&P 500 futures are up 4 points or 0.1% and Nasdaq 100 futures are up 22 points or 0.1%.
Recent data indicating a possible cooling of the US economy has eased some of the lingering inflationary concerns, fuelling hopes that the Federal Reserve will begin cutting interest rates from September's more than two-decade highs. Along with the Dow, the benchmark S&P 500 index and the tech-heavy Nasdaq Composite hit record highs last week.
The durability of Wall Street's strength will be tested this week with a fresh batch of corporate results, including the quarterly report from Nvidia, the darling of the artificial intelligence sector (see below). Durable goods and consumer confidence data will also be in focus as markets look for more evidence that growth is moderating enough for the Fed to justify rolling out rate cuts this year.
- Nvidia Results.
Nvidia will star in this week's earnings calendar, as traders wait anxiously to see whether the maker of artificial intelligence-specialised graphics processing units will once again boost revenue from its important data centre unit.
The company's shares have soared nearly 92% this year, making it one of the focal points of the AI boom. In February, Nvidia said it expected revenue to rise to $24bn in the first quarter, and its chief executive, Jensen Huang, has said he believes ‘accelerated computing and generative AI have reached their inflection point’.
Huang's statements are also likely to be in the spotlight. Nvidia faces competition from rival chipmakers such as Intel (NASDAQ:INTC) and Advanced Micro Devices (NASDAQ:AMD), as well as supply chain constraints and geopolitical tensions that threaten US AI chip exports to China. Meanwhile, major tech players such as Google parent Alphabet (NASDAQ:GOOGL) and e-commerce titan Amazon (NASDAQ:AMZN) are reportedly starting to build their own AI chips in-house, potentially limiting their need for Nvidia chips.
- Fed appearances and minutes.
Several Fed members will deliver speeches on Monday that may provide insight into the future course of the central bank's monetary policy. Fed board members Christopher Waller, Philip Jefferson and Michael Barr are scheduled to appear at various events.
Later this week, the Fed will release the minutes of its April 30-May 1 meeting, when Chairman Jerome Powell indicated that rates were likely to stay higher for longer due to persistent inflationary pressures. Since then, however, data have shown that US consumer prices - a key indicator of inflation - rose at a slower pace than expected in April, while the crucial labour market report missed expectations.
These figures reinforced bets that the Fed will implement two 25 basis point cuts in borrowing costs this year. Currently, rates are between 5.25% and 5.5%, a 23-year high.
- China keeps prime lending rates unchanged.
The People's Bank of China on Monday decided to keep its prime lending rates unchanged, as expected, even as Beijing continued to implement other stimulus measures to support the economy.
The PBOC decided to keep one-year rates anchored at 3.45%, while the five-year rate, which is used to determine mortgage rates, remained at 3.95%. Both rates remained at record lows as Beijing sought to underpin economic growth by keeping local monetary conditions as loose as possible.
On the other hand, shares of mainland Chinese property developers listed in Hong Kong fell despite Beijing's announcement last week of new measures aimed at supporting this ailing sector. In recent weeks, China has unveiled a series of such policies, including easing restrictions on home purchases in several major cities and providing funds to local governments to buy real estate from developers.
- Oil prices rise amid Iran uncertainty.
Crude oil prices are higher on Monday, adding to the previous week's gains, as uncertainty swirls around the political situation in the Middle East following the death of Iranian President Ebrahim Raisi.
At 9:44 a.m. (CET), US crude futures are up 0.3 per cent to $79.81 per barrel, while the Brent contract is up 0.3 per cent to $84.23 per barrel. Brent closed last week up about 1 per cent, its first weekly gain in three weeks, while WTI rose 2 per cent on improved economic indicators in the United States and China, the world's biggest oil consumers.
Iranian state media announced that Raisi, seen as a possible successor to supreme leader Ayatollah Ali Khamenei, died on Sunday in a helicopter crash in a remote region in the northwest of the country.
Raisi's death comes amid simmering tensions in the oil-rich Middle East, with Israel and the militant group Hamas at war in Gaza. Israel and Iran also attacked each other earlier this year.
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