European stocks started the day on May 21 with a slightly weaker note, marking a retreat from their recent impressive performance, with attention now shifting towards the upcoming earnings report from NVIDIA Corporation (NASDAQ:NVDA). The Stoxx 600 index dipped by 0.2%, showing a predominantly negative trend across most sectors, while futures for US equities remained relatively unchanged. Options markets in the US indicate significant anticipation for NVIDIA Corporation (NASDAQ:NVDA) earnings report this Wednesday, with traders expecting a notable shift in the chipmaker’s shares, reported Reuters.
Predictions suggest an 8.7% swing in either direction by Friday, potentially resulting in a staggering $200 billion market cap fluctuation, exceeding that of most S&P 500 companies. While substantial, this projected move falls short of the remarkable 16.4% surge witnessed in Nvidia’s shares after its previous quarterly report, and it’s also less aggressive than historical averages. NVIDIA Corporation (NASDAQ:NVDA), a key player in the AI industry, boasting a market value of approximately $2.3 trillion, is anticipated to deliver robust quarterly results, reflecting its pivotal role in the market. This optimism extends beyond NVIDIA Corporation (NASDAQ:NVDA), with other sectors such as power, commodities, and utilities benefiting from the broader AI theme.
While expectations are high, there’s recognition that the upcoming earnings announcement could trigger significant market activity. Implied volatility for options suggests traders are prepared for both upward and downward movements in the stock price. Despite Nvidia’s impressive performance this year, investors remain vigilant, aware that a substantial downturn in NVIDIA Corporation (NASDAQ:NVDA) shares could test the resilience of the broader AI trade, emphasizing the significance of NVIDIA Corporation (NASDAQ:NVDA) role in shaping market sentiment and trends.
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Meanwhile, in Asia, shares took a breather following a week-long streak of gains. Investors remained vigilant regarding commodity prices, especially with the Bloomberg Commodity Spot Index hitting its highest point since January 2023. Notably, gold and copper were trading near their historical peaks, adding to the market’s attention.
On another front, oil prices experienced a decline, influenced by various market metrics suggesting a subdued outlook, despite heightened geopolitical tensions ahead of an OPEC+ meeting on supply. Brent crude’s prompt spread narrowed to its smallest backwardation since January, indicating a potential shift in market dynamics, while the reduction in bets on crude price increases continued among money managers. Futures trading reflected a period of consolidation, with implied volatility levels nearing lows not seen since 2019.
From Chinese property market side, analysts suggest that China’s recent efforts to bolster the property sector will require patience to yield results. Despite these initiatives, S&P maintains its view that the market is still “searching for a bottom.” Edward Chan from S&P emphasizes the government’s seriousness in stabilizing the property sector but notes that significant stabilization requires improvements in homebuyers’ demand and confidence, which have been affected by a nearly three-year market downturn. According to CNBC, recent measures, including lowered down payment minimums and enhanced liquidity for developers, aim to address the challenges. However, analysts like Goldman Sachs’ Hui Shan and Nomura’s Ting Lu believe more substantial actions are needed, estimating a significant funding requirement to address inventory excess and stabilize prices. While progress is noted, challenges persist, as indicated by declining real estate investment and slower-than-expected retail sales growth. Rebuilding homebuyer confidence is crucial, particularly concerning delivery delays and economic uncertainty. Analysts anticipate further efforts from Beijing, including a national survey to assess funding needs for completing residential projects. Ultimately, restoring confidence in the presale system is seen as essential for a genuine recovery in China’s housing markets. As market players navigate these developments, attention remains keenly focused on unfolding events and their potential impact on investment strategies and market sentiment.
On the stock market front, analysts are bearish on stocks such as Deere & Company (NYSE:DE) by lowering their price targets. For a comprehensive overview of Deere & Company (NYSE:DE) and other stocks affected by such adjustments, see Wall Street Analysts Just Trimmed Price Targets for These 10 Stocks .
Deere & Company (NYSE:DE)
Price Reaction after the Price Target Cut: +2.59(+0.66%)
On May 20, DA Davidson adjusted the price target for Deere & Company (NYSE:DE) from $483 to $465 while maintaining a Buy rating on the stock. Following this adjustment, Deere & Company (NYSE:DE) stock price increased by 0.66%. The company, which operates in the agricultural machinery industry, delivered a “strong beat” in its Q2 earnings. However, it revised its guidance downward as it aims to significantly reduce its inventory levels. The analyst noted that the recent flooding in Brazil could positively impact row-crop prices and improve the outlook in other regions. Additionally, with easier comparisons, upcoming new product launches, and continued favorable pricing, the firm expects agricultural growth to be feasible next year.
Oakmark Fund stated the following regarding Deere & Company (NYSE:DE) in its first quarter 2024 investor letter:
“Deere & Company (NYSE:DE) is a leading manufacturer of agricultural equipment with dominant market share in North America and Brazil. Despite its brand strength, technological capabilities and distribution advantages, the company’s stock price has recently fallen due to fears about a downturn in the agriculture business cycle. Longer term, world population and food demand are expected to increase annually yet land and labor devoted to agriculture are expected to decline. Deere seems well-positioned to benefit from this dynamic as farms will have to become more productive. We were pleased to purchase shares in Deere at a low double-digit multiple of our estimate of normal earnings power.”
You can visit Wall Street Analysts Just Trimmed Price Targets for These 10 Stocks to see the other stocks that are downgraded.
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Disclosure: None. This article is originally published at Insider Monkey.