S&P 500, Nasdaq Reverse Early Gains as Investors Await Nvidia Results

S&P 500, Nasdaq News Analysis

• Quiet week sees risk sentiment edge higher but rising US yields pose a headwind
• S&P 500, Nasdaq 100 immediately weaker after gapping higher at the open
• High US yields threaten the attractiveness of expensive US stocks ahead of Nvidia results
• The analysis in this article makes use of chart patterns and key support and resistance levels. For more information visit our comprehensive education library

Quiet Week sees Risk Sentiment Ease Despite Elevated US Yields

US yields were marginally lower on Tuesday but remain elevated, placing pressure on US stocks as the bond market expresses the likelihood that interest rates will need to remain higher for longer as long as USD data continues to show a phenomenal resilience. With flash PMI data due tomorrow and Jackson Hole on Thursday and Friday, this week offers very little from a scheduled risk point of view but keep an eye on Nvidia earnings tomorrow after market close.

The S&P 500 rose at the open, buoyed by optimism surrounding Nvidia’s earnings report for the second quarter of this year. Last quarter, the company beat an earnings per share (EPS) estimate of 0.92, reporting $1.09 per share, sending tech stocks into a frenzy around the artificial intelligence hype.

The daily chart revealed a gap higher at the open but soon closed the gap between yesterday’s close and today’s open. The bearish move that ensued since printing the yearly high at 4607 in July remains in tact but has found support at 4325. The temporary reprieve form the selloff looks to 4450 as possible resistance and could see the index trading between 4325 and 4450 if market direction becomes less clear.

Nvidia’s results and industry guidance has great potential to extend the selloff or see the index trade back towards the high. AI and the semiconductors that support the growth of the industry have been the major driving force behind the stock market ascent this year so investors wait with bated breath.

S&P 500 Daily Chart

Source: TradingView, prepared by Richard Snow

The Nasdaq rose at the open, buoyed by optimism surrounding Nvidia’s earnings report for the second quarter of this year. Last quarter, the company beat an earnings per share (EPS) estimate of 0.92, reporting $1.09 per share, sending tech stocks into a frenzy around the artificial intelligence hype.

The Nasdaq chart below is similar to the S&P 500 chart, revealing a reprieve to the near-term bearish direction. Unlike the S&P 500 though, the Nasdaq actually traded and closed below the prior swing low at 14,687 before trading higher. Today’s immediate weakness after the open, signals a potential over-eagerness around Nvidia in a rather quiet week. Support remains at 14,687 with resistance at 15,285.

Nasdaq 100 Daily Chart

Source: TradingView, prepared by Richard Snow

Nvidia has stood head and shoulders above the other mega-cap tech stocks, rising around 221% year-to-date. Second place Meta posts 140% and Tesla has declined to 87% as big tech dominates index performance.

Nvidia Outperforms All of US Big Tech in 2023 Thus Far

Source: Refinitiv, prepared by Richard Snow

— Written by Richard Snow for DailyFX.com

Contact and follow Richard on Twitter: @RichardSnowFX