(News Bulletin 247) – Wall Street lost ground Thursday in early trading despite quarterly results well above Nvidia’s expectations, which do not encourage investors to push the market higher.
At the end of the morning, the Dow Jones fell 0.2% to 34,395.5 points, while the Nasdaq Composite dropped 0.7% to 13,621.7 points.
Admittedly, investors undeniably welcome Nvidia’s much better than expected quarterly results with a 1.5% rise in its stock, which sets new all-time highs above $500.
But the bullish movement seems to be marking time a little because of the high valuations reached by equities, a phenomenon which seems more and more likely to condemn the American stock market to the spot.
At more than 30 times expected earnings, the Nasdaq 100 index, which has jumped 37% since January 1, is now posting a valuation well above its historical average of 23.7x.
Even more specifically, Nvidia is trading at 33.5x its expected profits for 2024, a level again well above the 20x average on which the rest of the chip sector trades.
With bond yields and interest rates rising, investors seem tempted to review stock market valuations and look elsewhere for other sources of investment.
On the bond front, the solid figures for jobless claims, which militate for a continuation of rate hikes, carry the yield of the ten-year American bond to more than 4.20%.
In this context of uncertainty, the speech – tomorrow – of Fed Chairman Jerome Powell could be a real test for the markets.
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