Wall Street rally eases as Fed considers rate pause and Nvidia earnings loom

Wall Street rally cools amid Fed 'skip' speculation

United State (US) stocks closed sharply lower on Friday as investors reacted to Federal Reserve (Fed) Chair Jerome Powell’s hawkish comments. Powell indicated that the central bank isn’t 'in a hurry' to cut interest rates, citing the strength of the job market and above-target inflation.

For the week, the Nasdaq 100 fell 3.4%, the S&P 500 dropped 2.8%, and the Dow Jones declined 1.2%.

Mixed signals from retail sales data

The release of mixed October retail sales data on Friday evening added to the cautious sentiment. Headline retail sales rose 0.4% in October. However, the retail control group, which feeds into gross domestic product (GDP) calculations, fell 0.1% month-on-month (MoM).

Thus, reflecting the increased possibility of a Fed rate cut 'skip' in December, the US rates market now prices in a 15 basis point (bp) or 60% chance of a Fed rate cut, down from 82% in the middle of last week.

It’s a relatively quiet week for US economic data, with attention focused on manufacturing and services purchasing managers' index (PMI) figures, as well as housing market updates, including building permits, housing starts, and existing home sales.

Nvidia earnings in focus

Date: Thursday, 21 November 2024 at 8.20am AEDT

Artificial Intelligence (AI) chip maker Nvidia is set to report its third quarter (Q3) 2025 earnings on Thursday morning (AEDT), after US equity markets close. Nvidia will aim to beat its earnings estimates for the fifth consecutive quarter. The market expects it to report $0.72 earnings per share on $32.1 billion in revenue.

Earlier this month, Nvidia's share price reached a record high of $149.77 before closing last week at $141.98. If Nvidia’s earnings exceed expectations, its share price could surge above $150 in the coming sessions.

Conversely, a disappointing earnings report might see its share price drop towards support at $130. Nvidia's influence on the S&P 500 and Nasdaq 100 means its results could significantly impact sentiment towards tech stocks and the broader market. Strap in - it’s going to be a pivotal report.

Nasdaq 100 technical analysis

The upside momentum in the Nasdaq 100 observed post the US election cooled noticeably last week, as it gapped lower on Friday through short-term support at 20,700 - 20,500.

While the Nasdaq 100 remains above medium-term support at 19,900 - 19,800, and with Nvidia's earnings being the key event this week, we anticipate the rally in the Nasdaq 100 to resume. The first upside target is the record high 21,182 from earlier this month, followed by 21,500. A significant resistance level is the trend channel at approximately 22,400.

A sustained break below support at 19,900 - 19,800, would lead to a test of the 200-day moving average at 19,000, reinforced by trend line support at 18,700.

Nasdaq 100 cash daily chart

S&P 500 technical analysis

The upside momentum in the S&P 500 observed post the US election cooled noticeably at the end of last week, with the index testing support at 5850, stemming from the gap higher that followed the US election.

Nonetheless, while the S&P 500 remains above the gap support at 5850 and above the band of medium-term support at 5700 - 5650, and with Nvidia's earnings being the key event this week, we anticipate the rally in the S&P 500 to resume. The first upside target is the record high of 6012 from earlier this month, followed by 6150. Above that, significant resistance is currently at approximately 6250.

A sustained break below the band of horizontal support (at 5760 - 5750) would indicate a deeper pullback is underway, initially towards 5500 - 5400, which includes uptrend support from the October 2023 low of 4103 and the 200-day moving average.

S&P 500 daily chart

• _{Source: TradingView. The figures stated are as of 18 November 2024. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}