VIDEO: What We're Watching With Nvidia, Marvell, Retailer Earnings and More

In today’s Daily Rundown video, Chris Versace breaks down what the portfolio will be focusing on this week — from Nvidia NVDA and Marvell MRVL and also from PC makers and Salesforce CRM.

He also explains what we’ll be listening for when another sea of retailer earnings reports arrives this week, and what we’re watching with the portfolio’s position in the Energy Select Sector SPDR Fund XLE.

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Transcript

CHRIS VERSACE: Hey, folks. Chris Versace here on Monday, August 26, the last summer hurrah, if you will, week for the market. But even though it traditionally is a slower one with lower volume because people are out squeezing in the last bit of vacation ahead of the Labor Day holiday weekend, it's still going to be a rather important week for the market.

And as we get started, Yes, the Dow is hitting new highs, joining the S&P 500 and the NASDAQ in recovering from the market's larger route that it went through earlier this month. But let's remember, when it comes to the Dow, it's just a basket of 30 stocks, 30 important stocks to watch, but still just 30 stocks. It's not really the broad based indicator of the overall market that we find in the S&P 500.

And of course, that is what we're going to focus on, even though newscasters and nightly news shows tend to always talk about the Dow. But the S&P 500 is trading higher this morning. But if you read our morning comments, you know that the market is still in overbought territory. And its valuation, especially after last Friday's pop, is starting to bump up against the peak PE multiple that we saw, not only for this year, but candidly, one that barring the pandemic dates all the way back to 2002.

So to say that it is stretched, I think that's a very fair comment. Also on our morning comments today, we talked about how that is going to keep us walking a cautious path ahead of earnings from Nvidia this week. Make no mistake, that will be an important earnings report, not only because it's going to be a barometer on AI and data center. And Yes, we do think that the June quarter results will be good.

The issue is going to be the guidance and whether or not it lives up to such lofty expectations. Remember, Nvidia shares have popped more than 30% or so over the last 12 trading sessions, so expectations are running high. And as we saw so far in the recent earnings season, that companies that deliver a good quarter but don't surprise on the upside, the stocks could get hit.

And remember, third largest holding S&P 500 NASDAQ composite. So our thinking on this is if NVIDIA shares do trade off, if they hit key support levels, given what we've heard from Taiwan Semiconductor, given what we know about big tech capital spending and what we're hearing about AI adoption, that could be a reason for us to wade back and pick up some Nvidia shares if they indeed are on sale after the company's earnings report later this week. So that's the first big event.

The second big event is going to be the July PCE data that shows up on Friday. The reason this is going to be important is after Fed Chair Powell signaled that, yes, the Fed has an adjustment in policy to make towards a loosening of monetary policy. What this means that the market is now going to be keyed in on how big could this first move be.

Now, our thinking has been and continues to be that so far, based on recent data, we're looking at a 25 basis point rate cut. However, if we see the progress in the July PCE data move tremendously closer to the Fed's 2% target and the data we get next week, the usual start of the month data, everything from ISM, PMI, data for manufacturing and services, employment data and others-- if that shows the economy has rolled over, then I would expect the market to start thinking that 50 basis points that could be on the table for the September policy meeting. So we're going to have to watch the data carefully. But then again, when don't we.

But as we think about the balance of this week, there are some other things that are going on outside of those big two that we will be watching, and I wanted to share them with you. We do have earnings from Salesforce, so we will be digging into that as it relates to AI adoption. We've heard positive things from Microsoft on their earnings call, ServiceNow as well. Remember earlier this month, the market had been questioning the rate of AI adoption. So we want to hear what Salesforce has to say on that front.

We also have results from Dell and HP. One of our plays that is Qualcomm is benefiting from the rebound in the PC market, but especially the uptake of AI on PC. So we'll want to hear what Dell and HP have to say about this into the back half of the year. We'll also want to, with that in mind, listen to what Best Buy has to say about the PC market, about AI on PC.

But also, what it might tell us about how it's preparing for upcoming new smartphone models, including those from Apple. Remember in the roundup on Friday, we said that Apple is expected to hold its iPhone event on September 10th. And the buzz suggests that it could start shipping those models as soon as September 20th. Outside of that, we do have another big week of retail. Everybody from Nordstrom's, Abercrombie and Fitch, Foot Locker, American Eagle, Gap, Ulta, Five Below, Victoria's Secret, and Kohl's, all that is going to help us refine our view on the consumer.

Coming out of last week, we saw that indeed, the consumer remains more choosy. If we look at TJX, doing very well. Consumers are trading down. So we'll look for more confirmation on that. But we'll also be interested in what a firm, a buy now, pay later, or BNPL company has to say about the consumer as well. Now, let's remember, too, that outside of all of that, we do have one other portfolio company reporting this week that, of course, will be Marvell, and that comes after Nvidia's earnings.

So in many respects, what Nvidia says will set the table for what Marvell has to say about its data center and AI businesses. Remember, they are a key partner for AI chips as it relates to Microsoft, Amazon, and Meta. Also too, Cisco's comments about AI's impact on digital infrastructure really reaffirmed our view that Marvell's business outside of data center should start to pick up in the second half of this year.

That, in our view, lays a very positive outlook for Marvell. We continue to rate that share a one with a $95 price target. And one other thing I just wanted to cover, just as we're kicking off the week. Coming into trading today, we did see renewed Middle East tensions. Those are pushing our shares of XLE higher. But in our view, the real determinant that we have to keep an eye on is going to be supply demand dynamics. That means the US economy, but also Europe and China.

Remember, China is the largest importer of oil. So that will be the demand side. On the supply side, we will want to keep our ears to the ground to see if OPEC might extend yet again their production cuts. So as we think about demand and the economy, the one thing we will be paying attention to today will be the next update for the Atlanta Fed GDPNow model. When it was last updated, mid August, it said about 2% for the current quarter.

But I will caution you with this. Even though we are getting this update, as I talked about a couple of minutes ago, we have over the next nine trading sessions, a lot of data that's going to tell us far more about the speed of the economy and what the Fed is likely to do in the September policy meeting. So with that, folks, please remember, check your emails, check your alerts. We want to make sure you're getting our latest thoughts. And if we make any moves with the portfolio, we want you right there with us. Thanks for watching.

At the time of publication, TheStreet Pro Portfolio was long NVDA, MRVL and XLE.