May 22 Market Movers: Earnings, UK Elections & Fed Minutes

A plethora of factors from the financial markets and the political fronts materialised yesterday, Wednesday, May 22, causing ostensible volatility across the global markets, especially in the US and the UK. 

From NVIDIA’s stellar earnings report to hawkish Fed minutes and UK Prime Minister Rishi Sunak’s surprise announcement, here are this week’s main headlines and market movers:

NVIDIA’s Earnings Report: What You Need to Know

On Wednesday, May 22, 2024 tech giant and AI leader NVIDIA (NVDA) reported its Q1 fiscal 2025 earnings results. The tech behemoth has clearly benefited from the artificial intelligence (AI) hype these past couple of months, soaring over 97% since the start of the year, and Wednesday’s earnings can only attest to that.

What Did the Earnings Reveal?

According to the report, whereas Wall Street analysts expected a Q1 revenue of $24.69 billion and an adjusted EPS of $5.65, NVIDIA exceeded expectations by reporting a revenue of $26 billion and an adjusted EPS of $6.12. For comparison, these results are also notably above the year ago quarter EPS of $1.09 and revenue of $7.19.

What’s Behind this Growth?

The report showed that the company’s data centre grew 427% YoY (comprising 86% of the company’s total revenue). NVIDIA CEO, Jensen Huang revealed that the company’s “data centre growth was fueled by strong and accelerating demand for generative AI training and inference on the Hopper platform." He also said that "beyond cloud service providers, generative AI has expanded to consumer internet companies, and enterprise, sovereign AI, automotive and healthcare customers, creating multiple multibillion-dollar vertical markets."

Nonetheless, it may be important to note that segments such as the company’s revenue from China experienced notable losses due to the US-SINO tech bans. 

NVIDIA Announces a Stock Split

Besides the numbers mentioned above, NVIDIA made an important announcement on Wednesday as it revealed a 10-for-1 stock split that will come into effect on June 10. That means that based on Wednesday’s closing price of $949.50, a single NVIDIA share would be priced at $94.95. 

While there’s no clear-cut answer to what this might mean, in general, stock splits lead shares to become cheaper, hence potentially affecting market sentiment and making the company’s shares more “more accessible to employees and investors.” Nonetheless, only time will tell what this decision will actually cause. 

NVIDIA’s Shares Surpass $1000 for the First Time

Perhaps unsurprisingly, NVIDIA’s positive earnings beat drove the company’s shares upward and caused them to surpass $1000 in extended trading hours. This is the first time NVIDIA’s shares have reached this price. 

In addition, other chip companies like AMD (AMD), Broadcom (AVGO), ARM (ARM), Dell (DELL), and Super Micro Computer (SMCI) felt the positive impact of NVIDIA’s earnings as they soared. 

It will be interesting to see how long NVIDIA will be able to sustain this growth along with rising competition and economic uncertainties.

Hawkish FOMC Minutes Drive Indices Downward

While Wednesday was positive for companies like NVIDIA, it was less-than-rosy for many Wall Street indices. This is because, on Wednesday, the FOMC minutes were released and indicated that inflation may still be stubbornly high despite the multiple efforts to lower it. 

According to the minutes “while inflation had eased over the past year, in recent months there has been a lack of further progress toward the Committee’s 2 percent objective.” Moreover, the minutes revealed that many Fed officials are willing to adopt a hawkish monetary policy should inflation threats arise further. 

As uncertainty surrounding the monetary policy of the world’s largest economy arises, market indices like the S&P 500, Dow Jones Industrial Average (USA 30), and the US-TECH 100 (NASDAQ) closed Wednesday’s trading lower. 

Rishi Sunak Announces Surprise Early Elections

In the UK, outside Downing Street, Prime Minister Rishi Sunak made a significant announcement on Wednesday evening. Sunak revealed a surprise decision to call a general election for July 4th. 

This move comes amidst earlier obligations for Sunak to hold a vote by January 2025, despite his initial reluctance to disclose his plans. 

According to experts, this surprise announcement is likely to be embraced by the Labour Party, led by Keir Starmer, which has been experiencing a surge in the opinion polls. The party has endeavoured to portray itself as a reformed and moderate group prepared for governance.

Additionally, Britain, like many other economies worldwide, has encountered numerous economic challenges. Sunak attributed these challenges to factors such as COVID-19 and the conflict between Russia and Ukraine, highlighting that this confluence of events has brought the country to its most challenging period since World War II. 

Interestingly, Sunak’s announcement also occurs at a time when he does not currently enjoy favourable polling numbers.

How Did the Markets React to Sunak’s Announcement?

Yesterday, the announcement has led to some losses across some European markets, in general, and the UK market, in particular. 

Accordingly, the FTSE 100 (UK100) closed 0.6% lower while the DAX 40 (Germany 40) lost 0.3% and the CAC 40 (France 40) erased 0.6%.

What else will this surprising turn of events bring to the financial markets is yet to be seen. 

Conclusion

Wednesday, May 22, 2024, brought forth important news and announcements to the financial, political, and economic realms causing market volatility and increasing uncertainties. 

While the future remains uncertain, it may be helpful for traders, investors, and consumers to keep track of any other upcoming events and news that could provide them with clearer information on what to expect.