Yesterday's Highlights: Friendly PCE Inflation Data, Big Earnings Report From NVIDIAStocks closed mostly lower yesterday, and only modestly so, after yesterday morning's PCE inflation report, and before NVIDIA's afternoon earnings. The Personal Consumption Expenditures (PCE) index, which is the Fed's preferred inflation gauge, was deemed friendly. The headline rate was up 0.2% m/m vs. last month's -0.1% and views for 0.1%. The y/y rate was at 3.7%, in line with last month's pace, but slightly higher than the consensus of 3.6%. The core rate (ex-food & energy) was up 0.2% m/m vs. last month's 0.1%, and matching views for 0.2%. The y/y rate came in at 3.3%, matching both last month's pace and expectations for 3.3%. All in all it was a friendly report. Especially given the headline rate, which includes the volatile energy market. That suggests inflationary pressures have eased elsewhere, and they did. Goods inflation, for example, declined 0.1%. Core was flat. And services inflation was up modestly at 0.3% m/m as consumer spending shifted toward services. Before I get into NVIDIA's earnings, let me also point out that the second estimate for Q2'26 GDP came in as expected at 1.5%, in line with the first estimate. But again, that's a lookback period. For those wondering what Q3'26 is pacing at, the GDPNow forecast by the Federal Reserve Bank of Atlanta is estimating a robust 4.0% growth rate. If true, that would be the second 4% print within the last 5 quarters (Q3'25 was 4.4%). After the close yesterday, NVIDIA posted a positive EPS surprise of 6.22%, and a positive sales surprise of 4.82%. That translated to a quarterly EPS growth rate of 111% vs. this time last year, and a sales growth of 106%. That marks the 13th quarter in a row of double-digit (or higher) EPS growth. Their 6th triple-digit growth rate in 13 quarters. And their 2nd triple-digit growth rate in a row. They noted data center revenue also beat expectations at $89.0B vs. estimates for $85.83B, showing the buildout is accelerating. They also upped their guidance by 3.65% above estimates with Q3 rev forecast at $108B (+/- 2%) vs. $104.2 expected. And even though they do get some data center revenue from China (less than 1%), their raised guidance does not include sales from China. NVIDIA was off -1.59% in the regular session before earnings, and climbed by roughly 5% in after-hours trade following earnings. YTD, they are up 12.4%. And 56.1% from 2025 to now. CrowdStrike, another AI-related name (AI security), also reported earnings after the close and posted a positive EPS surprise of 6.90%, and a positive sales surprise of 2.15%. That equated to a quarterly EPS growth rate of 34.8%, and a sales growth of 25.6%. They raised full-year rev guidance by 1.18% above estimates, and full-year EPS guidance by 2.03% above estimates. They were up 2.05% in the regular session, and soared by another 11% in after-hours following earnings. And Okta, also AI-security related, reported a positive EPS surprise of 9.38%, and a positive sales surprise of 1.62%. That equated to a quarterly EPS growth rate of 15.4%, and a sales growth of 10.6%. They also raised guidance across multiple metrics, including full-year revenue, full-year operating income, and Q3 outlook, signaling stronger demand and improving profitability. They were up 2.92% in the regular session, and soared by more than 20% in after-hours. On the economic report front today, we'll get Weekly Jobless Claims, Retail and Wholesale Inventories, the Kansas City Fed Manufacturing Index, and the International Trade in Goods report. See you tomorrow,  Kevin Matras
Executive Vice President, Zacks Investment Research |
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