Nvidia, Meta, Google, Microsoft, and other giant tech stocks have one important challenge coming up

Stocks

Summary:

Large-cap tech stocks face a key test: justifying recent surges with strong earnings. Valuations are stretched, and analysts warn that continued gains must be backed by real EPS growth.

Large-cap tech stocks will likely soon be forced to meet the moment.

The do-or-die challenge for the tech bulls? A series of hot financial results and outlooks to match three months of hot stock price gains.

"I anticipate that the quality of earnings from these [large cap tech] companies will continue to be strong, but their ability to move their valuations to move higher and higher, completely unfettered, certainly is likely to be challenged here in the next couple of quarters," New York Life Investments chief markets strategist Lauren Goodwin said on Yahoo Finance's Opening Bid (watch above).

New York Life Investments has more than $800 billion in assets under management (AUM).

Goodwin cited cost challenges and trade uncertainty as risks to the sizzling tech trade headed into the second half of the year.

Unfettered tech valuations have been the modus operandi for the large-cap tech space of late.

High-profile tech names in Alphabet (GOOG, GOOGL), Meta (META), Nvidia (NVDA), and Microsoft (MSFT) have advanced an average of 35% in the past three months, according to Yahoo Finance analysis. The top two performers are AI darlings Nvidia and Meta, which have logged respective gains of 52% and 41%.

The four giant tech stocks have an average forward price-to-earnings (PE) multiple of 30 times, well above the S&P 500's (^GSPC) 22 times. Meta, Nvidia, and Microsoft's forward PE multiples are above their three-year averages, while Alphabet's is slightly below.

Large-cap tech's strong rally extends beyond the household names in the "Magnificent Seven" complex.

For instance, Broadcom (AVGO) is up 57% in the past three months, pushing its valuation multiples to some of the highest levels in five years. The same situation extends to Uber (UBER) after a 25% stock price increase in the last three months.

Nowhere has the rush to drive up large-cap valuations been more evident than in Nvidia.

On Wednesday, the company's market cap stood at nearly $4.2 trillion amid enthusiasm about its AI chips flowing back into China soon.

"The AI Revolution is just hitting its next stage of growth," crowed tech analyst Dan Ives of Wedbush, epitomizing the enthusiasm in the space.

But others eyeing the tech trade are beginning to echo Goodwin's more measured tone when putting money to work at higher valuations.

"We note that the recent rally in large-cap tech and AI stocks has been fueled mainly by price-to-earnings (P/E) multiple expansion," Ulrike Hoffmann-Burchardi, global head of Equities for UBS Financial Services, pointed out. "While we remain structurally bullish on AI, we would prefer to see further gains underpinned by upward earnings-per-share (EPS) revisions rather than valuation expansion alone."

She added, "Pockets of elevated valuations across leading AI companies, ongoing geopolitical uncertainty, and the upcoming second-quarter earnings season all point to the need for a balanced and selective approach. We recommend investors seek diversified exposure across semiconductors, software, and internet platforms, rather than concentrating risk in any single segment or individual stock."

Source : finance.yahoo

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Adam

Economic

Hours after President Donald Trump told a room full of Republican lawmakers that he will fire Federal Reserve Chair Jerome Powell, he denied plans to do that.

“We’re not planning on doing it,” he said. “It’s highly unlikely.”

Trump on Tuesday met with Republican lawmakers and asked them if they thought he would fire Powell. After receiving support, the president said he would follow through, according to a senior White House official.

“The President asked lawmakers how they felt about firing the Fed Chair. They expressed approval for firing him. The President indicated he likely will soon,” said the official, who spoke on the condition of anonymity to speak candidly on the issue.

Separately, the New York Times reported that Trump has gone so far as to draft a letter for firing Powell and showed it to lawmakers during that meeting.

A Fed official declined comment to CNBC on the report about the Trump meeting Tuesday, which came after Republicans blocked a procedural vote on crypto legislation that the president favors.

Trump and other White House figures have launched a multi-pronged attack on Powell to push the central bank to lower its key borrowing rate. Most recently, they have blasted Powell over renovations to the Fed’s Washington headquarters, raising suspicion that Trump could try to remove the Fed leader for cause.

A recent Supreme Court decision indicated that the president does not have the authority to remove Fed officials at will.

In a CNBC interview Wednesday, Rep. French Hill, the chair of the House Financial Services Committee, repeated that “I don’t see” Trump firing Powell. Treasury Secretary Scott Bessent also told Bloomberg News on Tuesday that he didn’t expect Trump to move in that direction.

However, Rep. Anna Paulina Luna, a Florida Republican who on Tuesday joined with other party members in blocking the crypto initiative, said on social media site X that a move against Powell is forthcoming.

“Hearing Jerome Powell is getting fired! From a very serious source,” she said, later adding, “I’m 99% sure firing is imminent.”

In prior statements on the matter, Powell has said his firing is “not permitted under the law.” No president ever has attempted to so in the past, though others have criticized the central bank leader.

Trump nominated Powell for the chair in November 2018 to succeed Janet Yellen, who went on to become Treasury secretary under former President Joe Biden after holding the Fed position for four years. The Senate confirmed Powell the following February, but has been the subject of frequent criticism from Trump both during the president’s first term and the second.

Source: cnbc

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Adam

Commodity

Gold and silver prices are up a bit in early U.S. trading Tuesday. At mid-week it’s a lackluster marketplace, which is not surprising for mid-summer. August gold was last up $9.40 at $3,346.10. September silver prices were last up $0.165 at $38.275.

Asian and European stocks were mixed overnight. U.S. stock indexes are pointed to mixed openings today in New York, amid quieter summertime trading.

The key outside markets today see the U.S. dollar index slightly down. Nymex crude oil futures prices are weaker and trading around $66.00 a barrel. The yield on the benchmark 10-year U.S. Treasury note is presently at 4.477%.

U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the producer price index report, industrial production and capacity utilization, the Federal Reserve’s beige book and the weekly DOE liquid energy stocks report.

Mild price gains for gold, silver in quieter summertime trading_1

Technically, August gold futures bulls have the overall near-term technical advantage. Bulls’ next upside price objective is to produce a close above solid resistance at $3,400.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the June low of $3,250.50. First resistance is seen at $3,375.00 and then at this week’s high of $3,389.30. First support is seen at this week’s low of $3,327.30 and then at $3,300.00. Wyckoff's Market Rating: 7.0

Mild price gains for gold, silver in quieter summertime trading_2

September silver futures bulls have the solid overall near-term technical advantage. Prices are in an uptrend on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at $40.00. The next downside price objective for the bears is closing prices below solid support at $36.00. First resistance is seen at Tuesday’s high of $38.74 and then at $39.00. Next support is seen at Tuesday’s low of $37.895 and then at $37.50. Wyckoff's Market Rating: 7.5

Source:kitco

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Thomas

Central Bank

Economic

Short-maturity US Treasuries jumped and the dollar plunged after a White House official said President Donald Trump is likely to fire the chief of the Federal Reserve soon.

Yields on two-year notes, which are most sensitive to changes in Fed monetary policy, fell seven basis points to about 3.87% as traders bet that Trump would choose a more dovish successor to Chair Jerome Powell. Powell has signaled the need to monitor the impact of Trump’s tariffs on the economy before lowering interest rates further.

“US rates appear to be coming lower no matter what, the US curve will steepen and the dollar will continue weakening, especially vs those with central banks that will not follow the Fed,” said Alvaro Vivanco, head of strategy at TJM FX.

The yield gap between 5- and 30-year Treasuries rose to the highest since 2021 on the news. Meanwhile, the Bloomberg Dollar Spot Index sold off, falling the most since late June on an intraday basis. All G-10 currencies advanced, led by the yen, which rose more than 1% at one point before paring gains.

In Treasuries, the steepening move extended as traders priced in a greater chance that the Fed will cut rates as soon as September.

Source: Bloomberg Europe

To stay updated on all economic events of today, please check out our Economic calendar

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James Whitman

Forex

Technical Analysis

GBPUSD technicals

The GBPUSD is joining the dollar selling also the news that Trump is set to fire Fed chair Powell. The low price for the day reached into a swing area between 1.33607 and 1.33784.

The news has helped to push the price up sharply higher and up toward the 50% midpoint of the move higher from the May 2024 low to the high price reached on July 1, and the 100 hour moving average. Both those levels come near 1.3464. Move and stay above those levels would open the door for further upside momentum.

The New York Times is now reporting that Trump has drafted a letter to chair Powell. He apparently showed the letter to around a dozen GOP members in the White House late yesterday.

The yield curve is steepening with the 2-year yield down -8.6 basis point at 3872%. The 30-year yield is back above 5% at 5.055% up 4.0 basis points.

US stocks are not taking the news that well – at least initially. The NASDAQ index is down -89 points or -0.44%. The S&P index is down -26 points or -0.41%.

Source: ForexLive

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Adam

Commodity

After more than a month of sideways movement, silver looks ready to resume its upward trend. The next step for bulls is to break above the $39 per ounce mark, setting a new high for this bull market. Even though silver is already up around 30% this year, there is still room for more gains.

Yesterday’s stronger-than-expected US inflation data gave the US Dollar a boost, which caused some pullback in silver prices. But the bigger drivers—like ongoing worries about the tariff war—are likely to keep the uptrend intact. For now, buyers are aiming to push prices past the $40 level.

Can Silver Still Catch Up to Its Record Highs?

Unlike gold, which keeps setting new highs in dollar terms, silver still has a long way to go to reach similar levels in this bull market. So the key question is—can silver catch up in the next few months?

That would be a tough climb and would depend on two major developments:

A Dovish Fed: The Federal Reserve would need to cut interest rates more aggressively, weakening the US dollar. This usually helps precious metals like silver. But for this to happen, there would likely need to be a deep recession and a sharp drop in US employment.

Tariffs on Silver: The US-Mexico trade conflict would have to escalate and start including silver in the list of taxed goods. Right now, silver is not affected, but with President Donald Trump’s unpredictable policies, investors cannot rule out a change. Since Mexico is the world’s largest silver producer, new tariffs could be a strong trigger for price increases.

Inflation Surprise Clouds Rate Cut Hopes

Yesterday’s US inflation data gave mixed signals. While the monthly core reading came in below expectations, the annual core CPI rose 2.7%—slightly above forecasts. This surprise was enough to strengthen the US dollar.

These readings do not give the Fed any reason to shift its current stance. This means the most hawkish scenario—no interest rate cuts this year—remains a real possibility. In such a policy environment, a sharp rise in silver prices toward historic highs appears very unlikely by year-end.

Silver Technical Analysis

The latest inflation data is now the main driver behind the market rebound, largely due to the strengthening of the US dollar. For silver, the first target for sellers is the area where the upward trend line meets the support level, around $37.50 per ounce.

Silver: Can Tariff Fears Offset US Dollar Pressure and Keep the $40 Target Alive?_1

If the $37.50 support breaks, it could pave the way for a further decline toward the next key support level near $35.50 per ounce, which has been tested multiple times. On the other hand, for buyers, the main target remains the round-number resistance at $40.

source :investing

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James Whitman

Central Bank

Political

President Trump on Tuesday told reporters that Jerome Powell’s handling of a $2.5 billion renovation of the Federal Reserve headquarters “sort of is” a fireable offense, and reportedly asked some GOP lawmakers Tuesday night if he should remove the central bank chairman.

CBS News reported Wednesday that Trump posed the question during a meeting in the Oval Office with House GOP members; that some lawmakers agreed; and several indicated he will do it.

Trump's latest comments and the new CBS report raise new questions about whether the president may in fact seek to oust the Fed chair, a move that would surely lead to a legal war with Powell, who has argued he can't be removed by law.

The president also appeared in his latest comments to narrow his choices to replace Powell. Treasury Secretary Scott Bessent is an "option," but not the top choice, “because I like the job he is doing,” he said.

The Washington Post and Bloomberg reported this week that National Economic Council Director Kevin Hassett is rising as an early front-runner in the race to replace Powell, although former Fed governor Kevin Warsh is also under consideration. Fed governor Christopher Waller is another possibility.

Bessent, though, is “probably not that much of an option," Trump said Tuesday, citing what he views as his good performance as Treasury secretary.

Trump has been hammering Powell for months over what Trump viewed as a refusal to ease monetary policy for political and personal reasons, referring to Powell publicly as “dumb,” a numbskull,” a “stubborn mule,” “stupid,” a “moron,” and a “fool.”

Trump nominated Powell for the Fed chair seat during his first administration, and his current term is scheduled to run until May of 2026.

Trump’s allies in recent weeks have used another tactic to turn up the pressure on Powell: They have invoked a $2.5 billion renovation of the Fed’s headquarters as a way to question the chair’s management of the institution and whether he told Congress the truth about the project during testimony in June.

Trump said Tuesday that "the one thing I wouldn't have guessed is he would be spending two and a half million dollars to build a little extension onto the Fed."

When asked if it was a fireable offense, Trump said, "I think it sort of is, because if you look at his testimony ... he's not talking about the problem. It's a big problem."