Chips on the table

Considering the New York Stock Exchange and Nasdaq list more than 5,000 stocks between them, paying too much attention to a single company may strike some market observers as unwise. But when that company has the world’s second-largest market cap and has been responsible for roughly a quarter of the S&P 500’s gain this year, it’s difficult for traders and investors to ignore it.

Of course, we’re talking about Nvidia (NVDA), which is scheduled to release earnings after the closing bell on November 20—numbers with the potential, as they have sometimes in the past, to drive the broad market, or at least the tech sector.

With NVDA up nearly 200% year-to-date and nearly 49% since it fell to a 12-week low in early August, the question on most minds will be whether it will be able to extend such a robust rally. Lately, the stock appears to have entered “wait-and-see” mode, with shares consolidating since jumping to new all-time highs after the election:

While no one knows what the company’s numbers will be this time around, NVDA’s earnings announcements have been, more often than not, short-term bullish catalysts over the past few years. The Earnings Analyzer below shows NVDA’s implied and actual earnings-day moves (vertical bars) for its past 12 releases, along with its five-year average implied and actual earnings moves (horizontal dashed lines). As of Thursday, the market was forecasting a roughly +/-8% earnings move (final bars):

The chart also shows the stock has rallied on eight of its past 12 earnings days (technically, the day after the announcement, since NVDA releases its numbers after the close).

Digging a little deeper, the following chart shows how NVDA has performed in the final three trading days before earnings, along with its five- and 10-day post-announcement returns:

The blue bars represent the past 12 earnings announcements, while the green bars represent the past 36. One of the more interesting aspects of the chart: Since November 2021, NVDA has tended to be a little weaker in the final three days before earnings, and a little stronger in the five-and 10-day periods after. The stock posted a three-day net loss before earnings in seven of the past 12 quarters.

Since 2021 the stock was higher eight of 12 times five days after earnings, and seven of 12 times after 10 days. But there wasn’t a strong connection between pre-earnings declines and the post-earnings returns. Of the seven times NVDA lost ground in the three days before earnings, it posted positive five- and 10-day returns five times.

Today’s numbers include (all times ET): retail sales (8:30 a.m.), Empire State Manufacturing Index (8:30 a.m.), import and export prices (8:30 a.m.), industrial production and capacity utilization (9:15 a.m.), business inventories (10 a.m.).

Today’s earnings include: Alibaba (BABA), Spectrum Brands (SPB).

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