The week ahead including US Q2 GDP and Nvidia Q2 earnings

1) US Consumer Confidence (Aug) – 26/08 – has proved to be somewhat flaky in the last few months having slid to a 5- year low in April of 85.7, we’ve seen a modest rebound since then, but we’re not anywhere close to the levels we were at the start of this year. As we look to the holiday period, we saw an improvement to 97.2 in July, but are still below the level we saw in June at 98. While the Michigan consumer confidence indicator has also struggled, that particular indicator has shown more of a split along partisan lines with Democrat leaning voters tending to be more pessimistic than their Republican counterparts. That said there is evidence that rising food prices and concerns over sticky inflation are causing consumers to become a little more cautious in the outlook around the US economy. Will we continue to see a recovery in sentiment from the April lows or are we set to stall out as we head into the dying embers of the summer holidays and prepare for a new school year.  

2) US Q2 GDP – 28/08 –. the US economy rebounded strongly in Q2, more than reversing a modest decline in Q1 with an annualised 3% recovery. This rebound in economic activity was partly down to a reversal of Q1 which saw a surge in imports to avoid the April tariff deadline, and which prompted a -0.5% economic contraction for Q1. This reversed in Q2 with a 30.3% drop in imports and meant that over H1 the economy expanded by 1.1%.  The 30.3% drop in imports helped reverse a 37.9% surge in Q1. Consumer spending rose 1.4% in Q2  

3) US PCE, Spending etc (Jul) – 29/08 – Jay Powell and more broadly the Fed is coming under increasing pressure from the Trump administration to cut rates rapidly at a time when the Fed has been more or less alone as the only G7 central bank to not cut rates this year. One year on from cutting by 50bps last September the Fed has been cautious amidst concerns that the new tariffs regime will result in more persistent inflation in the US economy. Thus far those fears have not materialised, with headline CPI modestly lower from where it was in January and consumer spending levels, although cautious, still fairly resilient. Personal spending in the US has so far this year posted two negative months, one in January due to the cold weather and again in May in the aftermath of the sharp falls in US stock markets in April. Inflation at a PCE level still remains above target at 2.8%, however recent sharp rises in PPI inflation may well make Fed officials a little more cautious when it comes to their September meeting and their next rate decision.     

4) JD Sports Q2 26 – 27/08 – could we be on the cusp of a well overdue rebound in the JD Sports share price? For a while now JD Sports has seen its shares mimic the travails of the Nike share price. Now that we seem to be seeing a turnaround in the Nike share price the fortunes of JD Sports also appear to be turning. Having fallen to as low as 62p in April, just shy of its Covid lows at 55p, the shares have seen a modest recovery, getting a boost earlier this week from a broker's note from Deutsche Bank who upgraded its price target to 100p. When JD Sports reported in Q1 the sports retailer said that like for like sales were down 2%, with the US bearing the brunt with a 5.5% fall. The company said that trading in Q1 had got off to a slow start, particularly in the US, where the retailer had shown a reluctance to cut its prices. This could well be a problem given that its US operation is now much bigger due to its Hibbert acquisition, and now accounts for the biggest region when it comes to overall sales. This puts the retailer firmly in the cross hairs of the tariff wars given most of its goods get imported from China and Vietnam. This could well put a dent in expectations for profits this year which are currently in the area of £890m but for now haven’t been revised.

5) Nvidia Q2 26 – 27/08 – Nvidia shares are enjoying the rarified air of an in excess of $4trn valuation begging the question as to whether we are in bubble territory when it comes to the rebounds we’ve seen of the lows in April. Since that sell-off, Nvidia's share price has more than doubled, rising from $77 to a record high of $185 at the end of July. The rebound from those April lows was given an added catalyst in May when the chipmaker crushed expectations on revenues and profits. Q1 revenues came in at $44.1bn, a 70% increase on the previous year and above its guidance target of $43bn +/-2%. This was despite the chipmaker seeing a negative impact from US restrictions on chip sales to China, which prompted the company to take a $4.5bn write down on its H20 inventory and meant it couldn’t ship an additional $2.5bn during Q1. Gross margins would have been 71.3% during Q1 excluding this charge and fell to 60.5% as a result of the charge. Profits still came in at 76c a share, a 15% decline from Q4, but still 27% higher than the same quarter last year. Data Centre revenue continues to be the main driver, rising 10% from the previous quarter to $39.1bn, and up 73% on the year, while gaming revenue also saw a decent performance with a record $3.8bn in revenue, an increase of 42% year on year. Q2 guidance was for $45bn +/-2%, with CEO Jensen Huang saying that the company was seeing strong demand for its chips, with estimates for Q2 expected to see a modest increase in gross margins to 72%.  The guidance also reflects an estimated $8bn loss in H2 revenue due to the new US restrictions. The company is also taking steps to diversify its customer base, setting up AI hubs in Saudi Arabia, and the UAE with fancy names like Humain and Stargate.

6) Best Buy Q2 26 – 27/08 – since the sharp sell off in April Best Buy shares have largely trod water for the last 3-months trading in a range between $60 and $80 on the wide. When the electrical retailer reported in Q1 the US equivalent of Currys here in the UK reported revenue of $8.77bn, slightly shy of estimates, although profits were better than expected at $1.15 a share. On its full year outlook, the retailer said it expects to generate $41.5bn in revenue and profits of $6.23 a share, saying that the amended guidance was due to the impact of tariffs, although this guidance was based on the premise that they wouldn’t change from current levels. A big assumption? Growth in the sales of computing, tablets and mobile phones saw improvements, while appliances and home entertainment saw a slowdown.

7) Dicks Sporting Goods Q2 25 – 28/08 – having crafted a $2.4bn bid for Foot Locker earlier this year in order to expand outside the US the bar for earnings is likely to be quite high when it comes to the retailer's Q2 numbers. In Q1 the company saw net income fall by 4% to $264m or $3.24 a share on revenues of $3.17bn. The retailer reaffirmed its full year guidance of profits between $13.80 and $14.20 a share on revenues of between $13.6bn and $13.9bn. The Foot locker acquisition is expected to conclude at the end of this fiscal year and expects it to deliver between $100m and $125m in cost synergies.