Nvidia posts strong earnings, while Target hits the skids. Plus, new state employment data undermine the strong-economy consensus. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

By M egan Leonhardt | Wednesday, November 20

Off Target. It was the most watched earnings event of the week, dare I say the quarter, and Nvidia managed to beat expectations yet again.

The AI chip leader late today reported strong earnings and delivered a better-than-expected forecast for the January quarter. Revenue came in at $35.1 billion, ahead the analyst expectations of $33.2 billion. The company's highly-profitable data center business more than doubled.

But expectations were sky high, with Nvidia shares up some 200% this year. The stock slipped in after-hours trading after the release.

Leading into tonight's big report, investors seemed to be in a wait-and-see mode.

After spending much of the day in the red, the Dow Jones Industrial Average closed up 0.3%. The S&P 500 was flat on the day and the Nasdaq Composite slipped 0.1%.

Target, on the other hand, had a very bad, no good day. It posted a big earnings miss this morning that sent its stock spiraling. It was the S&P 500's worst performer on the the day, closing down 21%. The retailer's quarterly earnings came it at $1.85 a share, well below analysts’ expectations for $2.30.

CEO Brian Cornell attributed the miss to a buildup of inventories ahead of the dock workers' strike in October, as well as continued softer consumer demand for discretionary products.

My colleague Sabrina Escobar reports that Target has struggled with building demand for discretionary purchases for the better part of the past two years. Other retailers, particularly Walmart, seem to have a better value proposition, Sabrina writes:

Americans have remained surprisingly resilient in the face of inflation and higher interest rates, but they have also been price sensitive and selective. Many shoppers still consider Target a more premium shopping experience than Walmart, despite Target’s efforts to slash prices and position itself as a value-focused retailer. Karen Short, an analyst at Melius Research, estimated ahead of earnings that Target’s price gaps with Walmart remain between 4% to 5% on like-for-like essential items

That gap could drive even more customer decisions during the all-important holiday shopping season.

DJIA: +0.32% to 43,408.47
S&P 500: +0.002% to 5,917.11
Nasdaq: -0.11% to 18,966.14

The Hot Stock: Keysight Technologies +8.8%
The Biggest Loser: Target -21.4%

Best Sector: Healthcare +1.2%
Worst Sector: Consumer Staples -0.5%

It Wasn't Just the Hurricanes...

Investors won't get the next jobs report until the first week of December, but the latest state employment data released on Tuesday are pointing to weaker conditions—beyond what was caused by storms and strikes.

Released several weeks after the national jobs report, the state-level analysis provides a more granular picture of local employment conditions. And the news isn't great.

"The October jobs report was an unambiguously weak report," writes James Knightley, chief international economist at ING.

Although state employment data can be volatile, the latest report found last month that 29 states reported negative payrolls growth. "We certainly didn't have 29 states impacted by the hurricane and strikes," Knightley says, noting that there were only 14 reporting a negative monthly change in payrolls in September.

Pantheon's Sam Tombs also called out the marginal declines in New York and California, which he believes are signals of real weakness.

Adding back striking workers and those Americans who were temporarily out-of-work due to the hurricane, gets to an October payroll figure between 90,000 and 121,000—well below the 175,000 monthly average logged in the first nine months of this year.

FactSet's consensus call for November payrolls is currently at 177,500. But Knightly says that anything under 225,000 is likely weak enough for the Fed to cut rates at the December meeting—before signaling a pause in January.

The November report is due on Dec. 6. If headline payrolls are above 284,000, Knightly says that could push for a Fed pause next month. "Anywhere in between and it is a coin toss," he added.

Beyond its impact on the Fed's rate decision in December, a weaker employment picture could impact bond yields, which have been up in recent weeks thanks to stronger-than-expected economic data.

The Calendar

Copart, Deere, Intuit, NetApp, PDD Holdings, and Ross Stores report earnings tomorrow.

The National Association of Realtors reports existing-home sales for October. The consensus call is for a seasonally adjusted annual rate of 3.93 million homes sold, about 100,000 more than in September.

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