JPMorgan Sees Tech Stock Dip as Buying Opportunity Ahead of NVIDIA Earnings

JPMorgan Chase's market intelligence team has advised clients that the recent decline in U.S. technology stocks presents a buying opportunity. The team emphasized that the recent pullback in technology stocks has created favorable conditions for investors to enter the market. This assessment comes amidst a broader market downturn, where technology stocks experienced substantial losses, leading to a notable decrease in overall market sentiment. The team's recommendation to buy into the market at this juncture is based on the belief that the current dip represents a temporary setback rather than a long-term trend. This perspective is supported by the team's analysis of market dynamics and the potential for a rebound in technology stocks. The advice to capitalize on the current market conditions underscores the team's confidence in the resilience of the U.S. stock market, particularly in the technology sector.

The team pointed out that while the recent downturn in the U.S. stock market has been driven by a sell-off in technology stocks, the upcoming earnings report from NVIDIA is of greater importance than the Jackson Hole global central bank symposium scheduled for this week. The team believes that a strong earnings report from NVIDIA could reignite market interest in AI-related themes, potentially driving a rebound in technology stocks and the broader market. The team also noted that the market's focus should be on the upcoming earnings report from NVIDIA, rather than the Jackson Hole symposium, as the latter is not expected to provide any significant new information. The team's analysis suggests that the market's reaction to the Jackson Hole symposium is likely to be muted, as the Federal Reserve's decision on whether to cut interest rates in September will be heavily dependent on future economic data, including the non-farm payrolls report and the consumer price index, both of which are scheduled to be released in early September.

However, the team also cautioned that their bullish outlook is conditional on the absence of evidence of stagflation. Factors that could shift their outlook to a more bearish stance include weaker manufacturing and services PMI readings, deteriorating unemployment data, or a hawkish speech from Federal Reserve Chairman Powell. The team's analysis suggests that the current market downturn is the result of a combination of factors, including high valuations, crowded positions, and pre-emptive selling ahead of NVIDIA's earnings report. The team believes that the current pullback in momentum factors is within historical norms, and that the market's focus should be on the potential for a rebound in technology stocks and the broader market, rather than on the short-term volatility in momentum factors.