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Dow Selloff, Nvidia, Tesla AI Day, Robinhood: 5 Things You Must Know Thursday

Stock futures fall after the Fed indicates it could begin tapering stimulus this year; Nvidia issues an upbeat forecast; Robinhood expects lower third-quarter trading activity; Tesla's artificial intelligence day is Thursday.

Here are five things you must know for Thursday, Aug. 19:

1. -- Stock Futures Sink as Most Fed Officials See Tapering This Year

Stock futures fell sharply Thursday after the Federal Reserve indicated it could begin tapering stimulus this year even as surging coronavirus infections caused by the delta variant have raised worries about the pace of the U.S. recovery.

Contracts linked to the Dow Jones Industrial Average fell 344 points, S&P 500 futures fell 37 points and Nasdaq futures declined 104 points.

The yield on the benchmark 10-year Treasury dipped Thursday to 1.232%.

Stocks finished sharply lower Wednesday after minutes from the latest Federal Reserve meeting showed that central bank officials said more progress was needed in the employment market before it considered tapering stimulus, but most said "it could be appropriate to start reducing the pace of asset purchases this year.”

"While the Fed minutes reveal more conviction in terms of starting to taper this year, they made the bold point that there’s no connection between tapering and rate hikes," said Mike Loewengart, managing director of investment strategy at E*Trade. "That said, the start of tapering necessarily chips away at the tools at the Fed’s disposal, and in reality, after tapering, must come rate hikes. 

"But that can be very far down the road. And keep in mind that there’s a pretty big caveat in the Fed’s potential move to start tapering, and that’s improvement on the jobs front. If you take a step back though, the Fed seeing some real economic progress is a good thing at the end of the day," he added.

The Fed has been buying about $120 billion a month of Treasuries and mortgage bonds to help prop up the economy during the pandemic.

The central bank's conference next week at Jackson Hole, Wyoming, will be top of mind for investors, with some expecting the Fed to provide a more definitive timeline on tapering. Federal Reserve Chairman Jerome Powell’s keynote speech will be closely scrutinized.

2. -- Thursday's Economic Calendar: Jobless Claims and Applied Materials Earnings

The economic calendar in the U.S. Thursday includes weekly Jobless Claims at 8:30 a.m. ET and the Philadelphia Fed Manufacturing Index for August at 8:30 a.m.

Macy's  (M)  reported second-quarter adjusted earnings of $1.29 a share, smashing estimates that called for a profit of 23 cents. Same-store sales at the retailer jumped 61.2%.

Earnings reports are expected Thursday from Applied Materials  (AMAT) , Estee Lauder  (EL) , NetEase  (NTES) , Bilibili  (BILI) , Ross Stores  (ROST) , Farfetch  (FTCH) , Kohl's  (KSS) , and Petco Health and Wellness  (WOOF) .

Estee Lauder is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells the stock? Learn more now.

3. -- Nvidia Rises After Chipmaker Issues Upbeat Forecast

Nvidia  (NVDA)  was rising more than 2% in premarket trading Thursday after the largest U.S. semiconductor maker by market value issued an upbeat forecast for the fiscal third quarter even as the market for chip supplies remains tight.

Nvidia said it expects current-quarter revenue of $6.66 billion to $6.94 billion, higher than analysts' forecasts of $6.57 billion.

CEO Jensen Huang addressed supply constraints on the company's conference call following the release of second-quarter earnings, which beat forecasts.

“We have enough supply to meet our second-half company growth plans,” Huang said. “We expect to be able to achieve our company’s growth plans for next year.”

Nvidia also said its $40 billion acquisition of British chipmaker Arm was taking longer than expected with the deal facing regulatory scrutiny in several countries. But the company said it was "confident in the deal and that regulators should recognize the benefits of the acquisition to Arm, its licensees, and the industry.” 

"All in, it was another strong print from Nvidia met with equally strong guidance," said Jim Cramer and the Action Alerts PLUS team, which holds Nvidia in its portfolio. "Despite the supply constraints, management appears to be navigating effectively."

4. -- Robinhood Anticipates Lower Trading Activity in Third Quarter 

Robinhood Markets  (HOOD)  fell sharply in premarket trading Thursday after the brokerage said it expects weaker third-quarter revenue from lower trading activity.

In its first earnings report as a public company, Robinhood posted a second-quarter loss of $502 million, or $2.16 a share, a swing from a year-earlier profit of $58 million, or 9 cents.

Revenue in the second quarter more than doubled to $565 million, with most of the gains coming from trading in virtual currencies. Revenue from crypto transactions in the quarter was $233 million.

But the company issued a cautious forecast for the third quarter, saying it expected "seasonal headwinds and lower trading activity across the industry to result in lower revenues and considerably fewer new funded accounts than in the prior quarter."

The stock dropped 11.27% to $44.19 early Thursday.

5. -- Tesla's AI Day: What to Expect

Tesla  (TSLA)  will be conducting its artificial intelligence day on Thursday. The electric vehicle company likely will showcase, among other things, the company's advances in self-driving capabilities.

Tesla's AI Day is invite-only and is expected to begin at 8 p.m. ET. CEO Elon Musk said the event would be livestreamed but a link has yet to be provided.

In the invite for the event, Tesla said participants would "get an inside-look at what’s next for AI at Tesla beyond our vehicle fleet."

“We expect Tesla to discuss AI applications beyond
autonomous driving, including for solar/storage software and advanced manufacturing in its factories,” Mark Delaney of Goldman Sachs wrote in a research note. “Tesla’s energy software leverages machine learning, forecasting, optimization and real-time control algorithms to reduce utility bills, increase renewable energy consumption, improve efficiency/uptime and enable microgrid.”

Tesla Stock Undervalued?

Tesla stock fell 1.74% to $677 in premarket trading Thursday.