Get 40% Off
🚨 Volatile Markets? Find Hidden Gems for Serious OutperformanceFind Stocks Now

Marketmind: Nvidia chipped while Fed minutes pass

Published 21/02/2024, 10:06 pm
Updated 21/02/2024, 10:10 pm
© Reuters. FILE PHOTO: Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., February 12, 2024. REUTERS/Brendan McDermid/File Photo

A look at the day ahead in U.S. and global markets from Mike Dolan

It's a measure of sheer scale of tech-sector dominance that Wednesday's results from the most valuable chipmaker probably overshadows a readout on the Federal Reserve's most recent deliberations.

Either way, the keenly awaited quarterly update from artificial intelligence darling Nvidia and the minutes of the Fed's Jan 30-31 meeting will vie for most market attention later.

As the AI-infused trebling of Nvidia's stock price over the past year now makes it a top five market cap, jitters about whether its latest results can continued to meet a sky-high bar of expectations were largely responsible for the sharp retreat of Wall St benchmarks this week.

The S&P500 dropped 0.6% and the Nasdaq lost almost 1% on Tuesday and futures on both remain in the red premarket today.

Nvidia tumbled 4.35%, its biggest percentage fall since October, while the broader Philadelphia semiconductor index declined 1.56% as other chip stocks followed. And Nvidia is down another 2% premarket on Wednesday.

The retreat has been enough to whip-away the firm's newly-found third place ranking in top Wall St market caps, seeing slip back below Amazon (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOGL) again into fifth position. In a most mixed blessing, it has replaced Tesla (NASDAQ:TSLA) as the Street's most-traded stock.

Investors seem concerned that Nvidia's results, expected after markets close on Wednesday, can justify its expensive valuation of a forward price-to-earnings ratio just above 32 - although that's not isolated, given the 'Magnificent 7' top caps as a whole are trading close to 35 times.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

Nevertheless, it's a tough gallery to 'wow' after a 225% stock price increase over 12 months. Analysts expect earnings of $4.56 a share and revenue to rise to $20.378 billion from $6.05 billion a year earlier, according to LSEG estimates.

And the sudden cloud over the tech sector seems to go beyond Nvidia. Cybersecurity firm Palo Alto Networks plunged more than 20% overnight after it forecast third-quarter billings below Wall Street estimates, signalling more cautious spending by businesses in an uncertain economy.

It seemed better for big retailers, however.

Despite a downbeat update from Home Depot (NYSE:HD), Walmart (NYSE:WMT)'s beat sent its stock up more than 3% to record highs as the U.S. retail giant forecast fiscal 2025 sales above expectations and raised its annual dividend by 9%. And smart-TV maker Vizio jumped 16.26% after Walmart said it would buy the company for $2.3 billion.

How do Fed minutes match up to all that?

With auctions of 20-year Treasury bonds and 2-year floating rate notes later on Wednesday, the rates market seems calmer going into the Fed readout and 10-year Treasury yields ticked down to 4.26%.

Helping the bond market mood was a sharp retreat in crude oil prices from 3-month highs and Tuesday's surprisingly soft January inflation report in Canada - which casts some questions over the hotter U.S. reading for the same month.

While chances of a first Fed rate cut as soon as next month have all but disappeared in favor of a June move, investors will watch the minutes today for details on the thinking and also for more signs of when the Fed's balance sheet rundown may start to slow.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

The dollar was a little firmer going into the open.

In contrast to the tech sector swoon and bucking recent trends, U.S.-listed shares of Chinese firms climbed premarket as China's benchmark stock indexes notched a seventh straight day of gains amid some rekindled hopes the authorities were finally getting some grip on the property crisis there.

China's housing authority said on Wednesday that 123.6 billion yuan ($17.20 billion) of development loans have been approved and 29.4 billion yuan have been issued under a special mechanism aimed at injecting liquidity into the crisis-hit property sector.

And foreign investors bought a net 13.6 billion yuan of A-shares on Wednesday via northbound trading, the biggest daily inflow since July 2023.

To keep the recent moves in context, however, the CSI300's one-year underperformance against the S&P500 has been reduced to 33% from 37%.

In related news, HSBC reported a $3 billion charge on its stake in a Chinese bank amid mounting bad loans in the world's second-largest economy, taking the shine off a record annual profit and sending shares in the British lender down as much as 7%.

Key diary items that may provide direction to U.S. markets later on Wednesday:

* Federal Open Market Committee issues minutes from its Jan 30-31 meeting; Federal Reserve Board Governor Michelle Bowmanand Atlanta Fed President Raphael Bostic both speak. Bank of England policymaker Swati Dhingra speaks

* U.S. corp earnings: NVIDIA (NASDAQ:NVDA), Marathon Oil (NYSE:MRO), Nordson, Mosaic, Verisk, ETSY, Garmin, Analog Devices (NASDAQ:ADI), APA, Synopsys (NASDAQ:SNPS), ANSYS, Exelon (NASDAQ:EXC), NiSource (NYSE:NI), Host Hotels,

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

* G20 foreign ministers meet in Rio de Janeiro to prepare for November summit

* U.S. Treasury auctions $16 billion of 20-year bonds, $28 billion of 2-year floating rate notes

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.