Stocks are underperforming, with investors focusing on Nvidia’s upcoming earnings, which slumped over 3% on Tuesday for their worst day since October 17 as they prepared for the announcement. The stock extended its decline on Wednesday, plummeting more than 3% ahead of the results announcement. Expectations are high for the chipmaker’s fourth-quarter earnings, which are viewed as both a barometer for the AI trade and a possible turning point for equities in general.
The market is bracing for potential disappointments in the report, which is scheduled to be released following the bell. Nvidia is one of a tiny number of megacaps that have contributed significantly to recent stock index advances. According to Goldman Sachs, hedge funds are reducing their holdings of the “Magnificent Seven” equities due to mixed growth forecasts.
Palo Alto Networks (PANW) shares fell more than 28% after the cybersecurity company reduced its 2017 sales projection, raising fears about a potential slowdown in IT investment. Meanwhile, Walgreens (WBA) shares fell as much as 3% after losing its seat on the blue-chip Dow index to Amazon (AMZN).
Minutes from the Fed’s January meeting, released on Wednesday, indicated that most Fed members “noted the risks of moving too quickly” in lowering interest rates at the meeting. Recent dismal data has caused some to question whether the central bank would drop interest rates in June, which is widely seen as the most likely time.
Following the closing bell, Nvida disclosed fourth-quarter results and first-quarter revenue forecasts that exceeded Wall Street’s high expectations. The business forecasted first-quarter sales of $24 billion, plus or minus 2%, above Wall Street’s forecasts of $21.9 billion. Shares climbed up to 7% in after-hours trade.
On Wednesday afternoon, Nvidia posted fourth-quarter results that exceeded Wall Street’s lofty forecasts, but it also acknowledged that data shipments to China had decreased dramatically.
The company’s fourth-quarter adjusted profits per share of $5.16 above analysts’ forecasts of $4.64. Meanwhile, fourth-quarter sales of $22.1 billion above analyst forecasts of $20.4 billion.
The business also guided higher than analysts’ projections for the first quarter, estimating sales of $24 billion, plus or minus 2%. Wall Street expected $21.9 billion for the quarter.
US markets surged late Wednesday as investors anticipated high-stakes earnings from AI favourite Nvidia (NVDA) and processed the publication of Federal Reserve minutes, which underlined the central bank’s commitment to not decreasing interest rates too fast.
The S&P 500 (^GSPC) increased by over 0.1%, while the Dow Jones Industrial Average (^DJI) increased by over 0.1%, or nearly 50 points. The tech-heavy Nasdaq Composite (^IXIC) led the way down, down 0.3% following Tuesday’s falls.
Given the stock’s more than 200% increase in the last year, even if the firm exceeds its lofty goals, the stock’s attractiveness at near-all-time highs will serve as a signal of investors’ risk tolerance.
But Yardeni Research president Ed Yardeni warned investors not to read too much into Wednesday’s data, even if it proves to be a market-moving event.
Yardeni, who has a 5,400 year-end target for the S&P 500 for 2024 and expects it to reach 6,500 by the end of 2026, believes AI will play a part in this ascent. But this isn’t the complete tale.
“[Nvidia’s report] is obviously viewed as a big deal,” he added. “But there’s more to this economy than Nvidia and artificial intelligence. The fact is that the economy has shown to be incredibly robust. It is still growing at a good rate. Inflation has decreased despite the fact that the jobless rate remains below 4%.