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US investors are treading cautiously ahead of Nvidia earnings, which are due out after markets close today.
There are some concerns that investors have maybe gotten “over exuberant” about Nvidia and the wider tech sector, which could bite hard if Wall Street has a negative reaction to the chipmaker’s earnings or forward guidance. Not surprisingly, there seems to be some trimming of positions going into Nvidia’s results with many choosing to book some profits.
To be clear, no one is floating big doubts about Nvidia meeting analyst expectations. The “unknown” is whether the results will be good enough for Wall Street to justify pushing Nvidia’s stock - as well as other tech stocks - even higher. That means Nvidia’s forward guidance will likely be crucial to investors who are worried that sentiment has become overblown. Keep in mind, despite beating analyst expectations by nearly +20% in Q3, Nvidia traded lower to sideways for the rest of 2023 and only really started to soar at the beginning of January. Year-to-date, the stock is up more than +44% already versus the S&P 500 that is up just under +5%, and the tech-heavy Nasdaq which is up just under +6% so far in 2024.
The company’s valuation is fast approaching the $2 trillion milestone, which would put it in an exclusive club that includes only Apple and Microsoft. Since Nvidia reports after the market close, the results will impact Thursday’s trading.
Other earnings due today include Centerpoint Energy, CoStar, Diamondback Energy, Medtronic, and Toll Brothers. It’s worth noting that Walmart and Home Depot earnings yesterday both indicated further slowdowns in consumer discretionary spending, though the declines still remain moderate.
In its case, Walmart has been able to make up the difference with an increase in “need to have” item sales, though that also means slightly lower margins.
Investors today will also be digesting the “minutes” from the Federal Reserve’s January meeting, though it’s not expected to have much impact on markets. There are several Fed officials scheduled to speak, including Fed Governor Michelle Bowman. From what I am gathering, most on Wall street are now thinking the Fed will start cutting rates at their June FOMC meeting and will make a total of three or four quarter-point cuts in 2024.
US to Deliver Tougher Sanctions on Russia: The Biden administration will impose "major sanctions" on Russia, the White House said Tuesday, in response to the death of Alexei Navalny, a fierce critic of Russian President Vladimir Putin who died in prison last week under mysterious circumstances. John Kirby, the White House's national security communications adviser, said the new sanctions are designed to "hold Russia accountable for what happened to Mr. Navalny" as well as "all its actions over the course of this vicious and brutal war" that has raged in Ukraine for two years. President Joe Biden plans to unveil the sanctions package Friday. Kirby declined to elaborate on what the new sanctions could look like or explain how they might differ from previous U.S. sanctions targeting Russia. Source USA Today
Walmart to Buy TV Maker Vizio for $2.3 Billion to Grow Ad Biz: Walmart will acquire Vizio for $2.3 billion, or $11.50 per share, in cash, as the largest U.S. retailer grows its high-profit ad business. The big-box retailer announced the acquisition as it reported its fourth-quarter earnings. Walmart and its Sam’s Club warehouse chain have long been major sellers of Vizio devices. But in buying the company, Walmart touted the potential to boost its ad business through Vizio’s SmartCast Operating System, which allows users to stream free ad-supported content on their TVs. As it pushes for higher profits, the retail titan has tried to expand its media business Walmart Connect, which comes with bigger profit margins than selling groceries or clothing. The segment’s advertising sales grew 22% in the fourth quarter. Source CNBC
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Amazon to replace Walgreens in Dow Industrial Average: Amazon will replace Walgreens Boots Alliance i n the Dow Jones Industrial Average, S&P Dow Jones Indices, which manages the price-weighted measurement of 30 stocks, said on Tuesday. “Reflecting the evolving nature of the American economy, this change will increase consumer retail exposure as well as other business areas in the DJIA,” S&P Dow Jones Indices said in a statement. The company said the revision was “prompted” by Walmart’s 3-for-1 stock split, resulting in lower index weight for Walmart. The change goes into effect prior to market open on Feb. 26. Source CNBC
January Home Prices Climbed Most in a Year: U.S. home prices climbed +0.5% from a month earlier in January, according to RedFin, matching the +0.5% gain seen in both December and November. On a year-over-year basis, prices rose +6.7%—the largest increase in a year. “Price growth held steady last month because many of the home purchases that closed in January were negotiated at the end of last year, when mortgage rates posted the biggest drop since 2008. The decline in rates gave buyers more purchasing power, and for some, a sense of urgency to lock in a mortgage,” said Redfin Senior Economist Sheharyar Bokhari. “Prices also climbed because there’s still a shortage of homes for sale, which is fueling competition in some areas.” New listings fell 1.2% month over month on a seasonally adjusted basis in January, the first drop since June, and remained far below pre-pandemic levels—contributing to the increase in prices. Listings are declining largely because many homeowners are hesitant to give up their rock-bottom mortgage rates; a majority of homeowners still have rates below current levels. Source Redfin
Ford Slashes Electric Mustang Mach-E by up to $8,100: Ford Motor Co on Tuesday said it had cut prices on its Mustang Mach-E electric SUV by up to $8,100 after sales fell sharply in January. The No. 2 U.S. automaker's lowest-price 2023 model year Mach E version now has a suggested retail price of $39,895, down from $42,995. The higher-end Mach-E GT spec will cost about $7,600 less, at $52,395. Other versions including the extended-range premium version will drop in price by $8,100 to $48,895. Ford said the price cuts come as the automaker continues "to adapt to the market to achieve the optimal mix of sales growth and customer value." The Dearborn, Michigan-based automaker said U.S. sales of the Mach-E fell by 51% in January to 1,295. The Mach-E lost eligibility for a $3,750 tax credit on Jan. 1 after new U.S. Treasury Department battery sourcing requirements aimed at weaning the electric vehicle supply chain away from China took effect. Source Reuters
Boom in Battery Metals for EVs Is Turning to Bust: When the world’s most valuable lithium company last year announced plans for a $1.3 billion plant in South Carolina, local officials hailed it as transformative for the Palmetto State. The high-tech project from Charlotte, N.C.-based Albemarle was designed to process different sources of lithium, including from recycled batteries, and serve as a supplier of the critical mineral for South Carolina’s burgeoning electric-vehicle industry. Less than a year later, those plans have been hobbled by a crash in battery metal prices, undercut by a slowdown in electric-vehicle sales growth in the U.S. and China. Albemarle has deferred spending on the project, amid companywide cost-cutting that includes layoffs and delays to other investments as well. Producers of lithium and nickel, which are used in lithium-ion batteries for EVs, have been stalling projects and closing mines to save cash after a painfully quick fall in commodity prices. Prices of lithium are down as much as 90% since the start of last year, while the price of nickel has roughly halved. Source WSJ
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