Wall Street Waits With Bated Breath For Nvidia Earnings After Tech Selloff, Fed Minutes Eyed: Analyst Flags This As Biggest Risk For Market

Author: Shanthi Rexaline | February 21, 2024 07:51am

Wall Street remains subdued following Tuesday’s sell-off, primarily driven by small-cap and tech stocks. All eyes are now on Nvidia Corp.‘s (NASDAQ:NVDA) fourth-quarter earnings report, scheduled for after the closing bell.

Given the crucial nature of this event, caution is likely to be the predominant sentiment with investors anxiously awaiting Nvidia’s performance. This anticipation is further amplified by the uncertainty surrounding its ability to meet the lofty expectations placed upon it.

Adding to the market’s concerns are upcoming speeches by Federal Reserve officials and, more importantly, the Fed minutes. Both pronouncements hold the potential to shed light on the future trajectory of interest rates, another significant factor influencing investor sentiment.

Cues From Tuesday’s Trading:

Three key developments weighed down the markets on Tuesday:

• Mixed retail earnings: Performance reports from retailers painted a mixed picture, leaving investors unsure about the health of the consumer sector.
• Nvidia anxiety: Apprehension mounted regarding Nvidia’s ability to live up to the high expectations set for its upcoming earnings report.
• Leading economic index decline: The Conference Board’s leading economic index experienced a larger-than-anticipated drop, raising concerns about future economic growth.

These factors contributed to a negative market atmosphere, pushing major averages down:

• Tech-heavy Nasdaq and S&P 500: Both opened lower and remained below the flatline throughout the session. The S&P 500 even dipped below the psychological barrier of 5,000.
• Dow: The Dow experienced some morning volatility but ultimately closed lower.
• Small-caps: The Russell 2000 underperformed, dropping 1.41%.
• Sectors: Only consumer staples, led by Walmart’s positive results, managed to escape the overall decline. Conversely, IT and consumer discretionary stocks took the biggest hits.

US Index Performance On Tuesday

Index	Performance (+/-)	Value
Nasdaq Composite	-0.92%	15,630.78
S&P 500 Index	-0.60%	4,975.51
Dow Industrials	-0.17%	38,563.80
Russell 2000	-1.41%	2,004.14

The biggest risk for the market is the Fed, according to Fund Strat’s Tom Lee. The market needs to broaden for the sustenance of the rally and it’s going to broaden when interest-rate cuts begin to be priced in and investors begin to think about the roadmap, Lee said in a CNBC interview.

“If inflationary pressures don’t ease and the Fed starts to sort of second guess that, I think it puts a lot of pressure on stocks,” he said.

Although the probability of a Fed rate hike is very low if the market begins to price that in, it would put pressure on stocks, he added.

Futures Today

Futures Performance On Wednesday (as of 6:46 am ET)

Futures	Performance (+/-)
Nasdaq 100	-0.46%
S&P 500	-0.21%
Dow	-0.18%
R2K	-0.47%

In premarket trading on Wednesday, the SPDR S&P 500 ETF Trust (NYSE:SPY) fell 0.26% to $498.20 and the Invesco QQQ ETF (NASDAQ:QQQ) 0.39% to $428.91, according to Benzinga Pro data.

Upcoming Economic Data:

Atlanta Fed President Raphael Bostic is scheduled to give the welcoming remarks at the Airports Council International CFO Summit hosted by the Regional Economic Information Network of the regional Fed bank at 8 a.m. ET.

Richmond Fed President Thomas Barkin is scheduled to give a radio interview at 9:10 a.m. ET.

Fed Governor Michelle Bowman will make a public appearance at 1 p.m. ET.

The Treasury will auction 20-year bonds at 1 p.m. ET.

The Fed is due to release the minutes of the January rate-setting meeting of the Federal Open Market Committee at 2 p.m. ET. At the meeting, the central bank opted to leave the Fed funds rate unchanged at a 22-year high of 5.25%-5.50% for a fourth straight time. Chair Jerome Powell, however, spooked investors by adopting a hawkish tone in the post-meeting press conference. Traders will likely want to sift through the minutes to gain better clarity on the interest rate outlook.

See Also: How To Trade Futures

Stocks In Focus:

• Palo Alto Network, Inc. (NASDAQ:PANW) fell over 22.50% in premarket trading following the release of the cybersecurity company’s earnings report. Other cybersecurity plays such as Zscaler, Inc. (NASDAQ:ZS) and CrowdStrike Holdings, Inc. (NASDAQ:CRWD) moved sharply lower in sympathy.
• Other stocks moving lower in earnings reactions are Caesars Entertainment, Inc. (NASDAQ:CZR) (down over 2%), La-Z-Boy Incorporated (NYSE:LZB) (down over 8.50%), Matterport, Inc. (NASDAQ:MTTR) (down over 14%), Toll Brothers, Inc. (NYSE:TOL) (up over 2%), RingCentral, Inc. (NYSE:RNG) (down about 6.70%) and Workiva Inc. (NYSE:WK) (down over 3.50%).
• Analog Devices, Inc. (NASDAQ:ADI), Bausch + Lomb Corporation (NYSE:BLCO), Canadian Natural Resources Limited (NYSE:CNQ), Garmin Ltd. (NYSE:GRMN), Wingstop Inc. (NASDAQ:WING), Wix.com Ltd. (NASDAQ:WIX) and Wolverine World Wide, Inc. (NYSE:WWW) are among the notable companies reporting earnings ahead of the market open.
• Those reporting after the close include The Cheesecake Factory Incorporated (NASDAQ:CAKE), Fidelity National Financial, Inc. (NYSE:FNF), Exact Sciences, Inc. (NASDAQ:EXAS), Five9, Inc. (NASDAQ:FIVN), Host Hotels & Resorts, Inc. (NASDAQ:HST), Jack in the Box Inc. (NASDAQ:JACK), Lucid Group, Inc. (NASDAQ:LCID), Rivian Automotive, Inc. (NASDAQ:RIVN), Marathon Oil Corporation (NYSE:MRO), Nordson Corp. (NASDAQ:NDSN), Nvidia, Sturm, Ruger & Company, Inc. (NYSE:RGR), Sunnova Energy International Inc. (NYSE:NOVA) and Sunrun Inc. (NYSE:RUN).

Commodities, Bonds, Other Global Equity Markets:

Crude oil futures fell 0.42% to $76,72 in early European session on Wednesday after the commodity fell by 1.13% on Tuesday. The benchmark 10-year Treasury note slipped 0.004 percentage points at 4.271%.

Most Asian markets retreated on Wednesday ahead of some key U.S. catalysts, although the Chinese and Hong Kong markets posted strong gains as domestic traders began to bake in stimulatory measures from authorities. The New Zealand market rose modestly for the day.

European stocks showed cautious optimism by late-morning trading.

Read Next: Government Debt Exceeds 120% Of GDP: Why Former IMF Economist ‘Very Worried’ About US Fiscal Crisis

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