Stocks Close Lower as Nvidia Weighs Ahead of Earnings
Concerns Mount as Nvidia Stumbles Before Earnings Report
U.S. stocks closed lower on Tuesday, with the Nasdaq experiencing the largest declines as chipmaker Nvidia stumbled ahead of its highly anticipated earnings report. The broader Philadelphia semiconductor index also declined as other chip stocks followed suit.
Market Worries Over Nvidia’s Expensive Valuation
Shares of chip designer Nvidia tumbled 4.35%, its biggest daily percentage fall since October 17. Investors are concerned whether Nvidia’s quarterly results, expected after markets close on Wednesday, will justify its expensive valuation. The stock currently has a forward price-to-earnings ratio of just over 32, leading to apprehensions about the sustainability of the buying frenzy around artificial intelligence (AI) related stocks.
Impact of AI on Nvidia’s Position
The AI-fueled bets have propelled Nvidia to become the third-most valuable U.S. company, recently surpassing Tesla as Wall Street’s most traded stock. However, with the stock being priced to perfection, there are worries about potential profit-taking and position adjustments by traders and asset managers.
Market Reactions and Performance of Other Stocks
Super Micro Computer, another stock seen to benefit from AI, also experienced a decline. However, Walmart closed at a record high, contributing to the performance of the Dow Industrials. The S&P 500 consumer staples index, which includes Walmart, emerged as the sole advancer among the major S&P sectors, while the information technology sector was the weakest.
Market Expectations and Upcoming Events
The recent stall in the Wall Street rally was fueled by hotter-than-expected U.S. inflation data, resulting in a pushback of market expectations for the timing of a rate cut from the Federal Reserve. Investors are now keenly awaiting the release of minutes from the Fed’s latest policy meeting, as well as remarks from various central bank officials later this week.
Notable Market Moves and Trading Patterns
Vizio saw a significant jump after Walmart announced its plan to acquire the company, while Discover Financial Services surged higher on news of a planned acquisition by Capital One. Declining issues outnumbered advancers on both the NYSE and Nasdaq, indicating a certain level of market volatility.
The S&P 500 posted 29 new 52-week highs and 3 new lows, with 11.67 billion shares changing hands on U.S. exchanges.
