Traders work on the floor at the New York Stock Exchange on Feb. 7, 2024.
Brendan Mcdermid | Reuters
U.S. stock futures ticked down Wednesday morning after the major averages incurred a second day of losses, fueled by a decline in Nvidia.
Nasdaq 100 futures shed 0.6%. Futures tied to the Dow Jones Industrial Average slipped 87 points, or about 0.2%. declined by 0.3%.
In premarket action, Palo Alto Networks shed more than 24% after the cybersecurity company cut its full-year revenue guidance. SolarEdge Technologies lost more than 17%, dropping on weak first-quarter guidance..
A slump in Nvidia — which slid more than 4% Tuesday and was off another 2% in the premarket Wednesday — weighed on the Nasdaq and S&P 500 as sentiment soured the day before the chip giant is expected to post its quarterly results. Concerns surrounding Nvidia's high valuation have grown leading up to the company's earnings announcement, slated for Wednesday after the bell. The stock has soared about 225% over the past year.
The broader tech sector is now overvalued, according to Alex McGrath, chief investment officer at NorthEnd Private Wealth. He thinks Tuesday's sell-off of Nvidia and other big tech names could mean investors are coming to terms with "the greater fool theory" — that is, when overvalued assets continue to rise because there are enough investors willing to pay more, until there aren't any more left.
"People continued to pay higher and higher prices for the tech sector throughout [the rally]. It had to have been a core asset allocation, but as you get longer and longer into this, the biggest question is: When do you start to trim?" McGrath said. "And with the Nvidia action today, I think that's what you're seeing."
On Wednesday, Wall Street will also have an eye out for the minutes from the Federal Reserve's January meeting, seeking further insight on where the central bank stands on rates. This comes on the back of hotter-than-expected economic data the previous week.
Other companies slated to announce their quarterly results Wednesday include HSBC, Wingstop and Analog Devices before the bell. In addition to Nvidia, Etsy will also report its results in the afternoon.
In other market news, Amazon shares rose roughly 1% premarket following news that it will replace Walgreens Boots Alliance next week in the Dow. Walgreens shed more than 2%.
During the regular session, the three major averages had slid, dragged lower by tech. The Nasdaq Composite lost 0.92%, while the fell 0.6%. The 30-stock Dow fell 0.17%
Nvidia earnings will be key test for momentum trade, Wolfe Research says
Nvidia's earnings report on Wednesday evening is likely to be a key factor in whether the momentum trend that has pushed stocks to new highs can continue, according to Wolfe Research.
Strategist Chris Senyek said in a note to clients that the momentum trade is showing signs of weakening during the recent hiccup for stocks but that it was still too soon to call for a bigger reversal. Momentum is a trading factor that can serve as a bet that hot stocks will keep leading the market higher.
"While there could be some more near-term downside, we believe that the key event to derail the Momentum trade will be indications that AI demand and Tech fundamentals broadly are starting to soften. Along this vein, NVDA's report tonight has the potential to be a major market moving event — both to the upside and the downside," Senyek said.
— Jesse Pound, Michael Bloom
Stocks making the biggest moves before the bell: Nvidia, SolarEdge and more
These are the stocks moving the most in premarket trading:
- Nvidia— The chipmaker giant slipped nearly 2% as investors grappled with concerns the stock has become too overvaluedahead of its widely-anticipated fourth-quarter earnings release.
- SolarEdge Technologies— Shares dropped more than 20% after the company posted mixed quarterly results.
- Teladoc— Shares dropped 20% the morning after the online health-care company posted worse-than-expected revenue and guidance.
Read the full list of stocks moving here.
— Lisa Kailai Han
U.S. tech rally 'should be underlined' by Nvidia earnings out Wednesday, Barclays says
CostFoto | Nurphoto | Getty Images
Tech earnings should continue to support an already impressive earnings season, according to Barclays.
"U.S. tech exceptionalism has remained a massive theme, and should be underlined by Nvidia earnings this week...margin expansion for the second straight quarter is all about U.S. mega-cap tech firms," analyst Ajay Rajadhyaksha wrote in a Tuesday note."In sum, we believe that much of the equity rally is justified based on better earnings, and so is less vulnerable to a pullback"
Earnings per share growth year-over-year in the U.S. was 5%, higher than in Europe, Rajadhyaksha pointed out. Nearly four-fifths of the broader market have beaten on EPS expectations, while 68% have beaten on sales, he said.
Nvidia, which is expected to post earnings after the bell on Wednesday, has been the crown jewel of the market since last year amid the excitement around advancements in AI, which also boosted shares of 'Magnificent 7' tech peers such as Meta and Amazon. Investors are eyeing the chipmaker's results to gauge how far the stock can rally.
— Pia Singh
Teladoc shares tumble on weak revenue
Teladoc shares dropped more than 20% before the bell on Wednesday, the morning after the online health-care company posted worse-than-expected revenue and guidance.
The company reported $661 million in revenue, below the $671 million forecast of analysts polled by LSEG. However, Teladoc saw a loss of 17 cents per share, smaller than the 21-cent figure anticipated by analysts surveyed.
For the current quarter, Teladoc guided revenue between $630 million to $645 million. That's lower than the estimate of $673 million from analysts, per LSEG.
Teladoc shares have dropped almost 5% so far in 2024, underperforming the broader market.
— Alex Harring
SolarEdge sells off on disappointing revenue
A Solarpro employee installs a SolarEdge Technologies inverter at a residential property in Sydney, May 17, 2021.
Brendon Thorne | Bloomberg | Getty Images
SolarEdge shares dropped 20% in the premarket after the company posted mixed quarterly results. The solar inverter maker posted fourth-quarter revenue of $316 million, less than an LSEG estimate of $354 million. It also reported a smaller-than-expected loss for the quarter.
However, first-quarter revenue guidance came in well below analyst expectations.
— Fred Imbert
Amazon to join Dow Jones Industrial Average next week
Products are seen on a conveyor belt at an Amazon fulfillment center where they are being sorted and shipped out as same day orders during Cyber Monday at the Same-Day Delivery Facility Fulfillment Center on November 27, 2023 in Tampa, Florida.
Octavio Jones | Getty Images News | Getty Images
Amazon will join the blue-chip Dow Jones Industrial Average next week, replacing Walgreens Boots Alliance, according to a Tuesday announcement from S&P Dow Jones Indices.
The change goes into effect prior to market open on Feb. 26.
Shares of Amazon gained 1% Tuesday in post market trading, while Walgreens fell 3% on the news.
— Hakyung Kim, Jordan Novet
Stocks making the biggest moves after hours
Check out the companies making headlines after the bell.
Palo Alto Networks – Shares declined nearly 19% after the cybersecurity company's full-year guidance missed expectations. Palo Alto Networks said it predicts full-year revenue growth of 15% to 16%, down from earlier guidance of 18% to 19% growth. The company also reduced its full-year billings forecast. Meanwhile, adjusted earnings and revenue in the fiscal second quarter topped analysts' estimates.
Diamondback Energy — Shares gained 1.6% after the energy company beat on both top- and bottom-lines in the fourth quarter. Diamondback posted adjusted earnings of $4.74 per share on $2.23 billion in revenue. Analysts polled by LSEG had forecasted $4.66 in earnings per share on revenue of $2.17 billion.
Caesars Entertainment — The hotel and resorts stock lost more than 1% after posting a revenue miss in the prior quarter. Caesars reported $2.83 billion in revenue while analysts had estimated $2.85 billion, according to LSEG.
— Hakyung Kim
Stock futures open lower Tuesday
U.S. stock futures opened in the red Tuesday night.
Nasdaq 100 futures shed 0.2%. Futures tied to the Dow Jones Industrial Average slipped 10 points, or 0.03%. declined 0.07%.
— Hakyung Kim
