Tech Stocks, Led by Investor Favorite Nvidia, Cause Wall Street to Decline
Technology stocks took a hit on Wall Street, causing a decline in the market. Investor favorite Nvidia pulled back ahead of its highly anticipated earnings report, leading to a drop in the S&P 500, the Dow Jones Industrial Average, and the Nasdaq composite. While this setback follows only the second losing week in the last 16, it pushed the benchmark index further below the record it set last week.
The biggest drag on the market was the technology sector, with chipmakers weighing heavily. Nvidia, despite being the S&P 500’s biggest gainer so far this year with a rise of about 40 percent, slumped 4.4 percent. Investors will closely watch Nvidia’s latest earnings update on Wednesday for insights into its health and the potential of the broader tech sector in 2024.
Several big retailers also reported their latest earnings, resulting in mixed results. Walmart saw a rise of 3.2 percent after reporting stronger-than-expected results for its latest quarter and issuing sales forecasts that exceeded Wall Street’s expectations. Additionally, Walmart announced its acquisition of smart TV maker Vizio. On the other hand, home improvement retailer Home Depot was mostly unchanged after beating Wall Street’s earnings forecasts but providing a disappointing profit forecast for the year.
The market decline last week came after economic data indicated persistent high inflation, which stalled a rally that began in late October based on hopes of a cooling inflation rate and potential interest rate cuts by the Federal Reserve. Sameer Samana, senior global market strategist at Wells Fargo Investment Institute, stated that the narrative that drove the market to its recent levels is now being questioned.
As a result, Wall Street is now expecting the first rate cut to come in June, several months later than previously anticipated. Investors will have to wait until the end of February for another key update on inflation when the government releases its monthly report on personal consumption and expenses, which is the Fed’s preferred measure of inflation. The question now is whether inflation is bottoming out and, if so, whether it will remain stable or increase.
This week, investors can expect relatively light economic news. Data on home sales will be reported on Thursday, with the housing market remaining tight due to high demand and limited supply. While mortgage rates have been easing from their peak in late October, when the average rate on a 30-year mortgage reached 7.79 percent, they still remain high.
Several companies are set to report earnings this week. Online crafts marketplace Etsy will report on Wednesday, followed by TurboTax maker Intuit and online travel company Booking Holdings on Thursday. Analysts polled by FactSet expect overall earnings growth of about 3.3 percent for the fourth quarter and forecast earnings growth of about 3.6 percent for the current quarter.
Discover Financial Services saw a significant increase of 12.6 percent, making it the top gainer in the S&P 500. This surge followed the announcement of its acquisition by Capital One Financial for approximately $35 billion.
Bond yields fell, with the yield on the 10-year Treasury slipping slightly to 4.27 percent and the yield on the two-year Treasury falling to 4.61 percent.
Overall, the decline in technology stocks, led by Nvidia, has caused a setback in the market. Investors are now closely watching earnings reports and inflation data for clues about the market’s future direction.
