Stocks close lower as Nvidia weighs ahead of earnings

It was a bad day for tech all around, well into the red all day but taking an especially big dive right at 11 a.m. The Dow fared better, being at break-even early on but also taking a big dive right at 11 a.m.  It must have been right at 11 a.m. that Nvidia started to stumble once investors became wary whether the AI giant’s Q4 earnings could justify its valuations. In fact, the day’s sentiment became defined as wariness over whether the whole glorious AI surge has become a bubble. Nvidia’s Q4 report is coming late Wednesday so Thursday will tell.  But as today’s experts pointed out, whether Nvidia comes in over or under expectations, there’s little doubt it will fall as profits are taken.  

After the Dow fell precipitously at 11 a.m., a big surge in Walmart saved the index as the retail giant closed at a record high and raised its dividend 9% which brought the Dow, which had been down some 170 points, recovered to a modest 64-point loss by close. Home Depot, on the other hand, took a drubbing, which also didn’t help the Dow. The oddsmakers today went back to being skeptical about rate cuts, now back to the first coming in June, and all eyes on Fed minutes coming later this week.  Volume was close to the 4-week average at 11.67 billion. 

Stocks close lower as Nvidia weighs ahead of earnings

By Chuck Mikolajczak

Tue February 20, 2024 4:40 PM

DJ: 38,627.99  -145.13        NAS: 15,775.65  -130.52        S&P: 5,005.57  -24.16      2/16

DJ: 38,563.80  -64.19          NAS: 15,630.78  -144.87        S&P: 4,975.51  -30.06      2/20

NEW YORK, Feb 20 (Reuters) - U.S. stocks ended lower on Tuesday, with the Nasdaq showing the largest declines as chipmaker Nvidia stumbled ahead of its highly awaited earnings report, while gains in Walmart kept losses on the Dow Industrials in check.  Shares of the chip designer Nvidia (NVDA.O), opens new tab tumbled 4.35%, it's biggest daily percentage fall since Oct. 17, while the broader Philadelphia semiconductor index (.SOX), opens new tab declined 1.56% as other chip stocks followed.  Investors are concerned whether Nvidia's quarterly results, expected after markets close on Wednesday, will justify its expensive valuation, currently at a forward price-to-earnings ratio of just over 32, and continue to fuel the buying frenzy around artificial intelligence (AI) related stocks.  AI-fueled bets have helped Nvidia become the third-most valuable U.S. company and recently supplant Tesla (TSLA.O), opens new tab as Wall Street's most traded stock.

"It is priced to perfection, no matter what they say they are probably going to take money out of it," said Ken Polcari, managing partner at Kace Capital Advisors in Boca Raton, Florida.  "No matter what they say, the traders are going to lock in profits, the asset managers are going to peel off a piece of their core position and lock in some profits and some of that is even happening today ahead of the number tomorrow."

Shares in Super Micro Computer (SMCI.O), opens new tab, which has surged in recent weeks as the latest stock seen to benefit from AI, fell 1.96%, its second straight decline, after closing down nearly 20% on Friday to snap a nine-session streak of gains.

The S&P 500 (.SPX), opens new tab lost 30.06 points, or 0.60%, to end at 4,975.51 points, while the Nasdaq Composite (.IXIC), opens new tab lost 144.87 points, or 0.92%, to 15,630.78. The Dow Jones Industrial Average (.DJI), opens new tab fell 64.19 points, or 0.17%, to 38,563.80.

Walmart (WMT.N), opens new tab closed at a record high and was the best performer on the Dow Industrials after the U.S. retail giant forecast fiscal 2025 sales largely above Wall Street expectations and raised its annual dividend by 9%.

The S&P 500 consumer staples index (.SPLRCS), opens new tab, which includes Walmart, rose 1.13% as sole advancer of the 11 major S&P sectors, while information technology (.SPLRCT), opens new tab, down 1.27% was the weakest.

Shares of fellow Dow component Home Depot alternated between modest gains and losses and before closing up 0.06% after the home improvement retailer forecast full-year results below analysts' estimates.

A weeks-long rally on Wall Street stalled last week, as hotter-than-expected U.S. inflation data pushed back market expectations for the timing of a rate cut from the Federal Reserve.  The rate cut is expected in June, according to a slim majority of economists polled by Reuters, who also flagged risk of a further delay in the first cut.  Investors are also awaiting the release of minutes from the Fed's latest policy meeting as well as remarks from a slew of central bank officials later this week.

Smart-TV maker Vizio (VZIO.N), opens new tab jumped 16.26% after Walmart said it would buy the company for $2.3 billion.  Discover Financial Services (DFS.N), opens new tab shot 12.61% higher on Warren Buffett-backed consumer bank Capital One's plans to acquire the U.S. credit card issuer in a $35.3 billion deal. Capital One shares edged 0.12% higher.

Declining issues outnumbered advancers by a 1.4 to 1 ratio on the NYSE, while on Nasdaq, decliners topped advancers by 1.9 to 1.  The S&P 500 posted 29 new 52-week highs and 3 new lows while the Nasdaq recorded 111 new highs and 95 new lows.

On U.S. exchanges 11.67 billion shares changed hands compared with the 11.64 billion moving average for the last 20 sessions.