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Stocks end Wednesday mixed
Here’s how much Nvidia matters to major ETFs
In this photo illustration, the Nvidia logo is seen displayed on an Android mobile phone.
Omar Marques | Sopa Images | Lightrocket | Getty Images
Nvidia‘s earnings report this afternoon is expected to be a key driver of investor sentiment in the days ahead, but it could have a more direct and immediate effect for those who own passive funds.
Nvidia’s rapid rise over the past year has driven its market cap above $1.6 trillion and made it a large component of many exchange-traded funds that track indexes. That means that the direction of Nvidia’s stock after the earnings report will have a sizable effect on how those funds trade on Thursday.
Here is the weight of Nvidia in a handful of the most popular index and sector ETFs, according to fund websites.
- Invesco QQQ Trust (QQQ) – 5.1%
- SPDR S&P 500 ETF Trust (SPY) – 4.1%
- Technology Select Sector SPDR Fund (XLK) – 6.1%
- Vanguard Information Technology ETF (VGT) – 5.1%
- VanEck Semiconductor ETF (SMH) – 24.2%
- iShares Semiconductor ETF (SOXX) – 9.9%
— Jesse Pound
Health-care trends improving, says Strategas
The internal trends within the health-care sector are improving, which could potentially come at the expense of tech, according to Strategas.
“The sector [is] supported by contrarian ETF flows and a longer-term relative performance profile that we’d describe as ‘in the go zone,'” head of technical and macro strategy Chris Verrone wrote in a Wednesday note.
Veronne believes health-care stocks could potentially be a growth “destination” for any outflows out of the tech sector.
“It’s too soon to say the HC vs. Tech pair has inflected, but we’re watching it more closely (particularly given the fact you could drive a truck through the flows over the last several months),” said Verrone.
— Hakyung Kim
Nvidia is ‘more vulnerable to the downside,’ Barclays says
Investors should be careful ahead of Nvidia’s earnings report, according to Barclays.
The artificial intelligence chipmaker could post a large move after releasing its latest results Wednesday after the close, especially given the level of optimism around the stock, Anshul Gupta wrote in a Wednesday note. The earnings-implied move of 10%, either up or down, for the stock would be the third-largest in two years, behind only moves in May 2023 and February 2023, of 24.4% and 14%, respectively.
Meanwhile, options flow, which indicates the buying and selling activity of options contracts, continues to suggest bullishness around the stock.
“Option flow suggests that sentiment is bullish, with put-to-call OI ratio/short-dated skew at the lowest/flattest level in five years,” Gupta wrote. “This indicates that, should earnings disappoint, NVDA is more vulnerable to the downside.”
— Sarah Min
Oil prices rise as Fed officials indicate interest rates have peaked
An oil pump jack in Midland, Texas, on March 2, 2023.
Bloomberg | Bloomberg | Getty Images
Crude oil futures rose Wednesday as Federal Reserve officials indicated that interest rates have likely reached their peak.
The West Texas Intermediate contract for April gained 87 cents, or 1.13%, to settle at $77.91 a barrel. April Brent futures added 69 cents, or 0.84%, to settle at $83.03 a barrel.
Fed officials agreed during the central bank’s January meeting that interest rates have likely peaked, according to minutes from the proceeding released Wednesday. The officials also generally agreed that rates should not be cut until they had more confidence inflation was under control.
Tensions continued to simmer in the Middle East this week after Israel launched airstrikes against Hezbollah in Lebanon, Houthi militants struck another cargo vessel Monday and as Iran now blames Israel for explosions that hit a natural gas pipeline in the Islamic Republic on Feb. 14.
— Spencer Kimball
UBS’ base case doesn’t see the Fed cutting rates until June
UBS updated its base case to reflect that the Federal Reserve would wait until June before cutting rates, rather than starting in May.
Economist Brian Rose highlighted upside surprises to recent payrolls and inflation data as catalysts for the change. He believes the U.S. central bank is likely to cut rates once per quarter until the Fed’s funds target range reaches between 3.25% and 3.5%.
However, the economist added that there is still a degree of uncertainty around the Fed’s actions.
“The Fed could be forced to stay on hold indefinitely if the labor and inflation data continues to run hot. On the other side, if the economy turns downward, the Fed would likely cut rates sharply since inflation should not be an issue in that case,” Rose wrote.
— Lisa Kailai Han
Boeing announces replacement for head of 737 Max program
An aerial photo shows Boeing 737 Max airplanes parked on the tarmac at the Boeing Factory in Renton, Washington, on March 21, 2019.
Lindsey Wasson | Reuters
Aircraft manufacturer Boeing announced Wednesday that it would be replacing the head of its 737 Max program, Ed Clarke. This change comes a little less than two months after a door panel on the side of a Boeing 737 Max 9 aircraft blew off midflight.
“I am announcing several leadership changes as we continue driving BCA’s enhanced focus on ensuring that every airplane we deliver meets or exceeds all quality and safety requirements. Our customers demand, and deserve, nothing less,” said Boeing Commercial Airplanes CEO Stan Deal in a memo to employees.
Boeing stock is down 22% since the start of the year. Shares of Boeing slid less than 1% upon the news Wednesday afternoon.
— Lisa Kailai Han
Fed officials cautious about lowering rates too quickly, last meeting’s minutes show
Minutes released Wednesday from the Federal Reserve’s January meeting indicated that central bankers are in no hurry to cut interest rates.
The Fed officials left their key overnight borrowing rate unchanged and indicated that no rate cuts would occur until the Federal Open Market Committee has “greater confidence” that inflation is slowing down, according to the meeting summary. Officials expressed a tone of general optimism and caution, saying they wanted to see more progress before easing policy.
“In discussing the policy outlook, participants judged that the policy rate was likely at its peak for this tightening cycle,” the minutes said. “Participants generally noted that they did not expect it would be appropriate to reduce the target range for the federal funds rate until they had gained greater confidence that inflation was moving sustainably toward 2 percent.”
For more, read here.
— Pia Singh
8 stocks in the S&P 500 hit new all-time highs during Wednesday’s trading session
The Diamondback Energy logo is displayed on a smartphone.
Rafael Henrique | Sopa Images | Lightrocket | Getty Images
Small caps could rally after tough period, Wolfe Research says
While major indexes could see momentum turning, the small-cap focused Russell 2000 might see upside, according to Wolfe Research.
A pullback may be in the cards for the broad S&P 500 and technology-heavy Nasdaq Composite as that momentum turns, said managing director Rob Ginsberg. The beat-down Russell 2000 has an opportunity to rise, on the other hand, though he said there’s uncertainty about if it actually will.
The Russell 2000 “has only recently turned positive from a momentum perspective and has plenty of potential upside to go, but can it capture it?” he wrote to clients. “So far, no, but the setup is there for the taking.”
The Russell 2000 has lost 1.8% so far in 2024, while the S&P 500 and Nasdaq Composite have added more than 4% and 3%, respectively.
The Russell 2000 vs. S&P 500 and Nasdaq Composite, year to date
— Alex Harring
Cybersecurity stocks drop after Palo Alto Networks slashes guidance
Stocks making the biggest moves midday
The Nvidia logo is displayed on a smartphone.
Jonathan Raa | Nurphoto | Getty Images
These are some of the stocks making the biggest moves midday.
- Nvidia — The artificial intelligence giant fell 2% during midday trading, building on Tuesday’s loss ahead of its quarterly earnings report after the bell.
- Teladoc — Shares dropped 24% Wednesday, the day after the online health-care company released worse-than-expected revenue and guidance.
- Toll Brothers — The homebuilder’s shares jumped more than 5% on the back of its better-than-expected earnings report.
— Alex Harring
Teladoc on track for second worst day ever
Shares of Teladoc are on pace to notch their second worst day in the stock’s history following weak revenue.
The virtual health-care company stock plummeted nearly 25% Wednesday. The only time the stock has previously seen a worse drop is April 22, 2022, when shares tumbled more than 40% in the session.
Teladoc, 1-day
Wednesday’s drop comes after Teladoc posted lackluster revenue for the fourth quarter and weak current-quarter guidance on the measure. Teladoc recorded $661 million in the fourth quarter, less than the $671 million forecast of analysts polled by LSEG, formerly known as Refinitiv. For the current quarter, the company said to expect between $630 million and $645 million, while analysts anticipated $673 million.
On the other hand, Teladoc saw a smaller loss per share than analysts expected in the fourth quarter. But the company offered guidance for its loss per share that was larger than analysts were predicting.
Teladoc went public in 2015. Shares have dived more than 28% so far in 2024.
— Alex Harring
Shares of fragrance company fall 8% Wednesday
International Flavors & Fragrances declined 8.4% midday Wednesday. This came a day after the company posted a mixed earnings report and slashed its quarterly dividend.
The company’s fourth-quarter earnings excluding items came in at 72 cents per share, missing consensus estimates of 86 cents per share, according to StreetAccount. Meanwhile, its revenue of $2.7 billion came in line with expectations.
Management also announced that it would reduce quarterly dividends by 50.6% to 40 cents from 81 cents.
Shares are now down 7.6% in 2024.
IFF shares
— Hakyung Kim
Palo Alto Networks heads for worst day ever
Shares of Palo Alto Networks cratered more than 26% and headed for their worst day on record after the company cut its full-year revenue and billings outlook after the bell Tuesday.
The new outlook anticipates billings growth to range between 10% and 11% for the year, while prior guidance called for between 16% and 17% growth. The company also expects revenue growth to range between 15% and 16%. That’s down from previous guidance that anticipated 18% to 19% growth.
CEO Nikesh Arora said during a call with analysts that the lowered forecast reflects a “shift” in strategy, “wanting to accelerate growth, our platform migration and consolidation and activating AI leadership.”
The cybersecurity company topped quarterly estimates on the top and bottom lines. With Wednesday’s moves, the company is on pace for its worst month since February 2020 and its worst week ever.
Shares sink 26%, head for worst day on record
— Samantha Subin
Garmin soars on earnings beat, dividend hike and stock repurchase plan
GPS devices designed for golfers lie on display at Garmin in Berlin, Germany.
Sean Gallup | Getty Images
Shares of Garmin jumped 11.5% and hit a 52-week high on Wednesday after the company reported fourth-quarter earnings and revenue that beat analysts’ estimates.
Garmin, which makes fitness and navigation devices, also guided for full-year revenue of $5.75 billion, topping the $5.56 billion expected from analysts polled by FactSet.
In addition, the Swiss company is returning money to shareholders. Garmin is increasing its quarterly dividend to 75 per share, up from 73 cents, beginning June 28 for shareholders on record as of June 17. Garmin also announced it was repurchasing up to $300 million of the company’s shares through Dec. 26, 2026.
The stock is up nearly 7% year to date.
— Michelle Fox
Market may be nearing fragility event, but not asset bubble: BofA
Quant funds, levered upside, momentum and call skew are nearing levels that previously preceded some of the largest S&P 500 fragility events in nearly a century, according to Bank of America. But an asset bubble may not be in the cards.
Those markers are all more than two-thirds of the way to where they stood when two of the four largest fragility events have taken place since 1928, analyst Vittoria Volta told clients. The two events were the February 2018 “Vix-plosion” and March 2020 Covid-19 pandemic shock.
In the current market, Volta said fragility risks are high due to the pressure to chase momentum and fickle liquidity. But slides in volatility within the “Magnificent Seven” also show the market is “far” from an asset bubble, as volatility typically rises with prices in that situation.
With depressed volatility and correlation, Volta said she continues to like owning options directionally, which aren’t fully pricing the future drift of markets in either direction.
— Alex Harring
Small-cap ETFs saw record inflows last week, Bank of America says
Institutional clients were net buyers of U.S. equities last week, while hedge funds and retail clients were net sellers, according to Bank of America.
Additionally, strategist Jill Carey Hall outlined that small-cap exchange-traded funds saw record inflows.
“Small cap ETF momentum continued, with inflows in 22 of the 23 past weeks, and largest weekly inflow in our data history since ’17 (mainly Retail-driven buying). Despite more positive sentiment, positioning in small caps remains light and valuations remain inexpensive vs. history,” she wrote.
Sector-wise, communications services led last week’s inflows, while health-care and tech stocks saw the biggest outflows.
“The last three weeks have been the three biggest weeks of Comm. Svcs. net buying in the history of the sector since ’18. The sector also has the longest recent buying streak of any sector (16 weeks),” Hall added.
— Lisa Kailai Han
Stocks open in the red
Traders work on the floor at the New York Stock Exchange on Feb. 1, 2024.
Brendan Mcdermid | Reuters
Nvidia earnings will be key test for momentum trade, Wolfe Research says
Nvidia’s earnings report 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 overvalued ahead 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 has beaten on earnings per share expectations, while 68% has beaten on sales, he said.
Nvidia, which is expected to post earnings after the bell Wednesday, has been the crown jewel of the market since last year amid the excitement around advancements in artificial intelligence, which also boosted shares of “Magnificent Seven” 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 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, formerly known as Refinitiv. 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 and $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, Australia, on 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 analysts’ expectations.
— Fred Imbert
Amazon to join Dow Jones Industrial Average next week
Products are seen on a conveyor belt at an Amazon fulfillment center in Tampa, Florida, on Nov. 27, 2023.
Octavio Jones | Getty Images News | Getty Images
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, formerly known as Refinitiv, had forecast $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
