Stocks close lower as Nvidia weighs ahead of earnings
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[February 21, 2024] By
Chuck Mikolajczak
NEW YORK (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 tumbled 4.35%, it's biggest daily
percentage fall since Oct. 17, while the broader Philadelphia
semiconductor index 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 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.
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"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, 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 lost 30.06 points, or 0.60%, to end at 4,975.51 points,
while the Nasdaq Composite lost 144.87 points, or 0.92%, to 15,630.78.
The Dow Jones Industrial Average fell 64.19 points, or 0.17%, to
38,56.80.
Walmart 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, which includes Walmart, rose 1.13%
as sole advancer of the 11 major S&P sectors, while information
technology, down 1.27% was the weakest.
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Traders work on the floor at the New York Stock Exchange (NYSE) in
New York City, U.S., February 20, 2024. REUTERS/Brendan McDermid
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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 jumped 16.26% after Walmart said it would buy
the company for $2.3 billion.
Discover Financial Services 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.
(Reporting by Chuck Mikolajczak; Editing by Aurora Ellis)
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