US stocks point lower on Tuesday as investors await results from artificial intelligence darling Nvidia and brace for fresh evidence from Federal Reserve officials on interest rates following last week's inflation data.
How are stocks traded?
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The S&P 500 SPX index fell 44 points, or 0.9%, to 4,960 points.
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The Dow Jones Industrial Average fell 135 points, or 0.3%, to 38,492.
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The Nasdaq Composite Index fell 245 points, or 1.5%, to 15,530 points.
The US stock market was closed on Monday for Presidents' Day.
What drives the markets?
Earnings reports and hints about monetary policy may serve as some catalysts in the holiday-shortened week. The Dow briefly entered barely positive territory early Tuesday, but then returned to negative territory along with the other two major indexes. The S&P 500 and Nasdaq Composite fell sharply Tuesday afternoon.
Some say it's a sign of selling nerves as investors wait for more information to trade on.
The first release for investors to consider was big-box retailer Walmart WMT's earnings on Tuesday,
Home Depot HD,
Which gave clues to consumers' minds and wallets.
Walmart shares rose Tuesday after the earnings beat, although Home Depot shares fell after its results.
Walmart and Home Depot's results were some of the bold names for Tuesday's earnings news, but when it comes to closely watched results, the focus on Nvidia's earnings may be hard to beat.
Earnings, which come after the market closes on Wednesday.
Investors are aware that the reception to the AI chip maker may determine broader market sentiment for a while. “It's no surprise that there are high expectations for Nvidia, and if it fails to deliver it could come as a big surprise to the S&P 500, as the top five stocks in the US blue-chip index have consolidated 75% of their gains so far in 2024,” said Kathleen Brooks. , analyst at XTB.
Tuesday's lackluster performance is “nervousness to Nvidia's earnings,” said Kent Engelke, chief economic strategist and managing director at Capitol Securities. “Unless Nvidia completely gets out of the water, I think things will be flat to the bottom for now,” he said in a phone interview.
Outside of Nvidia, people are still spooked by January's inflation data and what it could mean for interest rates, Engelke said.
This highlights the other big picture this week: a showcase of Fed officials speaking, along with the release of minutes from the central bank's January 31 meeting on Wednesday afternoon.
For Jeffrey Schulz of ClearBridge Investments, the Fed remains the driver behind Tuesday's market moves.
“There is no clear, conclusive evidence of risk aversion,” said Schultz, managing director and head of economic and market strategy at the company. What is likely instead is more of the “jitters” seen last week following hotter-than-expected January inflation data on consumer and wholesale prices.
That is likely to translate into sharper numbers in the Fed's preferred measure of inflation, which will be released next week, and will “reinforce the Fed's wait-and-see stance,” Schulz said.
He expects the January meeting minutes to repeat what Fed Chairman Jerome Powell said at the news conference, so Schulz's big focus is what the parade of Fed officials will say this week.
Seven Fed spokesmen are scheduled to speak in the coming days.
“We'll get a clear idea of how much weight the Fed is putting on the speed bump we've seen” from January's inflation data so far, Schulz noted. “Monetary policy expectations are the clear driver for the rest of the week.”
Andrew Hollenhorst, an economist at Citi, said the minutes were likely to follow recent Fed speakers in indicating that the Fed will cut interest rates this year but only “carefully” once officials have “more confidence” that inflation It permanently slows down about 2%.
“Most interesting may be any details about ending the balance sheet reduction. An in-depth discussion on the balance sheet is scheduled for March,” Hollinghurst said.
Ahead of Wednesday's meeting minutes, there was also some economic data to consider on Tuesday, presenting a mixed picture.
The main US economic indicator fell last month, marking the 22nd straight decline. The 0.4% decline in January continues to offer signs of hope, with six of 10 components showing positive results. It's been two years since that happened.
Companies in focus
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Capital One Financial Company
COF,
+0.62%
Shares rose 0.6% on news of the credit card giant's purchase plan Discover financial services. Discover DFS,
+14.25%
Shares rose more than 14% on news of the planned tie-up in an all-stock deal valued at more than $35 billion. - Walmart Inc Shares rose 3% early Tuesday following corporate earnings from the retail giant. The company reported lower earnings and raised its dividend by 9%. Walmart also confirmed its $2.3 billion purchase of smart TV maker Vizio.
- Home Depot Company Shares fell 0.5% on Tuesday after the home improvement company's earnings. Although it beat net sales, it missed expectations for U.S. same-store sales and provided a full-year outlook that also disappointed Wall Street.
