(Bloomberg) — Worries over whether Nvidia Corp. can deliver another blockbuster earnings beat sent US equity futures lower on Wednesday, with investors questioning the durability of the frenzy over artificial intelligence.
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The company described by Goldman Sachs Group Inc.’s trading desk as “the most important stock on earth” could shake up markets given its high weighting in equity indexes. Nvidia is at the heart of the AI revolution, boasting the best performance in the S&P 500 this year after more than tripling in 2023.
S&P 500 futures slipped 0.2% and Nasdaq contracts lost about 0.5%, suggesting Wall Street may be in for a third day of declines. Nvidia fell 1.7% in pre-market trading after sliding 4.4% yesterday. The company is due to release results after the close.
“It feels like these earnings today are a barometer of where we are in the global cycle,” said Justin Onuekwusi, chief investment officer at St James’s Place. “Concentration in the stock market has got to levels where one company’s earnings can have a big macro effect. It’s gone beyond being just a portfolio construction issue; it’s a macro challenge which you can’t get away from.”
In other notable pre-market stock moves, Palo Alto Networks Inc. slumped more than 20% after the cybersecurity firm cut its revenue forecasts. Amazon.com Inc. rose 1.2% after replacing Walgreens Boots Alliance Inc. in the Dow Jones Industrial Average. Walgreens fell 2.8%.
The 10-year Treasury yield slipped one basis point, and a gauge of the dollar was steady.
Meanwhile, Europe’s stock benchmark retreated from near a record high amid disappointing earnings from some of the region’s biggest companies.
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The Stoxx Europe 600 gauge edged lower, still about four points from its January 2022 peak. Banks were among the leading decliners as HSBC Holdings Plc tumbled more than 7% after reporting an 80% plunge in fourth-quarter profit.
Weak earnings from commodities trader Glencore Plc and Rio Tinto Plc, the world’s biggest iron ore miner, weighed on the basic resources sub-index, which slumped to a four-month low. On the positive side, Carrefour SA gained after the French grocer announced a share buy-back, even as quarterly sales disappointed.
Positive economic surprises have buoyed European stocks even as traders trimmed bets on interest rate cuts by the European Central Bank. Volatility measures are at historical lows, suggesting some complacency has crept into a market still facing potential headwinds, including rising bond yields, according to Bloomberg Intelligence.
“European stocks could consolidate recent gains in the near term as investor sentiment looks overheated,” BI strategists Laurent Douillet and Tim Craighead wrote in a report. “Rising government bond yields haven’t curbed enthusiasm so far, as highly leveraged companies slightly outperform, and remain a key 2024 risk for equities.”
Elsewhere, Chinese shares rose after policymakers took more steps to revive investor confidence, defying broader weakness in Asia following a tech-led retreat on Wall Street.
A gauge of Hong Kong-listed Chinese firms jumped as much as 4% before paring gains, while the CSI 300 Index of mainland shares rose 1.4%. Property developers led the gains after banks ramped up funding help for the troubled sector. A fresh crackdown on trading by quant funds also reduced concerns about short selling. That’s in contrast with losses in other Asian markets.
In the commodity space, aluminum surged on speculation that a fresh wave of US sanctions against Russia may target the metal, potentially disrupting supplies. Iron ore futures hit the lowest since October after a volatile session in which prices flipped between gains and losses. Oil edged lower.
Key Events This Week:
Eurozone consumer confidence, Wednesday
Nvidia earnings, Wednesday
Federal Reserve releases minutes from its January meeting, Wednesday
Atlanta Fed President Raphael Bostic speaks, Wednesday
Eurozone S&P Global Services PMI, S&P Global Manufacturing PMI, CPI, Thursday
US initial jobless claims, US existing home sales, Thursday
ECB issues account of January meeting, Thursday
Fed Governor Lisa Cook and Minneapolis Fed President Neel Kashkari speak, Thursday
China property prices, Friday
Germany IFO business climate, GDP, Friday
ECB publishes 1- and 3-Year inflation expectations survey, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures fell 0.2% as of 6:42 a.m. New York time
Nasdaq 100 futures fell 0.4%
Futures on the Dow Jones Industrial Average fell 0.2%
The Stoxx Europe 600 fell 0.2%
The MSCI World index was little changed
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro fell 0.1% to $1.0796
The British pound was little changed at $1.2612
The Japanese yen was little changed at 150.05 per dollar
Cryptocurrencies
Bitcoin fell 1.9% to $51,045.11
Ether fell 2.7% to $2,908.55
Bonds
The yield on 10-year Treasuries declined two basis points to 4.26%
Germany’s 10-year yield was little changed at 2.38%
Britain’s 10-year yield advanced one basis point to 4.05%
Commodities
West Texas Intermediate crude fell 0.7% to $76.49 a barrel
Spot gold rose 0.2% to $2,027.84 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Rob Verdonck and Winnie Hsu.
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