Nasdaq Declines Ahead of Nvidia Earnings and Fed Rate Stance

The Nasdaq Composite fell on Tuesday as investors grew cautious ahead of Nvidia’s upcoming earnings report and the Federal Reserve’s stance on interest rates. Nvidia, a leader in AI chips, saw its shares drop 1.3% before its quarterly earnings announcement on Wednesday, which is expected to significantly impact the market.

At 15:00 GMT, the Dow Jones Industrial Average is trading 39849.50, up 42.73 or +0.11%. The S&P 500 Index is at 5312.85, up 4.72 or +0.9% and the Nasdaq 100 Index is trading 16792.28, down 2.60 or -0.02%.

Chipmakers and Semiconductor Index Down

Losses in chipmakers contributed to a 1.2% drop in the Philadelphia Semiconductor Index. Micron, a memory chip manufacturer, saw a 2.2% decline after raising its full-year capital expenditure forecast. Overall, the Nasdaq eased off its record-high closing level from Monday, with information technology stocks leading the decline among the 11 S&P 500 sectors, down 0.5%.

Fed Officials Signal No Rush to Ease Rates

Investor sentiment was also influenced by Federal Reserve officials emphasizing a cautious approach to easing monetary policy. Atlanta Fed Chair Raphael Bostic and Fed Governor Christopher Waller both highlighted the need for more favorable inflation data before considering rate cuts. Traders are currently pricing in about 43 basis points of rate reductions this year, with expectations of a quarter-point cut by November.

Mixed Performances in Key Stocks

Palo Alto Networks dropped 5.1% after its fourth-quarter billings forecast disappointed investors. Lowe’s fell 1.6% despite better-than-expected quarterly sales. Macy’s gained 2.1% after raising its annual profit forecast, despite a significant drop in first-quarter sales. Peloton Interactive slumped 13.7% as it sought to refinance its debt amid declining sales. Li Auto’s U.S.-listed shares fell 3.4% after delaying the launch of its pure electric SUV models.

Nvidia and Market Expectations

Nvidia’s stock, which has surged 91% in 2024, edged lower by 0.3% ahead of its earnings report. Analysts anticipate strong results, with the stock’s performance closely tied to market enthusiasm for AI. UBS strategists noted that Nvidia’s earnings could be the next significant market catalyst.

Market Forecast

The market is closely watching Nvidia’s earnings as a potential driver of future movements. While the current sentiment is cautious, especially with the Federal Reserve’s stance on interest rates, a strong performance from Nvidia could bolster investor confidence. Conversely, any disappointing results or further cautious signals from the Fed could lead to a bearish outlook in the short term. Traders should prepare for potential volatility as the market digests these key developments.

E-mini Nasdaq-100 Index futures are hovering near a record high on Tuesday, but down for the session. Investors are a little hesitant to chase the market higher this close to Wednesday’s Fed minutes and Nvidia’s earnings.

A trade through 18794.50 will reaffirm the uptrend, while taking out 18545 changes the minor trend to down.