MARKET

Dow, S&P 500, Nasdaq all fall as market looks to Fed speakers, Nvidia earnings

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U.S. stocks ended lower Tuesday as investors await earnings results from AI darling Nvidia on Wednesday, as well as new clues from Federal Reserve officials on interest rates after last week’s inflation data.

How stocks traded

  • The Dow Jones Industrial Average
    DJIA
    fell 64.19 points, or 0.2%, to end at 38,563.80.

  • The S&P 500
    SPX
    lost 30.1 points, or 0.6%, to finish at 4,975.51.

  • The Nasdaq Composite
    COMP
    declined 144.87 points, or 0.9%, to close at 15,630.78.

The U.S. stock market was closed on Monday for Presidents Day. Last week, the Dow fell 0.1%, the S&P 500 shed 0.4% and the technology-heavy Nasdaq Composite dropped 1.3%.

What drove markets

While Walmart
WMT,
+3.23%

and Home Depot
HD,
+0.06%

both delivered earnings reports on Tuesday, investors will focus more on megacap tech company Nvidia’s
NVDA,
-4.35%

earnings, which arrive after Wednesday’s market close.

Investors are aware that the reception to the AI chip maker’s results may determine broader market sentiment for a while.

“Unsurprisingly, there are big expectations for Nvidia, and if they fail to deliver this could be a major upset to the S&P 500, as the top-five stocks in the U.S. blue-chip index have fueled 75% of its gains so far in 2024,” said Kathleen Brooks, analyst at XTB.

“Because investors believe that we are due for some sort of digestion of recent gains, if Nvidia’s results are not stellar, then the market could end up being disappointed,” Sam Stovall, chief investment strategist at CFRA Research, said in a call.

Tuesday’s lackluster performance of U.S. stocks is “nervousness going into Nvidia earnings,” said Kent Engelke, chief economic strategist and managing director at Capitol Securities Management. “Unless Nvidia completely blows it out the water, I think things will be flat to down in the immediacy,” he said in a phone interview.

Still, for Jeffrey Schulze at ClearBridge Investments, the Fed is still the main driver behind market moves Tuesday.

“There isn’t a clear risk-off smoking gun,” said Schulze, managing director and head of economic and market strategy at the firm. What’s likely instead is more of last week’s “jitters” after hotter-than-expected inflation January data on consumer and wholesale prices.

That would likely translate to steeper numbers in the Fed’s preferred inflation gauge, coming next week, and it’s “going to reinforce the Fed’s wait-and-see stance,” Schulze said.

That highlights the other big picture this week: The parade of Fed officials speaking, coupled with the Wednesday afternoon release of minutes from the central bank’s Jan. 31 meeting.

He’s expecting the January meeting minutes to reiterate what Fed chair Jerome Powell said at the press conference, so Schulze’s big focus is what a parade of Fed officials will say this week.

Seven Fed speakers are scheduled to talk in the coming days.

In economic data, the leading economic index for the U.S. fell last month, marking the 22nd straight decline. The 0.4% decline for January still offered signs of hope, with six of 10 components showing positive results. It’s been two years since that happened.

Companies in focus

  • Capital One Financial Corp.
    COF,
    +0.12%

    shares are 0.1% higher after news of the credit card giant’s plan to purchase Discover Financial Services. Discover
    DFS,
    +12.61%

    shares are over 12% higher after news of the planned tie-up in an all-stock deal valued at over $35 billion.

  • Walmart Inc. shares went up 3.3% Tuesday after corporate earnings from the retail giant. The company reported a beat on earnings and raised its dividend by 9%. Walmart also confirmed a $2.3 billion purchase of smart-TV maker Vizio.

  • Home Depot Inc. shares rose 0.1% Tuesday after earnings from the home improvement company. Though beating on net sales, it missed expectations on U.S. same-store sales and offered a full-year outlook that also disappointed Wall Street.

Jamie Chisholm contributed.

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