Investor Sentiment Turns Cautious Ahead of Nvidia Earnings

Barry Adams
20 Feb, 2024
New York City

Stocks on Wall Street declined as investors returned from a three-day weekend and reviewed the latest earnings reports. 

The S&P 500 and the Nasdaq Composite declined 0.6% and 1.1% respectively after Nvidia plunged 6% ahead of its quarterly earning report tomorrow. 

Valuation worries dragged down tech stocks and  Apple, Microsoft, Amazon, Netflix, and Taiwan Semiconductor, and AMD dropped between 1.5% and 6%. 

Treasury yields turned lower after investors reassessed the interest rate path after two reports suggested hot inflation and a decline in retail sales in January. 

The market mood has been positive despite the ongoing interest rate uncertainties, but investors are getting more comfortable with elevated inflation and higher interest rates as long as corporate earnings are growing. 

 

U.S. indexes and yields

The S&P 500 index decreased 0.6% to 4,974.98, and the Nasdaq Composite fell 1.1% to 15,587.58. 

The yield on 2-year Treasury notes decreased to 4.60%, 10-year Treasury notes inched down to 4.27%, and 30-year Treasury bonds edged down to 4.45%.

WTI crude oil decreased $1.30 to $77.15 a barrel, and natural gas prices increased 3 cents to $1.59 a thermal unit and rebounded from a low last seen in September 2020.

Gold increased by $10.04 to $2,027.60 an ounce after the U.S. dollar gained in international trading.

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 104.08.

 

U.S. Stock Movers

Walmart increased 2.9% to $175.36 after the general merchandise and grocery retailer reported better-than-expected revenue and earnings in the fourth quarter. 

Separately, Walmart said it plans to acquire smart TV maker Vizio for $2.3 billion and boost its advertising business through the ad-free streaming content on its television sets. 

Vizio jumped 16% to $11.06 and extended its two-day gain to over 40% when the news of a possible deal emerged. 

Home Depot decreased 2.6% to $352.70 after the specialty retailer reported better-than-expected revenue and earnings in the fourth quarter despite consumers retrenching from larger do-it-yourself projects. 

Capital One Financial decreased 3% to $133.0 after the company agreed to acquire Discover Financial in an all-stock deal for $35.3 billion. 

The deal was announced late Monday, and after the merger, Capital One shareholders would control 60% and Discover Financial shareholders would control 40% of the combined company. 

 

European Markets Traded Sideways Ahead of Policy Meeting Minutes

European markets traded mixed as investors overlooked interest rate uncertainties and shifted their focus to another batch of earnings. 

Benchmark indexes in Germany edged lower, but in Paris and London they advanced. 

Market indexes in Paris and Frankfurt hovered near record highs, but anxious investors awaited the release of the latest policy meeting minutes. 

 

Eurozone Current Account Swings to Surplus in 2023

The Eurozone current account surplus rose to a six-month high in December, the European Central Bank reported Tuesday. 

The current account surplus rose to €32 billion from €22 billion in the previous month, the highest level since last June. 

The goods surplus in the month rose to €35 billion from €32 billion, and the service surplus eased to €16 billion from €17 billion a year ago. 

The primary income shortfall in the month declined to €5 billion from €13 billion, and the secondary income shortfall decreased to €13 billion from €14 billion a year ago. 

In the full-year 2023, the current account surplus increased to €260 billion, or 1.8% of the eurozone GDP, from a deficit of €82 billion, or 0.6% of GDP, in 2022.

 

EU Passenger Car Registration Jumped In January 

Passenger car registration in the European Union rose 12.1% from a year ago in January to 851,700 units, the European Automobile Manufacturers Association reported Tuesday. 

Despite higher interest rates and rising costs of living, buyers returned to acquire new vehicles. 

Among major markets in the region, passenger car registrations in Germany soared 19.1%, followed by Italy with an increase of 10.6%, France 9.2%, and Spain 7.3%. 

Battery electric vehicle sales rebounded 28.9% to 92,700 units, comprising 10.9% of all registrations and rebounding from a 16.9% decline in December. 

In January, the petrol car market expanded by 4%, driven by an increase of 26.7% in Italy and a 16.9% rise in Germany. 

Despite maintaining its lead with 35.2% of the market in January, the share of gasoline cars decreased from 37.9% in the same month in 2023.

Diesel car registration continued to shrink as buyers opted for hybrids or other models of passenger cars. 

The EU diesel car market shrank by 4.9% in January, with a decline of 23.4% in France, 10.2% in Spain, and 8.7% in Italy. 

However, Germany diverged from this trend with an increase of 4.3%. 

In January, diesel car registrations were 114,415 units, shrinking its market share to 13.4% from 15.8% in the month a year ago.

 

Europe Indexes and Yields

The DAX index decreased by 0.1% to 17,075.65, the CAC-40 index rose 0.4% to 7,802.45, and the FTSE 100 index inched lower by 0.1% to 7,719.21.

The yield on 10-year German bonds edged down to 2.37%; French bonds inched higher to 2.84%; the UK gilts edged lower to 4.05%; and Italian bonds inched higher to 3.86%.

The euro edged higher to $1.08, the British pound inched higher to $1.263, and the U.S. dollar gained to 88.06 Swiss cents.

Brent crude decreased $1.22 to $82.27 a barrel, and the Dutch TTF natural gas increased by €0.24 to €23.94 per MWh.

 

Europe Stock Movers

Barclays PLC increased 5.7% to 157.50 pence after the UK-based bank reported weak quarterly results. 

Total revenue in the fourth quarter declined 3% to £5.6 billion from £5.8 billion, and net income attributable to shareholders swung to a loss of £111 million from a profit of £1.04 billion a year ago. 

The financial services company also said it plans to return £10 billion to shareholders between 2024 and 2026 through stock buybacks and dividends. 

Fresenius Medical Care decreased 0.3% to €26.51 despite the Germany dialysis firm reporting stronger-than-expected fourth quarter results. 

Revenue in the fourth quarter was flat at €4.98 billion, net income advanced to €188 million from €139 million, and basic earnings per share jumped 35% to 64 cents from 47 cents a year ago. 

The company estimated 2024 revenue growth at "a low- to mid-single-digit percent rate" and operating income at a "mid- to high-teen percent rate" compared to a year ago, respectively. 

 

China's Rate-cut Fails to Lift Market Mood In Asia

Asian markets traded down amid global interest rate worries and persistent weakness in Chinese markets amid growing tensions with the U.S. 

Market indexes in Tokyo, Shanghai, Hong Kong, Mumbai, and Seoul traded down after U.S. Treasury yields edged higher. 

Moreover, the latest rate cut by China failed to support market enthusiasm because investors are looking for stronger measures and long-term policy measures to support the property market and lift consumer sentiment. 

European markets closed down in lackluster trading in Monday's trading, and the U.S. financial markets were closed to celebrate President's Day. 

Market sentiment in Asian markets was cautious after U.S. Treasury yields spiked higher. 

 

Tokyo Stocks Drifted Lower Amid Weakness In Banks and Tech Stocks

The Nikkei index decreased 0.1% to 38,413.66, and the benchmark index traded just below a 34-year high as investors reassessed the possibility of a near-term rate cut. 

The Bank of Japan has been sending mixed signals, but most investors are hoping that the central bank is ready to end its ultra-loose monetary policy after the end of wage negotiations at large corporations over the next two months. 

Tech stocks were among the leading gainers, and Screen Holdings, Advantest, and Tokyo Electron gained between 0.5% and 4.0%. 

Banks were in focus for the second week in a row after investors scaled back bets on the end of ultra-loose monetary policy. 

Banks are likely to be big winners as interest rates rise, lifting the net interest rate margin. 

Mitsubishi UFJ, Sumitomo Mitsui Financial, and Mizuho Financial decreased between 0.5% and 1.5%. 

Three leading automobile exporters, Honda Motor, Toyota Motor, and Nissan, traded mixed after the yen rebounded to above 150 against the U.S. dollar. 

Fanuc and Yaskawa Electric jumped more than 3%. 

 

China Lowered Rates to Spur Property Market

China lowered its interest rate for the first time since June 2023, hoping that the lower rate may revive the moribund property market. 

The People's Bank of China lowered its 5-year loan prime rate by 25 basis points to 3.95%, the largest cut since the rate was introduced in 2019.

Just a few days ago, China held its one-year loan prime rate at 3.45%, and both one-year and 5-year rates are at record low levels. 

The CSI 300 index decreased 0.4% to 3,389.40, and the Hang Seng index dropped 0.1% to 16,134.47. 

China also offered about 160 billion yuan, or $22.2 billion, to local developers and supported the completion of housing projects, the state-controlled broadcaster CCTV reported Tuesday. 

Despite the record low interest rates, property market confidence remains weak due to worries about a lack of large stimulus from the government and long-term measures to revive market confidence. 

Longfor Group rose HK$9.03, China Vanke advanced 0.7% to $6.17, and China Resources Land decreased 2.8% to HK$24.15. 

Electric vehicle makers were among the leading decliners after BYD lowered prices on plug-in hybrid cars by 20% for its new models. 

The lower price by the industry leader is likely to spark another round of cuts by other players. 

BYD declined 3.8% to HK$179.30, Li Auto fell 1.4% to HK$123.0, and Geely Automobile Holdings dropped 2.2% to HK$7.92. 

 

China's FDI Drops to a Three Decade Low

Foreign direct investment in China declined for the second year in a row, the State Administration of Foreign Exchange reported Sunday. 

Rising tensions with the U.S. and the arbitrary spying charges on foreign companies by Chinese authorities have kept many from investing in China. Foreign direct investment dropped 80% from the previous year to $33 billion in 2023. 

The foreign direct investment declined for the second year and dropped to 10% of $344 in 2021. 

Net foreign direct investment, which includes outflow, has dropped to the level seen in the early nineties as foreign investors stay away from the world's second-largest economy after the government prioritized national security and raised uncertainties about the anti-spying laws. 

 

India Stocks Struggled to Advance After Mixed Earnings Season

Stocks in Mumbai traded lower, the bond yield edged higher, and the Indian rupee held firm in Tuesday's trading. 

The Sensex and the Nifty indexes traded down as investors reviewed the last batch of fiscal third quarter earnings results over the last week. 

The Sensex index decreased 73.10 points to 72,634.99, and the Nifty index fell 44.55 points to 22,077.70.

On the Mumbai stock exchange, 178 stocks traded at their 52-week highs and 2 stocks traded at their 52-week lows.

The yield on the 10-year Indian government bonds increased to 7.10%, and the Indian rupee strengthened to ₹83.10 against the U.S. dollar.