World Markets In Holding Pattern Ahead of Nvidia Earnings

Alexander Garcia
21 May, 2024
Miami

Market indexes entered the freezing zone as investors eagerly awaited the latest earnings from Nvidia, the leading artificial intelligence technology provider. 

Stocks were in a holding pattern after investors digested the latest batch of earnings from retailers and tech companies, and advanced chipmakers traded volatile ahead of Nvidia's earnings. 

Market indexes in early afternoon traded around flatline as investors digested a mixed batch of earnings from leading retailers including Macy's, Lowe's, and AutoZone. 

Palo Alto Networks also dropped more than 5% after the cybersecurity company's guidance fell short of market expectations. 

Investors have built expectations of rate cuts in the second half, but those expectations may have to be scaled back after policymakers signaled the need to keep rates higher. 

On Tuesday, Fed Governor Christopher Wallace said he would prefer more encouraging data on the inflation front for several months before lowering rates. 

"In the absence of a significant weakening in the labor market, I need to see several more months of good inflation data before I would be comfortable supporting an easing in the stance of monetary policy,” Wallace added. 

 

U.S. Indexes and Treasury Yields

The S&P 500 index was nearly unchanged at 5,308.15, and the Nasdaq Composite declined 0.2% to 16,762.19. 

The yield on 2-year Treasury notes edged higher to 4.84%, 10-year Treasury notes increased to 4.41%, and 30-year Treasury bonds edged higher to 4.54%.

Natural gas prices advanced in the previous four sessions in a row and hovered near this year's high on the expectation of rising demand from U.S. electric utilities. 

WTI crude oil decreased $0.76 to $78.51 a barrel, and natural gas prices declined 6 cents to $2.69 a thermal unit.

Gold increased by $0.80 to $2,427.05 an ounce, and silver rose 15 cents to $31.91. 

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 104.54.

 

U.S. Stock Movers

Palo Alto Networks declined 4.8% to $308.21 after the cybersecurity company reported better-than-expected quarterly earnings, but the company's guidance for the current quarter fell short of market expectations. 

Lowe's Companies decreased 1.8% to $225.04 after the home improvement retailer said comparable store sales declined 4.1% in the first quarter. 

The retailer reported better-than-expected quarterly results. 

Macy's Inc. gained 0.1% to $19.13 after the department store chain reported better-than-expected quarterly results. 

The retailer also lifted its full-year outlook. 

AutoZone declined 1.8% to $2,875.78 after the specialty retainer reported mixed results in the fiscal third quarter. 

 

European Markets Struggle Near Record Highs Amid Rate Jitters 

European markets turned lower, and benchmark indexes were under pressure in Tuesday's trading after rising in the previous session. 

Market sentiment was weak after several policymakers urged caution and stressed that inflation is still too high and restrictive, and higher rates may be needed for a longer time to bring down inflation to 2%. 

Moreover, policymakers in Europe also stressed the need to assess the incoming data before raising hopes for multiple rate cuts, as stated in June. 

 

Eurozone Current Account Surplus Widens

The European Central Bank president, Christine Lagarde, raised hopes of a rate cut as early as June during a press conference after the last policy meeting on April 11. 

On the economic front, the eurozone current account surplus improved in March after primary income improved in March, the European Central Bank reported Tuesday. 

The current account surplus adjusted for seasonal factors rose to €36 billion in March from €29 billion in February, having surged from €13 billion a year ago. 

Current account surplus, unadjusted for seasonal factors, rose to €44.5 billion from €27.0 billion a year ago. 

The goods surplus increased to €41.5 billion from €39.6 billion, the services surplus rose to €3.9 billion from €1.8 billion and the primary income surplus surged to €12 billion from €1.2 billion. 

Also, the secondary income gap narrowed to €12.9 billion from €15.6 billion. 

 

German Producer Price Inflation Accelerates 

Producer price inflation in Germany fell at a faster annual pace of 3.3% in April, faster than the 2.9% pace in March, Destatis reported Tuesday. 

Producer prices declined for the tenth month in a row, driven by the steady decline in energy prices.  

 

Europe Indexes and Yields

The DAX index decreased by 0.5% to 18,680.30; the CAC-40 index fell by 1.0% to 8,116.39; and the FTSE 100 index inched higher by 0.3% to 8,443.72. 

The yield on 10-year German bonds edged up to 2.51%; French bonds inched higher to 3.01%; the UK gilts edged higher to 4.15%; and Italian bonds inched higher to 3.81%.

The euro edged higher to $1.086; the British pound inched higher to $1.271; and the U.S. dollar gained to 90.93 Swiss cents.

Brent crude decreased $1.21 to $82.50 a barrel, and the Dutch TTF natural gas rose by €0.26 to €31.45 per MWh.

 

Europe Stock Movers

Kontron AG increased 3.1% to €20.48 after the German IoT company said it won a significant order to supply smart wallboxes. 

Generali SpA decreased 2.6% to €23.21 after the company reported a slightly weaker profitability in its property and casualty unit. 

Saipem SpA rose 3.2% to €2.36 after the energy contractor won three new orders worth $3.7 billion. 

Greencore Group PLC soared 18.6% to 165.33 pence after the sandwich supplier to supermarkets announced its plans to buy back its own stock. 

The company also said pre-tax profit in the first half soared to £14.7 million from a loss of £6.2 million a year ago. 

 

Japan Indexes Erase Morning Gains

Stocks in Tokyo struggled to advance after erasing gains in the morning session ahead of key economic releases. 

Benchmark indexes in Tokyo eased by 0.2% as investors awaited the release of consumer price inflation and international trade data. 

Market sentiment turned cautious after the morning rally in tech stocks failed to broaden to the financial, industrial, and automobile sectors due to the persistent weakness in the yen. 

The yen declined to 156.45 against the U.S. dollar in late afternoon trading in Tokyo on the worries that, despite tough talks from the ministry of finance and the Bank of Japan,. 

Traders are targeting the yen to trade between 165 yen and 170 yen against the U.S. dollar, as the Bank of Japan is not in a hurry to increase its policy rate and the U.S. Federal Reserve is likely to keep its current rates in pace in the near future. 

 

Japan Movers: Tokio Marine, MS&AD, T&D Holdings  

The Nikkei 225 Stock Average decreased 0.2% to 39,014.70, and the Topix index fell 0.2% to 2,763.60. 

Tech stocks cut early gains in the late afternoon as investors worried about the negative impact of the persistent decline in the yen. 

Tokyo Electron, Advantest, Disco Corp., and Screen Holdings gained between 0.5% and 2.4%. 

Sumitomo Mitsui gained 1.4%, Mitsubishi UFJ declined 0.9%, and Mizuho Financial dropped 2.4%. 

Tokio Marine advanced 2.6% to ¥5,096.0 after the insurance company said it plans to buy back up to 200 billion yen worth of its own stock. 

MS&AD Insurance soared 14.5% to ¥3,172.0 despite the company reporting fourth-quarter results that fell short of the company's estimates. 

Net income in the March quarter was 87.67 billion yen, compared to a projection of 193.66 billion yen.

Revenue in the fiscal year 2024 rose 25.2% to 6.5 trillion from 5.2 trillion yen, net profit advanced to 369.2 billion yen from 211 billion yen, and diluted earnings per share rose to 231.77 yen from 130.50 yen. 

The company increased its fourth-quarter dividend to 150 yen from 100 yen, and its total annual dividend rose to 270 yen from 200 yen a year ago. 

Sompo Holdings, Daikin Industries, and T&D Holdings fell between 3% and 6%. 

 

Hang Seng Index Drops 2%

Stocks in Shanghai and Hong Kong traded down after investors turned cautious. 

Benchmark indexes in China have been on the upswing for the last two months after regulators, the central bank, and policymakers signaled support for market-supportive measures. 

Stocks fell sharply after Li Auto, a leading electric vehicle maker, reported a sharp decline in earnings in its latest quarter, highlighting intense market pressures. 

The People's Bank of China held steady its two reference rates on Monday and announced the setting up of a lending facility for regional governments to purchase existing homes. 

Despite the flurry of announcements, investors are increasingly worried that stocks may have run too far from fundamentals, as corporate earnings may not pick pace in the near future and property market malaise is likely to drag on for years to come. 

The Hang Seng index dropped the most in five weeks after weak earnings from Li Auto dragged down other electric vehicle makers. 

 

China Movers: Intense EV Price War Drags Li Auto  

The CSI 300 index fell 0.4% to 3,676.48, and the Hang Seng index declined 2.1% to 19,234.33. 

Li Auto plunged 19% to HK$81.10 after the electric vehicle maker said net income in the first quarter declined 37% to 591.1 million yuan, or about $82 million, and revenue was 25.6 billion yuan. 

The electric vehicle maker said it plans to deliver between 105,000 and 110,000 vehicles this quarter, representing an increase of between 21% and 27% from a year ago. 

The company also estimated revenue in the quarter to range between 29.9 billion and 31.7 billion yuan, an increase between 4.2% and 9.7% from a year ago. 

BYD declined 3.8% to HK$218.40, Geely Automobile decreased 3.6% to HK$10.26, and Xpeng tumbled 7.8% to HK$31.75. 

Tech stocks were also among the leading decliners on the worry that valuations may have stretched too far from the sector's fundamentals. 

Tencent Holdings decreased 3.4% to HK$383.60, JD.com fell 2.4% to HK$133.50, and Baidu fell 3.2% to HK$104.0.