New York Stock Market Falls Ahead of Nvidia Earnings Release... Monitoring FOMC Meeting Minutes

NVIDIA Falls on Stock Price Pressure
FOMC Minutes Also in Focus for 'Interest Rate Path' Hints

The three major indices of the U.S. New York stock market all opened lower on the 21st (local time). After falling the previous day due to concerns over Nvidia's overvaluation, the market is showing a wait-and-see stance as it awaits Nvidia's earnings announcement and the FOMC minutes.

As of 9:39 a.m. at the New York Stock Exchange (NYSE) on the day, the Dow Jones Industrial Average was down 0.31% from the previous trading day, standing at 38,444.77. The S&P 500, which focuses on large-cap stocks, was down 0.24% at 4,963.79, and the tech-heavy Nasdaq index was trading 0.44% lower at 15,562.7.

Nvidia, which is set to announce its earnings for the fourth quarter of last year (November last year to January this year) after the market closes, was down 1.18%. Following a decline the previous day amid concerns over a sharp rise in valuation that weighed on the S&P 500 and Nasdaq indices, Nvidia is also showing weakness early in the session. Nvidia's stock price has risen 225% over the past year.

Alex McGrath, Chief Investment Officer (CIO) of NorthEnd Private Wealth, analyzed, "Investors paid increasingly higher prices for tech stocks amid the tech rally," adding, "This continued until there was no one left to accept it."

The flow of tech stocks depends on how well Nvidia's earnings, to be released after the market closes, meet market expectations. According to LSEG, Nvidia's quarterly revenue for the period ending in January this year is expected to more than triple to $20.37 billion, driven by increased demand for advanced artificial intelligence (AI) semiconductors. Adjusted net income for the same period is forecast to increase 400% to $11.38 billion.

Cautious expectations of interest rate hikes emerging on Wall Street are also weighing on the stock market. As opinions arise that the Federal Reserve's next monetary policy direction could be an 'interest rate hike' rather than a 'rate cut,' market caution is increasing.

Former U.S. Treasury Secretary Larry Summers said in an interview with Bloomberg TV on the 16th that due to persistent inflationary pressures, "There is a meaningful possibility that the Fed's next move will be a hike rather than a cut," estimating the probability of a rate hike at 15%. Jupiter Asset Management predicted a higher 20% chance of an additional rate hike than former Secretary Summers. Additionally, William Dudley, former President of the New York Federal Reserve Bank, mentioned "higher rates" in a Bloomberg op-ed the previous day. He said the current benchmark rate of 5.25-5.5% might not be sufficiently tight and stated, "If the neutral rate is rising, the Fed will need to keep the benchmark rate higher and longer."

Accordingly, the market is closely watching the January FOMC minutes released today. With inflation indicators coming in higher than expected, the market is likely to seek hints about the future interest rate path through the minutes. Remarks from Fed officials, including Fed Governor Michelle Bowman, are also scheduled for the day.

By individual stocks, cybersecurity company Palo Alto Networks is down more than 26% following a downward revision of its annual sales forecast. SolarEdge Technologies is down 14.6% after issuing a weak earnings outlook for the first quarter. Amazon is up 1.3% on news that it will replace Walgreens Boots Alliance in the Dow Jones Industrial Average. Walgreens is down 2.2%.

Government bond yields are slightly lower. The U.S. 10-year Treasury yield, a global bond yield benchmark, is at 4.26%, while the 2-year Treasury yield, sensitive to monetary policy, is around 4.59%.

International oil prices are declining amid expectations that the timing of U.S. interest rate cuts may be delayed. West Texas Intermediate (WTI) crude oil is down $0.39 (0.51%) to $76.65 per barrel, and Brent crude is down $0.41 (0.5%) to $81.93 per barrel.