In Tuesday’s trading session, the Nasdaq spearheaded the downturn on Wall Street, with chip manufacturer Nvidia experiencing a sharp decline early on, while retail giant Walmart’s optimistic outlook tempered losses on the Dow Jones Industrial Average.
Nvidia’s Decline and Market Sentiment
Nvidia’s shares plummeted by over 4%, lagging behind other megacap stocks and exerting downward pressure on the Nasdaq index. As investors returned from an extended weekend, all eyes turned to Nvidia’s upcoming earnings report, scheduled for release after the market’s close on Wednesday. This report is anticipated to gauge market sentiment towards the prospects of artificial intelligence (AI) technologies.
Over recent years, Nvidia has capitalized on the growing interest and investment in AI, propelling it to become the third-most valuable company in the United States, surpassing Tesla as the most traded stock on Wall Street. However, recent market volatility, particularly surrounding semiconductor-related stocks, has prompted concerns among investors.
According to Dennis Dick, a trader at Triple D Trading, the current sell-off can be attributed to the reversal in Super Micro Computer (SMCI) shares, indicating a retreat of speculative investment from AI-focused stocks. Super Micro Computer saw its stock prices plummet by 20% on Friday, leading to further selling pressure in the semiconductor sector.
Market Response to Economic Indicators and Federal Reserve Policy
Last week’s release of higher-than-expected inflation data in the United States tempered market expectations regarding the Federal Reserve’s monetary policy. This development stalled the recent bullish trend on Wall Street, with investors now eyeing a potential interest rate cut in June, according to a Reuters poll of economists. However, there remains a degree of uncertainty regarding the timing and magnitude of such a move, with some analysts cautioning against premature assumptions.
Investors are eagerly anticipating the release of minutes from the Federal Reserve’s latest policy meeting, along with insights from various central bank officials later in the week. These communications will likely provide valuable insights into the Fed’s stance on monetary policy and its approach to addressing inflationary pressures.
Performance of Major Indices and Key Stocks
As of 9:40 a.m. ET, the Dow Jones Industrial Average was down marginally, while the S&P 500 and Nasdaq Composite indices experienced more significant declines. Walmart’s stock, on the other hand, soared to a record high, surging by 5.9% following the company’s optimistic sales forecast for fiscal year 2025 and its decision to raise its annual dividend.
Walmart’s announcement also had a positive impact on Smart-TV maker Vizio, which saw its shares jump by 15.1% after Walmart revealed plans to acquire the company for $2.3 billion. However, despite these gains in specific sectors, the broader retail sector experienced a decline of 1.1%.
Meanwhile, Home Depot’s stock fell by 1.3% after the company forecasted lower-than-expected sales for the year 2024, signaling ongoing challenges in the home improvement market. Conversely, Discover Financial Services witnessed a substantial surge of 10.8% following the announcement of Capital One’s plans to acquire the company for $35.3 billion, a move backed by renowned investor Warren Buffett.
In the semiconductor industry, Intel’s shares rose by 2.6% after reports emerged of discussions between the Biden administration and the company regarding potential subsidies exceeding $10 billion. Similarly, GlobalFoundries saw a 2.2% increase in its stock price after receiving a $1.5 billion subsidy from the U.S. government to support semiconductor production.
Market Metrics and Outlook
The New York Stock Exchange (NYSE) and Nasdaq recorded more declining issues than advancers, reflecting the prevailing negative sentiment among investors. While the S&P index marked 15 new 52-week highs and three new lows, the Nasdaq index observed 34 new highs and 29 new lows.
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