The stock was down 4% in premarket trading today, after a more than 4% decline yesterday ahead of its quarterly earnings, expected after the bell today.
The drop is partly due to the rumor that Microsoft is working on hardware to compete with Nvidia's, to avoid being too dependent on the sector's star supplier. But it's mainly because the market is playing it safe as it awaits the group's quarterly performance. I bet you Nvidia's sales and earnings growth will be mind-blowing. The thing is, everyone knows it. So for the market to be truly satisfied, the results have to be more than mind-blowing. We'll see what happens. In the meantime, with the share price already up 45% since January 1 (after 240% in 2023), investors have been keeping their distance, in case things turn sour. And since for some time now, when Nvidia coughs, everyone catches a cold, we've been witnessing declines in ASML and its ilk in Europe, as well as in the American technology sector, where Advanced Micro Devices fell by 4.7% and Applied Materials by 5.2%.
To keep you waiting, we have the minutes of the discussions between Fed central bankers that led to the decisions and comments following the January 30-31 meeting. We'll see if investors draw inspiration from them to determine the central bank's monetary designs, and more specifically when it will start lowering rates. Here too, I can spoil the content: inflation is not vanquished, blah, resilient economy, blah, prices heading towards target anyway, blah, rate movements based on upcoming indicators, blah.
As a counterweight to the Fed/Nvidia duo, why not throw China into the mix? China's equity markets are once again abuzz with news that the equivalent of $17 billion in loans has been released to Chinese developers whose residential projects are on a white list drawn up by local Chinese authorities. This is one of the mechanisms announced at the end of January in a bid to stabilize the real estate sector for the ninth time. The Hang Seng Property Index gained over 4% in the wake of this announcement. At the same time, the Chinese market also reacted positively to the decision by the mainland Shanghai and Shenzhen stock exchanges to penalize a large algorithmic fund, Ningbo Lingjun, for placing massive bearish bets on Monday. The authorities are planning to tighten the screws on this type of operation, particularly leveraged transactions. So far, efforts to keep the market from falling by reducing opportunities to sell shares have not proved to be a very effective method. Investors would prefer the authorities to focus on creating a recovery shock.
The wait-and-see attitude is evident in the Asia-Pacific markets most closely correlated with Western markets: Japan, South Korea and Australia are down. India is gaining a little ground, and China is performing well: +2% for the Hang Seng and the CSI300 at the end of the day. European leading indicators are hesitant. Futures on Wall Street are in the red.
Economic highlights of the day:
The dollar is worth EUR 0.9250 and GBP 0.7918. The ounce of gold rebounds to USD 2,031. Oil stabilizes, with North Sea Brent at USD 81.62 a barrel and US light crude WTI at USD 76.93. The yield on 10-year US debt falls slightly to 4.27%. Bitcoin trades at USD 50,900.
In corporate news:
- Nvidia will publish its quarterly results after the close of trading. The group should post a threefold increase in sales in the fourth quarter, as demand for its chips dedicated to AI applications remains strong. But this remarkable performance may not be enough to satisfy high expectations and justify the company's valuation. On Tuesday, Nvidia's share price fell by more than 4% in a context of caution.
- Amazon will join the Dow Jones Industrial Average on February 26, replacing Walgreens Boots Alliance, S&P Dow Jones Indices announced on Tuesday. Amazon shares gained more than 1% in pre-market trading, while Walgreens shares lost more than 3%.
- Tesla - Swedish trade union Seko said Wednesday that its members could stop installing and maintaining the group's charging stations in the country, in support of the dispute between the IF Metall union and the automaker.
- Meta Platforms- Group CEO Mark Zuckerberg is planning to visit South Korea, Meta reported on Wednesday, without giving further details. According to sources close to the matter, Mark Zuckerberg is scheduled to meet with Samsung Electronics president Jay Y. Lee, among others, to discuss AI-related issues. Samsung declined to comment.
- Boeing - The Federal Aviation Administration (FAA) said Tuesday it had launched an investigation into the diversion of a United Airlines Boeing 757-200 after the crew reported a problem with the plane's wing. Boeing declined to comment.
- Citigroup - The head of the US bank, Jane Fraser, has seen her compensation rise by around 6% in 2023, to $26 million, according to a group document.
- Chesapeake Energy reported better-than-expected fourth-quarter results on Tuesday, as the US natural gas producer offset lower commodity prices with cost reductions. However, the share price was down 2% in after-hours trading, as the group announced a 20% cut in production-related expenses this year.
- International Flavors & Fragrances reported a lower-than-expected full-year sales forecast on Tuesday evening and announced a $2.6 billion write-down in the fourth quarter, as the group faces weak demand. The stock fell by 8.5% in pre-market trading.
- Palo Alto Networks published a lower-than-expected sales forecast for the third quarter on Tuesday evening, causing the stock to plunge 23% in pre-market trading and dragging down other cybersecurity companies. Fortinet fell by 5.9%, Crowdstrike Holdings by 9.4%, SentinelOne by 7.6% and Zscaler by 9.2%.
Analyst recommendations:
- Airbnb, Inc.: Morningstar downgrades to hold from sell with a price target raised from USD 132 to USD 137. Morningstar downgrades to sell from hold with a target price of USD 132.
- Akamai Technologies, Inc.: Morningstar upgrades to hold from sell with a target price of USD 105.
- Align Technology, Inc.: Morningstar downgrades to hold from buy with a target price of USD 316.
- Alnylam Pharmaceuticals, Inc.: Morningstar upgrades to buy from hold with a target price of USD 199.
- Amgen Inc.: Morningstar upgrades to hold from sell with a target price of USD 268.
- Berkshire Hathaway B : Morningstar downgrades to hold from buy with a target price of USD 600,000.
- Blackstone Inc.: Morningstar downgrades to sell from hold with a target price of USD 110.
- Broadridge Financial Solutions, Inc.: Morningstar upgrades to hold from sell with a target price of USD 190.
- Conagra Brands, Inc.: Morningstar upgrades to buy from hold with a target price of USD 31.
- Copart, Inc.: Morningstar downgrades to sell from hold with a target price of USD 45.
- Dexcom, Inc.: Morningstar upgrades to hold from sell with a target price of USD 105.
- Discover Financial Services: RBC Capital downgrades to sector perform from outperform with a price target raised from USD 117 to USD 140. Wolfe Research downgrades to peerperform from outperform.
- Eli Lilly And Company: DZ Bank AG Research downgrades to hold from buy with a price target raised from USD 790 to USD 820.
- Fortive Corporation: Morningstar downgrades to hold from buy with a target price of USD 88.
- General Electric Company: Morningstar downgrades to hold from buy with a target price of USD 154.
- Heico: Morningstar downgrades to sell from hold with a target price of USD 171.
- Hilton Worldwide Holdings Inc.: Morningstar upgrades to hold from sell with a target price of USD 178.
- Icon Public Limited Company: Morningstar downgrades to sell from hold with a target price of USD 243.
- Jacobs Solutions Inc.: Morningstar downgrades to hold from buy with a target price of USD 157.
- Lockheed Martin Corporation: Morningstar upgrades to buy from hold with a target price of USD 482.
- Markel Group Inc.: Morningstar upgrades to hold from sell with a target price of USD 1310.
- Meta Platforms, Inc.: Morningstar downgrades to sell from hold with a target price of USD 400.
- Mongodb, Inc.: Morningstar downgrades to sell from hold with a target price of USD 403.
- Norfolk Southern Corporation: Barclays upgrades to overweight from equalweight with a price target raised from USD 255 to USD 305.
- Palantir Technologies Inc.: Morningstar downgrades to sell from hold with a target price of USD 15.
- Palo Alto Networks, Inc.: Piper Sandler & Co downgrades to neutral from overweight with a price target reduced from USD 350 to USD 300. Capital One Securities downgrades to equalweight from overweight with a price target reduced from USD 368 to USD 302.
- Quest Diagnostics Incorporated: Morningstar upgrades to buy from hold with a target price of USD 143.
- S&P Global, Inc.: Morningstar upgrades to hold from sell with a target price of USD 395.
- Synopsys Inc.: Morningstar downgrades to sell from hold with a target price of USD 480.
- Targa Resources Corp.: Morningstar downgrades to sell from hold with a target price of USD 79.
- Target Corporation: Morningstar downgrades to sell from hold with a target price of USD 132.
- The Cigna Group: Morningstar downgrades to hold from buy with a target price of USD 344.
- The Home Depot, Inc.: HSBC downgrades to reduce from hold with a target price of USD 323.
- Tradeweb Markets Inc.: Morningstar downgrades to sell from hold with a target price of USD 88.
- Verisk Analytics, Inc.: Morningstar downgrades to sell from hold with a target price of USD 220.
- Walmart Inc.: Morningstar downgrades to sell from hold with a target price of USD 147.
- Walt Disney Company (The): Morningstar downgrades to hold from buy with a target price of USD 115.
- Xylem Inc.: Morningstar downgrades to sell from hold with a target price of USD 106.
- Anglo American Plc: Morningstar upgrades to buy from hold with a target price of USD 13.70.
- Bank Of Georgia Group Plc: Citi upgrades to buy from neutral with a price target raised from GBP 39 to GBP 53.
- Coca-Cola Hellenic: Morningstar downgrades to hold from buy with a target price of GBX 2600.
- J Sainsbury Plc: Morningstar upgrades to buy from hold with a target price of GBX 301.
- Rio Tinto Plc: Morningstar upgrades to buy from hold with a target price of USD 77.
- Tesco Plc: Morningstar upgrades to buy from hold with a target price of GBX 316.
- Unilever Plc: Bryan Garnier & Co. upgrades to buy from neutral with a price target raised from EUR 54 to EUR 56.
- Manulife Financial Corporation: Morningstar downgrades to sell from hold with a target price of HKD 168.
- Sun Life Financial Inc.: Morningstar downgrades to sell from hold with a target price of USD 47. Morningstar downgrades to sell from hold with a target price of CAD 63.