Tech Stocks Fall as Nvidia Leads Decline Ahead of Earnings Report
The stock market took a hit on Tuesday as tech stocks, led by chipmaker Nvidia, experienced a decline ahead of the company’s earnings report. The Dow Jones Industrial Average dipped 0.17%, settling at 38,563.80, while the S&P 500 slipped 0.60% to end at 4,975.51. The tech-heavy Nasdaq Composite lost 0.92% to close at 15,630.78.
Investors are expressing concerns about Nvidia’s sky-high valuation, despite expectations of impressive earnings results. The company’s shares fell nearly 4.4% in anticipation of the report. Amazon shares also declined by 1.4%, while Microsoft and Meta each lost about 0.3%.
Sam Stovall, the chief investment strategist at CFRA Research, commented on the situation, stating, “With technology now trading at close to 30x forward estimates, that seems to be a ceiling for the tech sector. Makes it pretty hard for additional PE multiple expansion.” Stovall added that investors are eagerly waiting for better-than-anticipated earnings results to improve future estimates.
Despite the recent decline, the technology sector has seen a 6% increase so far this year, making it the third-highest gainer in the broader market, trailing behind communication services and healthcare. Nvidia has been on a remarkable streak, with its shares rising by 40% since the beginning of the year. Other tech giants like Meta and Amazon have also experienced significant gains of approximately 33% and 10%, respectively, in 2024.
In addition to the tech sector, financial stocks were in focus on Tuesday due to a major announcement from Capital One Financial. The company agreed to purchase Discover Financial Services in an all-stock deal worth $35.3 billion, expected to close in late 2024 or early 2025. Following the announcement, Capital One’s shares increased by 0.1%, while Discover jumped by an impressive 12.6%.
Meanwhile, retail giant Walmart made headlines with its announcement of acquiring TV maker Vizio for $2.3 billion, or $11.50 a share. This news led to a 16% climb in Vizio’s shares. Walmart itself experienced a boost of more than 3% after beating quarterly earnings and revenue expectations, driven by strong growth in global e-commerce sales.
The recent market movements follow a challenging week on Wall Street, as economic data raised concerns about the Federal Reserve’s potential delay in cutting interest rates as expected this year.
Tuesday marked the beginning of a shortened trading week, with U.S. markets closed on Monday to observe the birthday of George Washington. Investors are now closely watching the upcoming earnings report from Nvidia, hoping for positive results that could potentially improve the outlook for the tech sector and the broader market.