Wall Street Falls Ahead of Nvidia Earnings: The U.S. stock market saw a notable decline as major technology stocks
weakened ahead of the highly anticipated Nvidia earnings report.
The S&P 500 dropped below 6,000 points, while the Nasdaq 100 lost more than 1%,
weighed down by the poor performance of tech giants.

Contents

Decline in the Magnificent Seven Stocks

Return of Market Volatility

Impact of Tariff Policies

Will Nvidia Determine Market Direction

Tech Stock Valuations

Capital Returning to U.S. Equities

Has the Market Reached Its Peak

Conclusion

Decline in the Magnificent Seven Stocks

Hedge fund exposure to the “Magnificent Seven” (Apple, Alphabet, Nvidia, Amazon, Tesla, Microsoft, and Meta)
has dropped to its lowest level since April 2023.
Nvidia’s stock fell by 3.1%, while Microsoft shares declined following reports
that the company had canceled some AI data center lease agreements.
Meanwhile, Apple shares saw a slight increase.

Return of Market Volatility

Investors have increased their bets on renewed volatility,
Nvidia’s earnings release on Wednesday is expected to be a key market catalyst.

According to Chris Larkin from E-Trade, a subsidiary of Morgan Stanley,
this week could be crucial for the stock market, which has been trading sideways for over two months.

Central U.S. Indices Performance in the Last Trading Session:

In the bond market, the 10-year Treasury yield dropped by three basis points to 4.4%,
while demand surged for U.S. two-year Treasury bonds, with a record $69 billion worth purchased.

Impact of Tariff Policies

The Canadian dollar and Mexican peso weakened after President Donald Trump confirmed
He will proceed with planned tariffs on both countries next month, escalating trade tensions.

Will Nvidia Determine Market Direction?

According to Mark Hackett from Nationwide, the market is currently in a stabilization
phase following recent gains driven by investor uncertainty and seasonal weakness in February.
However, he noted that strong economic fundamentals, positive earnings,
and steady fund inflows could support a new bullish rally once momentum returns.

As Nvidia’s earnings release approaches, the Federal Reserve’s preferred inflation metric is also expected to slow to its lowest since June.
However, slow progress in curbing inflation may keep the Federal Reserve cautious about future policy decisions.
The inflation data is set to be released on Friday.

Clark Bellin from Bellwether Wealth stated that strong earnings from
Nvidia and weaker-than-expected inflation data could provide a fresh boost for stocks.

Tech Stock Valuations Remain High

Tech and growth stocks dominate investor focus ahead of Nvidia’s earnings.
Strategists at Deutsche Bank point out that valuations are exceptionally high relative to earnings growth,
making the market particularly sensitive to underwhelming results.

While fourth-quarter corporate earnings have significantly outperformed expectations,
markets have not reacted strongly, as disappointment in earnings guidance, revisions,
and operating margins have led to muted investor sentiment.

According to Bloomberg Intelligence strategists,
As the corporate earnings season nears its end, Nvidia remains a major force in shaping market direction.

Capital Returning to U.S. Equities?

Despite concerns, some analysts believe that U.S. stocks will remain attractive long-term,
thanks to robust economic growth and rising corporate earnings.

Michael Wilson from Morgan Stanley, who had been bearish on U.S. equities until mid-2024,
suggested that capital could flow back into U.S. markets,
describing the S&P 500 as the highest-quality index with the best earnings growth potential.

Meanwhile, Mislav Matejka from J.P. Morgan noted that growing pessimism
around major tech firms has become a significant hurdle for U.S. stock outperformance.
However, he emphasized that a sharp market downturn would require a clear slowdown in corporate earnings growth.

Has the Market Reached Its Peak?

After U.S. stocks experienced strong gains over the past two years,
concerns are growing about whether the markets have reached their peak.
Christian Floro from Principal Asset Management believes that bull markets
do not collapse simply due to age but depend on Federal Reserve policy.

He added that the Fed’s tightening monetary policies have driven most major market sell-offs since 1965.
However, the current economic landscape differs from past cycles,
as there are no clear signs of a sharp economic slowdown.

In conclusion, markets remain watchful of Nvidia’s earnings, inflation data,
and Federal Reserve policy decisions could play a key role in shaping market direction in the coming period.

Wall Street Falls Ahead of Nvidia Earnings

Wall Street Falls Ahead of Nvidia Earnings

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