Key Takeaways
- Stocks Declined Sharply As Investors Await Key Economic And Earnings Reports
- Nvidia’s Earnings Will Be Closely Watched Amid AI Market Uncertainty
- Fed Likely To Hold Rates Steady, Inflation Data Remains A Key Focus
Stocks fell sharply on Friday and all the major indices ended the week lower. The S&P 500 lost 1.5% for the week. The Nasdaq Composite dropped 2.5%. Small caps were hit hardest, dropping 2.5%, while the Dow Jones Industrial Average fell 2.5%. While last week lacked any significant economic data or earnings news, this week has several items of note.
On the economic calendar, tomorrow, the Conference Board will release its latest read on Consumer Confidence. The Durable Goods report for January comes out Thursday. However, the most important report of the week and the Federal Reserve’s preferred gauge on inflation, Personal Consumption Expenditures (PCE), is due out Friday morning. Heading into the week, there is a better than 97% chance the Fed will leave interest rates unchanged when they meet in March, according to the CME Fed Watch Tool. As of now, the earliest point at which we may see a rate cut is not until June. I’ll be watching to see if these numbers change at all by the time the week ends.
Turning to earnings, there are a few bigger names scheduled to report. Home Depot is on the calendar for tomorrow, before the market opens. Lowe’s is scheduled for Wednesday morning. But the headline act will most certainly be Nvidia, after the close on Wednesday. I’ll have more on this one in my column Wednesday, but heading into the week, the expected move for Nvidia is $12 by Friday. Nvidia has been stuck in a bit of a trading range of roughly $120 – $150 since October. Having been the catalyst for much of the market these past few years, it’ll be interesting to see how markets respond to whatever the Artificial Intelligence (AI) chipmaker has to say.
Speaking of AI, Alibaba said they plan to invest $53 billion in AI infrastructure over the next three years. However, at the same time, Bloomberg is reporting Microsoft is canceling leases for data centers in the U.S. which could be a sign the company is building more AI computing than it needs. I think this is something investors will want to keep in mind when Nvidia reports their earnings to see if there are any comments on a slowdown in their outlook.
Elsewhere, Berkshire Hathaway has built up its cash reserves to a record high. With markets at all-time highs and by some metrics, perceived as fully valued, it’s not too surprising Buffett is hoarding cash. Still, it is worth noting the amount of cash Berkshire is sitting on and could potentially deploy should the right opportunity or opportunities unfold. One of the stocks Berkshire has been selling, though it still remains the company’s largest holding, is Apple. That company announced plans to hire twenty-thousand people in the U.S. to work in data centers and get ahead of any tariff issues. Apple is currently lower by 1% in premarket. Another Berkshire holding, and one of the top five acquisitions made in the fourth quarter, Domino’s Pizza, announced disappointing earnings for the U.S. International sales were higher, but not enough to offset the disappointing U.S. sales. Shares of Dominos are indicated lower by 4% in premarket.
For today, I want to see if the selling Friday was just a one-day event or the beginning of something bigger. Volume was heavy on a relative basis and often times, that is a sign it wasn’t just a one-day event. With the futures indicated higher in premarket, I’m very interested if we hold those gains or if investors sell into the rally. I’m also going to be paying attention to a number of the AI-related stocks and how investors position themselves heading into Nvidia’s earnings. As always, I would stick with your investing plan and long-term objectives.
tastytrade, Inc. commentary for educational purposes only. This content is not, nor is intended to be, trading or investment advice or a recommendation that any investment product or strategy is suitable for any person.
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