US stocks showed mixed results on Wednesday as traders focused on Nvidia’s upcoming earnings report, reacted to rising geopolitical tensions, and adjusted their expectations for future Fed rate cuts.
Investors are keenly awaiting Nvidia’s third-quarter results, with Wall Street forecasting $33 billion in revenue. The chipmaker’s performance is seen as a key indicator for the strength of the artificial intelligence sector. Shares of Nvidia closed slightly lower at $145.89, reflecting cautious sentiment ahead of the earnings release.
Nvidia is expected to provide insights into customer demand for its next-generation AI chip, Blackwell. CEO Jensen Huang has previously described demand for Blackwell as “insane,” fueling optimism for the stock. However, experts like Paul Marino, Chief Revenue Officer of Themes ETFs, caution that even strong earnings and solid guidance may not be enough to sustain the stock’s valuation. “Meeting expectations won’t be enough to excite investors,” Marino warned, pointing to Nvidia’s high price-to-earnings ratio of 52x.
“There’s a market expectation for not just strong guidance but an ‘insane’ outlook that’s not yet priced in,” added Quincy Krosby, Chief Global Strategist for LPL Financial. Options data suggest an 8% swing in Nvidia’s stock price following earnings, indicating the potential for a $300 billion move.
Meanwhile, geopolitical concerns added to market unease, as Ukraine launched fresh strikes on Russian targets using US-made weapons, raising tensions in the region.
On the domestic front, remarks from several Federal Reserve officials caused a shift in market sentiment regarding future rate cuts. The odds of the Fed pausing rate cuts at its next meeting rose significantly to 48%, up from just 17% a week ago, according to the CME FedWatch tool.
Fed Governor Michelle Bowman expressed concern that inflation progress had “stalled” in recent months, stressing that more caution was needed in policy adjustments. Similarly, Fed Governor Lisa Cook called for a more neutral stance on interest rates, acknowledging that while inflation may be trending lower, the road ahead remains uncertain.
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