Stocks fell Wednesday as markets awaited the minutes from last month’s Fed policy meeting and an earnings report from Nvidia (NVDA) after the bell.
The Nasdaq Composite traded 0.7% lower Wednesday afternoon, while the S&P 500 fell 0.3% and the Dow Jones Industrial Average slipped 0.2%.
Investors will be parsing the Fed minutes for clues about when and how quickly policymakers will cut interest rates this year. Though developments since the meeting—including two hotter-than-expected inflation reports—could complicate those efforts.
Palo Alto Networks (PANW) stock tumbled and took cybersecurity peers with it after the company lowered its full-year sales guidance, citing “spending fatigue” among customers.
Amazon (AMZN) shares ticked up after the e-commerce giant was named to the Dow Jones Industrial Average, in which it will replace ailing pharmacy chain Walgreens Boots Alliance (WBA) starting Monday.
Stocks fell yesterday as investors shunned the market’s riskier corners in favor of safer bets, like food and consumer staples stocks, Treasurys, and gold.
Natural Gas Jumps as Chesapeake Cuts 2024 Production Targets
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Natural gas futures jumped Wednesday after Chesapeake Energy (CHK) said it would reduce production capacity this year as it grapples with gas prices at multi-year lows.
Chesapeake Energy said in its earnings report Tuesday that it expected to produce between 2.65 and 2.75 billion cubic feet per day (bcf/d) in 2024, down from 3.43 bcf/d last year. Specifically, the company plans to take out of commission this March one of the five rigs it runs in the Haynesville shale and one of its four rigs operating at the Marcellus shale. The company will also halve its fracking activities in March and further reduce rig count around mid-year.
Natural gas continuous contracts were up more than 12% at $1.77 Wednesday afternoon.
Natural gas prices have been battered by robust domestic production, higher storage levels, and unseasonably warm weather forecasts through February. On Tuesday, futures closed at $1.576, their lowest level since June 2020.
The stocks of major natural gas producers followed futures higher. Chesapeake Energy shares rose more than 8%, while EQT Corp. (EQT) and Antero Resources (AR) climbed 12% and 11%, respectively.
Nvidia Partner Vertiv Drops as Sales and Guidance Fall Short of Forecasts
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Shares of Vertiv Holdings (VRT) slipped Wednesday after the maker of power and cooling equipment for AI data centers missed sales estimates and gave weak current-quarter guidance.
Vertiv reported revenue was up 13% year over year to $1.87 billion, about $10 million short of forecasts. Adjusted earnings per share (EPS) came in at $0.56, double what it was in 2022 and ahead of expectations.
For the first quarter, Vertiv sees adjusted EPS in a range of $0.32 to $0.36, while analysts had been looking for $0.37.
The report sent shares of Vertiv tumbling about 6%, but that has been a rare event recently. The stock’s price hit an all-time high last week, and even with the current selloff shares have soared 300% over the past year.
SolarEdge Stock Dives After Earnings Miss, Weak Sales Guidance
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SolarEdge Technologies (SEDG) shares slumped 13% to trade at $73 Wednesday after the company announced quarterly earnings that fell short of Wall Street’s estimates and provided weaker-than-expected current-quarter sales guidance amid ongoing softness in the retail solar market that has led to an inventory glut.
The maker of solar inverters, power optimizers, and monitoring platforms posted fourth-quarter adjusted earnings of 92 cents per share on revenue of $316 million. Wall Street had expected earnings of $1.17 a share on sales of $354 million.
Moreover, the top line fell more than 60% from the prior year, highlighting the severity of the solar industry’s prolonged downturn. For the March quarter, SolarEdge sees revenue coming in between $175 million and $215 million, significantly below analysts’ forecast of $406 million.
The company said weakening demand in the second half of last year due to elevated interest rates has led to a backlog of inventory that it doesn’t expect to clear until the end of 2024.
Since gapping below $90 in mid-October, SolarEdge’s share price has tracked mostly sideways, with volume levels in recent months slightly higher than throughout most of last year. If selling continues beyond Wednesday, monitor if buyers can defend the November and February swing low support area around $64. A successful hold of this level could potentially carve out a triple bottom pattern and mark the beginning of a new trend higher.
Cybersecurity Stocks Tumble as Palo Alto Cuts Sales Guidance
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Cybersecurity stocks were hit hard Wednesday after Palo Alto Networks (PANW) lowered its full-year sales guidance, raising concerns about industrywide headwinds.
Palo Alto Networks now expects fiscal 2024 revenue to fall in the range of $7.95 billion and $8 billion, down from a prior estimate of between $8.15 billion and $8.2 billion. Total billings, which includes deferred revenue, are expected to fall between $10.1 billion and $10.2 billion. The company in November had forecast a range of $10.7 billion and $10.8 billion.
CEO Nikesh Arora noted on a call with analysts that clients were showing signs of “spending fatigue” even as online threats increased. “Customers are finding that adding incremental products is not necessarily driving a better security outcome for them,” he said. The company, he added, was prioritizing “platformization” to facilitate deals and reposition itself for long-term growth.
Palo Alto’s forecasts spooked investors, sending cybersecurity stocks sharply lower Wednesday. Palo Alto Networks shares tumbled more than 25%, their largest drawdown since the company’s 2012 IPO. Peers ZScaler (ZS) and CrowdStrike Holdings (CRWD) dropped 15% and 10%, respectively.
Cybersecurity stocks were flying high before Wednesday’s declines. Palo Alto shares had more than doubled in value in the year leading up to Tuesday’s earnings report, while CrowdStrike stock had nearly tripled and ZScaler had risen more than 90%.
Analysts were less pessimistic than markets. “While claims of cyber fatigue are logical, it hasn’t emerged elsewhere. We remain massive fans of the LT story but shares will be under duress in the interim,” wrote Jefferies analysts, who lowered their price target but reiterated their buy rating on the stock.
That sentiment was echoed by Mizuho Securities: “While we fully acknowledge a messier near-term story, we remain bullish on PANW’s improving mix shift toward higher-growth recurring revenue.”
Amazon To Join the Dow Jones Industrial Average, Replacing Walgreens
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Amazon.com Inc. (AMZN) rose 0.7% in early trading Wednesday following news that the online retailing giant is set to join the Dow Jones Industrial Average, replacing pharmacy chain Walgreens Boots Alliance (WBA).
The changes will be effective next Monday, according to S&P Dow Jones Indices, which manages the storied 30-stock benchmark and announced the move Tuesday.
S&P said the changes were prompted by Walmart’s 3-for-1 stock split, which also takes effect next week—and reflect “the evolving nature of the American economy.”
The blue-chip index is widely followed by individual investors but is dominated by legacy industrial companies. Adding Amazon will increase the benchmark index’s exposure to the tech industry.
Shares of Amazon are up more than 11% this year. Walgreens shares were down more than 3% in early trading Wednesday and are down 16% this year.
Stocks Making the Biggest Moves Premarket
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Gains:
- Garmin Ltd. (GRMN): Shares of the navigation technology company gained more than 4% after its fourth-quarter earnings beat analyst estimates on the top and bottom lines.
- PDD Holding (PDD): Shares of the Chinese e-commerce company rose more than 2% after Bloomberg reported the Chinese government would impose a rule banning major institutional investors from being net sellers in the first and last 30 minutes of each trading day, its latest effort to prop up a struggling equities market.
- Amazon.com Inc. (AMZN): Shares inched up about 1% after S&P Dow Jones Indices said the company would replace Walgreens Boots Alliance (WBA) in the Dow Jones Industrial Average starting on Monday. Walgreens shares fell 3%.
Losses:
- Palo Alto Networks Inc. (PANW): Shares of the cybersecurity firm plummeted more than 20% after it offered a disappointing current-quarter bookings forecast and lowered its full-year sales guidance.
- Vertiv Holdings LLC (VRT): Shares slumped about 14% after the company, which sells power and cooling equipment to data centers, forecast current-quarter earnings of between 32 cents and 36 cents a share, falling short of Wall Street’s estimates.
- HSBC Holdings Plc (HSBC): Shares of the British bank fell more than 7% after it reported a $3 billion write-down on its stake in Chinese Bank of Communications Co.
Stock Futures Fall Ahead of Fed Minutes, Nvidia Earnings
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Futures contracts connected to the Dow Jones Industrial Average traded 0.2% lower in premarket trading on Wednesday.
S&P 500 futures slipped 0.3%.
Nasdaq 100 futures were down 0.6% about an hour before markets opened.
