Traders work on the floor at the New York Stock Exchange on Feb. 7, 2024.
Brendan Mcdermid | Reuters
U.S. stock futures ticked down Tuesday night after the major averages incurred a second day of losses, fueled by a decline in Nvidia.
Nasdaq 100 futures shed 0.2%. Futures tied to the Dow Jones Industrial Average slipped just 25 points, or 0.06%. S&P 500 futures declined 0.1%.
In after-hours action, Palo Alto Networks shed 20% after the cybersecurity company cut its full-year revenue guidance. SolarEdge Technologies lost more than 10%, dropping on weak first-quarter guidance.
During the regular session, the three major averages slid, dragged lower by tech. The Nasdaq Composite lost 0.92%, while the S&P 500 fell 0.6%. The 30-stock Dow fell 0.17%.
A slump in Nvidia — which slid more than 4% — weighed on the Nasdaq and S&P 500 as sentiment soured the day before the chip giant is expected to post its quarterly results.
Concerns surrounding Nvidia’s high valuation have grown leading up to the company’s earnings announcement, slated for Wednesday after the bell. The stock has soared about 225% over the past year.
The broader tech sector is now overvalued, according to Alex McGrath, chief investment officer at NorthEnd Private Wealth. He thinks Tuesday’s sell-off of Nvidia and other big tech names could mean investors are coming to terms with “the greater fool theory” — that is, when overvalued assets continue to rise because there are enough investors willing to pay more, until there aren’t any more left.
“People continued to pay higher and higher prices for the tech sector throughout [the rally]. It had to have been a core asset allocation, but as you get longer and longer into this, the biggest question is: When do you start to trim?” McGrath said. “And with the Nvidia action today, I think that’s what you’re seeing.”
On Wednesday, Wall Street will also have an eye out for the minutes from the Federal Reserve’s January meeting, seeking further insight on where the central bank stands on rates. This comes on the back of hotter-than-expected economic data the previous week.
Other companies slated to announce their quarterly results Wednesday include HSBC, Wingstop and Analog Devices before the bell. In addition to Nvidia, Etsy will also report its results in the afternoon.
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Palo Alto Networks – Shares declined nearly 19% after the cybersecurity company’s full-year guidance missed expectations. Palo Alto Networks said it predicts full-year revenue growth of 15% to 16%, down from earlier guidance of 18% to 19% growth. The company also reduced its full-year billings forecast. Meanwhile, adjusted earnings and revenue in the fiscal second quarter topped analysts’ estimates.
Diamondback Energy — Shares gained 1.6% after the energy company beat on both top- and bottom-lines in the fourth quarter. Diamondback posted adjusted earnings of $4.74 per share on $2.23 billion in revenue. Analysts polled by LSEG had forecasted $4.66 in earnings per share on revenue of $2.17 billion.
Caesars Entertainment — The hotel and resorts stock lost more than 1% after posting a revenue miss in the prior quarter. Caesars reported $2.83 billion in revenue while analysts had estimated $2.85 billion, according to LSEG.
— Hakyung Kim
