Dow, S&P 500, Nasdaq all fall as market looks to Fed speakers, Nvidia earnings

What drove markets

While Walmart
WMT,
+0.09%
and Home Depot
HD,
+0.17%
both delivered earnings reports on Tuesday, investors are focused more on megacap tech company Nvidia’s
NVDA,
+0.36%
earnings, which arrive after Wednesday’s market close.

Investors are aware that the reception to the AI chip maker’s results may determine broader market sentiment for a while.

“Unsurprisingly, there are big expectations for Nvidia, and if they fail to deliver this could be a major upset to the S&P 500, as the top-five stocks in the U.S. blue-chip index have fueled 75% of its gains so far in 2024,” said Kathleen Brooks, analyst at XTB.

“Because investors believe that we are due for some sort of digestion of recent gains, if Nvidia’s results are not stellar, then the market could end up being disappointed,” Sam Stovall, chief investment strategist at CFRA Research, said on a call.

The stock market’s lackluster performance Tuesday was the result of “nervousness going into Nvidia earnings,” said Kent Engelke, chief economic strategist and managing director at Capitol Securities Management. “Unless Nvidia completely blows it out the water, I think things will be flat to down in the immediacy,” he said in a phone interview.

Still, for Jeffrey Schulze at ClearBridge Investments, the Federal Reserve was still the main driver behind the market’s moves Tuesday.

“There isn’t a clear risk-off smoking gun,” said Schulze, managing director and head of economic and market strategy at the firm. What’s likely instead is more of last week’s “jitters” after hotter-than-expected January inflation data on consumer and wholesale prices.

That data may well translate to steeper numbers in next week’s personal-consumption expenditures (PCE) price index, the Fed’s preferred inflation gauge, which would “reinforce the Fed’s wait-and-see stance,” Schulze said.

That highlights another big-picture factor this week: The parade of Fed officials who will be speaking publicly, coupled with Wednesday afternoon’s release of minutes from the central bank’s Jan. 30-31 meeting.

Schulze said he expects the January minutes to reiterate Fed chair Jerome Powell’s comments at the press conference after the meeting, so his big focus is on what Fed officials will have to say this week — with seven Fed speakers scheduled to talk in the coming days.

In economic data, the Leading Economic Index for the U.S. fell last month, marking its 22nd straight decline. The 0.4% decline for January still offered signs of hope, with six of 10 components showing positive results. It’s been two years since that last happened.

Companies in focus

• Capital One Financial Corp.
  COF,
  +0.71%
  shares closed 0.1% higher after news of the bank’s plan to purchase Discover Financial Services. Discover
  DFS,
  +1.37%
  shares rose more than 12% on news of the planned tie-up in an all-stock deal valued at over $35 billion.

• Walmart Inc. shares climbed 3.3% Tuesday after corporate earnings from the retail giant. The company reported a beat on earnings and raised its dividend by 9%. Walmart also confirmed its $2.3 billion purchase of smart-TV maker Vizio.

• Home Depot Inc. shares rose 0.1% Tuesday after earnings from the home-improvement retailer. Though beating on net sales, it missed expectations on U.S. same-store sales and offered a full-year outlook that also disappointed Wall Street.

Jamie Chisholm contributed.