S&P 500 opens lower as Nvidia dips ahead of earnings midweek

What’s driving markets

News of a $35 billion credit card merger and softness in Treasury yields were positive factors early Tuesday, but a holiday-shortened week that is full of potential catalysts was nevertheless starting on a muted note.

The first issue for investors to consider are the earnings on Tuesday of big retailers Walmart
WMT,
+5.64%
and Home Depot
HD,
-1.13%,
which may give clues to the confidence of U.S. households, a crucial sentiment-gauge given consumption accounts for roughly 70% of the economy.

Walmart shares were rising Tuesday after an earnings beat, though Home Depot shares were falling after a miss on certain measures, like same-store sales.

Other companies announcing results on Tuesday before the opening bell include KBR
KBR,
-1.52%,
Medtronic
MDT,
+0.41%,
and LGI Homes
LGIH,
-9.71%,
followed after the close by Palo Alto Networks
PANW,
-1.26%,
Toll Brothers
TOL,
-1.12%,
Teladoc Health
TDOC,
-2.40%
and Matterport
MTTR,
-1.85%.

Then Wednesday at 2 p.m. Eastern sees the release of the Federal Reserve’s minutes from its January 31 meeting, from which traders will try to glean any fresh guidance to the likely timing of interest rate cuts.

Andrew Hollenhorst, economist at Citi, said the minutes will likely follow recent Fed speakers in suggesting that the Fed will lower interest rates this year but only ‘carefully’ once officials have ‘greater confidence’ that inflation is durably slowing towards 2%.

“Most interesting might be any details of the winding down of balance sheet reduction. An ‘in-depth’ discussion on the balance sheet is scheduled for March,” said Hollenhorst.

Last, but definitely not least, Nvidia
NVDA,
-4.39%
will release its earnings after Wednesday’s market close, with investors aware that the reception afforded the AI-chipmaker may determine broader market sentiment for a while. A 2% fall for Nvidia shares in premarket trading was pressuring S&P 500 and Nasdaq index futures.

“With a year-to-date gain of 50% already and a market cap of $1.8 trillion, Nvidia has a lot to live up when it reports numbers this week,” said Bespoke Investment Group.

Kathleen Brooks, analysts at XTB concurred: “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.”

U.S. economic updates set for release on Tuesday include the leading economic indicators for January, due at 10 a.m. Eastern.

News that Beijing has trimmed mortgage costs by more than expected has done little to brighten the mood, as traders note a muted response in Chinese stocks amid concerns more must be done to revive the world’s second biggest economy.

Companies in focus

• Capital One Financial Corp.
  COF,
  -2.28%
  shares are 4.8% lower after news of the credit card giant’s plan to purchase Discover Financial Services. Discover
  DFS,
  +11.11%
  shares are over 10% higher after news of the planned tie-up in an all-stock deal valued over $35 billion.

• Walmart Inc. shares are 5% higher early Tuesday after corporate earnings from the retail giant. The company reported a beat on earnings and raised its dividend by 9%. Walmart also confirmed a $2.3 billion purchase of smart-TV maker Vizio.

• Home Depot Inc.  shares dropped 0.6% Tuesday after earnings from the home improvement company. 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.