Global stocks slipped on Wednesday ahead of highly anticipated results from chipmaker Nvidia, while the dollar seesawed as investors await minutes from the Federal Reserve’s last policy meeting for insight into potential interest rate cuts.
Steps by Chinese authorities to prop up economic growth in the world’s largest raw materials consumer revived doubts about the growth outlook, which weighed on crude oil and iron ore.
In Europe, stocks traded lower as shares in HSBC tumbled 8.6% after the region’s largest bank reported a record annual profit that nonetheless missed analyst expectations.
The day’s focus is on Nvidia, whose earnings are slated to be released after the U.S. market close. Results and its outlook could determine equity sentiment for weeks to come as AI-related stocks have driven much of this year’s rally.
“Nvidia is going to have to absolutely crush earnings and crush earnings expectations and probably deliver an above expectations outlook for that stock to continue to move higher,” said Anthony Saglimbene, chief market strategist at Ameriprise Financial in Troy, Michigan.
If Nvidia, up 40% so far this year as of Tuesday’s close, only marginally meets or beats expectations, it will suffer dramatically as investors are looking for an excuse to pull back, at least in Big Tech, he said.
“If Nvidia’s report is lackluster and kicks off a decline in big tech or the overall S&P 500 by 5%-10%, I wouldn’t change my outlook. That would be healthy for the market,” Saglimbene said.
Nvidia, the third-largest company by market cap in the S&P 500, was down about 2.1%. The company is expected to post more than a three-fold surge in fourth-quarter revenue on robust demand for its AI chips, which dominate the market.
MSCI’s gauge of stocks across the globe fell 0.30% to 745.92, while in Europe, the pan-regional STOXX 600 index slid 0.29%, pulled lower by HSBC.
On Wall Street, the Dow Jones Industrial Average (.DJI), opens new tab fell 0.24%, the S&P 500 lost 0.28% and the Nasdaq Composite (.IXIC), opens new tab slid 0.66%.
Minutes from the Federal Open Market Committee’s policy meeting in January will not capture last week’s data on inflation, which revealed enough of an uptick to prompt investors to rethink when the Fed might cut interest rates.
A slim majority of economists polled by Reuters now expects the Fed to start cutting rates in
June, farther out than market expectations last month of a first cut in March.
Markets now expect 91.5 basis points of cuts from the Fed this year, closer to the U.S. central bank’s own projection of 75 bps of easing – or half the 150 bps of cuts priced in by traders at the start of the year.
The yield on benchmark U.S. 10-year notes fell 0.2 basis points to 4.273%. The two-year’s yield , which typically moves in step with interest rate expectations, fell 0.6 basis points to 4.6061%.
The changing rates outlook has boosted the dollar and kept the yen, which is extremely sensitive to U.S. rates, near three-month lows.
The dollar index was down 0.01% at 104.03, with the euro up 0.0% at 1.0811. The dollar strengthened 0.09% at 150.12 against the Japanese yen .
Sterling shrugged off Britain’s highest ever monthly budget surplus in January and traded flat on the day.
Meanwhile, Chinese blue-chip stocks posted a 1.4% gain on the day (.CSI300), opens new tab, a day after the biggest reduction yet in the nation’s benchmark mortgage rate as authorities stepped up efforts to support the property market.
“Regulators are cautious and taking a gradual approach, with the possibility of introducing further measures if needed,” said Jian Shi Cortesi, investment director of Asia/China Growth Equities of GAM Investments.
“The market sentiment has improved slightly, but the sustainability relies more on improvements in economic activities and corporate earnings.”
In commodities, U.S. crude gained 0.16% to $77.16 a barrel and Brent rose to $82.43 per barrel on the day.
Iron ore futures declined for a third consecutive session on Wednesday to their lowest in nearly four months.
The most-traded May iron ore on China’s Dalian Commodity Exchange ended daytime trade 3.98% lower at 893 yuan ($124.29) per metric ton, the lowest close since Oct. 31, after a more than 5% drop the day before.
