Market Looks To Nvidia Earnings To Stop Two Day Slide

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Key Takeaways

• Stocks Fall For Second Consecutive Day
• Jeff Bezos Unloading Amazon Stock
• Nvidia Earnings After The Close Tonight

Stocks fell for a second consecutive day on Tuesday. The S&P 500 was down 0.6% while the Nasdaq Composite dropped by just under 1%. The selling was heaviest in technology stocks with shares of Nvidia down 4.4% for the day.

Six out of the seven Magnificent Seven stocks closed lower on Tuesday with Google
GOOG
parent Alphabet being the only stock up on the day, gaining 0.4%. Notable losses included Tesla
TSLA
, down 3.1% and AmazonAmazon” data-type=”stock”>
AMZN
fell by 1.4%. As I mentioned above, Nvidia was the hardest hit in this group; however, for the year, shares of Nvidia are still up nearly 40% and that comes after tripling last year. After the close tonight, Nvidia will report earnings.

It is another heavy week for earnings. Yesterday we heard from Walmart
WMT
. The retailer reported a bump in revenues that came as a result of more shoppers rather than higher prices. That could mean a couple of things. First, the fact that more shoppers drove revenues instead of increasing prices may signal inflationary pressures are easing on some goods. Secondly, and also inflation related, an uptick in shoppers may be a result of consumers looking for ways to reduce spending and “trading down” to Walmart versus higher end brands. Walmart also announced they would be purchasing TV maker Vizio in a deal valued at $2.3B. The foray into TV manufacturing is expected to provide Walmart more opportunities to advertise directly to consumers.

Home Depot reported sales that exceeded analyst expectations. However, despite that beat, revenues declined. After initially falling by as much $8 from last Friday’s close, the stock turned around and closed slightly higher by 0.06%.

Other stocks reporting earnings yesterday included HSBC
HBA
. The company missed on profit forecasts and reported a $3 billion “valuation adjustment” as a result of the company’s 19% stake in China’s Bank of Communications, according to CNBC.

Palo Alto Networks
PANW
reported numbers that beat on both the top and bottom lines. However, the company lowered its full year guidance. Shares are taking a substantial hit in premarket and are currently indicated to open lower by 23%.

Elsewhere, China is looking for more ways to prop up its struggling economy. The latest move is a cut by major banks to the five-year loan prime rate. That rate is being reduced from 4.2% to 3.95% and is used as a benchmark for home loans according to the Wall Street Journal. The cut is aimed specifically at propping up the housing market.

Last week I mentioned a story about ESPN, Warner and Fox Sports all combining to launch a new sports streaming service. That move is being challenged by Fubo TV. Fubo’s streaming service is primarily known for its sports offerings and the company says in its suit it is being forced to broadcast unwanted and expensive content.

Turning back to the Magnificent Seven, Amazon is being added to the Dow Jones Industrial Average after the close on Friday. Amazon is replacing Walgreens Boots Alliance
WBA
and it will rank 17^th by weighting and influence on the index. The Dow, unlike the S&P 500, is weighted by share prices, not market capitalization. As a result, stocks with higher share prices have a disproportionate impact on the index.

Another interesting Amazon story is the sale of stock by Jeff Bezos. Bezos has recently sold 50 million shares. In just the past few days alone, he has sold nearly $2.4 billion worth of stock. While there could be any number of potential reasons for the sale, I think one that isn’t being widely discussed yet has merit is taxes. With a soaring budget deficit, I think it’s possible that regardless of who wins this year’s elections, there is a very real possibility that taxes will increase. Therefore, it could be that Bezos is unloading shares ahead of any increase.

Finally, as previously mentioned, Nvidia will report earnings tonight after the close. Based on the options market and its implied volatility, the stock has an expected move of around $75 higher or lower. According to CNBC, analysts are expecting revenues to increase 240% from a year ago to $20.6 billion. Net income is forecast to be $10.5 billion, up from $1.41 billion last year. Each quarter there are a handful of stocks with potential to significantly move the market. Nvidia has been one of those companies for the past year and will certainly continue to be one. As is the case with most earnings, it’s not just past earnings that will matter, but future guidance. As always, I would stick with your investing plans and long term objectives.

tastytrade, Inc. commentary for educational purposes only. This content is not, nor is intended to be, trading or investment advice or a recommendation that any investment product or strategy is suitable for any person.