US stocks fall on countdown to Nvidia earnings

U.S. stocks were on Wednesday as investors counted down high-stakes gains from AI darling Nvidia (NVDA) and the release of Federal Reserve minutes that could set expectations on interest rates. It fell because of this.

The S&P 500 (^GSPC) was down about 0.3%, and the Dow Jones Industrial Average (^DJI) was down 0.4%. The tech-heavy Nasdaq Composite Index (^IXIC) led the decline, falling 0.5% following Tuesday's decline.

Stocks have been lagging in the spotlight on Nvidia's impending earnings, dropping 4% on Tuesday, its worst day since Oct. 17, as investors awaited the announcement. Expectations are high for the company's fourth-quarter results, which are seen as both a barometer for AI trading and a potential tipping point for the broader stock.

Markets are wary of expected disappointment in this report after the bell. Nvidia is one of a small number of mega-cap groups behind the recent strong gains in stock indexes. Growth prospects for these Magnificent 7 stocks are mixed, according to Goldman Sachs, and hedge funds are cutting back on their holdings.

In business, Palo Alto Networks (PANW) stock fell more than 25% after the cybersecurity provider cut its annual revenue forecast, raising concerns about a potential pullback in technology spending. Meanwhile, Walgreens stock (WBA) fell 3% after the pharmacy giant lost its spot as a Dow blue-chip stock to Amazon (AMZN).

Minutes from the Fed's January meeting are also being awaited for insight into whether policymakers are likely to ease interest rates soon. Recent lackluster data has undermined confidence that the central bank will cut interest rates, most likely in June.

read more: Impact of Fed interest rate decisions on bank accounts, CDs, loans, and credit cards

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Wednesday, February 21, 2024, 9:37 a.m. ET

Stock prices start low ahead of Nvidia earnings report

U.S. stocks were on Wednesday as investors counted down high-stakes gains from AI darling Nvidia (NVDA) and the release of Federal Reserve minutes that could set expectations on interest rates. It fell because of this.

The S&P 500 (^GSPC) was down about 0.3%, and the Dow Jones Industrial Average (^DJI) was down 0.4%. The tech-heavy Nasdaq Composite Index (^IXIC) led the decline, falling 0.5% following Tuesday's decline.
Wednesday, February 21, 2024, 8:42am EST
Trend Watch: There's talk of deflation.

From inflation to the opposite of inflation.

deflation It is slowly starting to make its way into consumer corporate conference calls and presentations. Additionally, as prices fall, top-line sales trends are starting to be affected.

Places I’ve already heard the word deflation used this week:

Tuesday's Home Depot earnings report: Deflation was mentioned six times during the conference call. “Deflation in core product categories negatively impacted our average ticket by 35 basis points in the fourth quarter due to deflation in lumber and copper wire. -Billy Bastek, Vice President of Merchandising, Home Depot (HD)

Tuesday's Walmart earnings report: Deflation was mentioned twice during the conference call. “During the third quarter conference call, we stated that there is a possibility of deflation in early 2024.Walmart US is in deflation in the general merchandise area, but the slope of the decline is slowing. This means prices are lower than they were a year ago, but not as much as the trend line would indicate at the end of the third quarter. The Walmart US food and supplies trend line also softened, resulting in food and supplies retail prices slightly higher than a year ago. ” Doug McMillon, CEO, Walmart (WMT)

This is the topic I'll be covering in a chat with Mondelez (MDLZ) CEO Dirk van de Putte at 10:40 a.m. ET on Yahoo Finance Live. Oreo maker's sales forecast at CAGNY conference (Yahoo Finance's Brooke DiPalma is on duty this week) generate interesting insights) yesterday suggested that it is ready to overcome deflation in 2024, but we will hear more in our interview soon.
Wednesday, February 21, 2024, 7:49am EST

Palo Alto Networks takes a hit

If you were in the Yahoo Finance newsroom early in the morning and all you heard was chatter about lightning-fast tech company Palo Alto Networks (PANW), one of the most popular tickers on our platform…

The AM team seems to think Palo Alto Networks is unstoppable (a sentiment probably echoed by many who traded this name over the past two years). I understand. Over the past five years, the stock has risen 377%, but before the market it was up 22%, but after today's earnings it fell. Palo Alto's Meteor stock has been supported by strong growth rates driven by demand for cybersecurity products.

But I reminded the team last night that some things appear to be fundamentally changing around Palo Alto Networks. And taken together, the sharp decline seems justified, and the stock could remain at the cap in the short term until investors feel more comfortable.

One example of this is that the company's billing outlook was 10% below consensus estimates. Palo Alto Networks said it is seeing some softening in federal demand. But I suspect there's more here, especially when it comes to easing demand from large enterprises, similar to what we heard last week from Cisco (CSCO) (the company is also in the cybersecurity business) ).

And second, Palo Alto Networks surprised the public with a new pricing strategy. This could impact margins this year and possibly into 2025.

The strategic shift reflects Palo Alto Networks' move to more aggressively capture market share by offering customers short-term access to its solutions for free.

“This pricing/bundling/integration strategy could weigh on performance over the next 12 to 18 months,” Stifel analyst Adam Borg warned in a client note this morning.

Welcome to PANW, the Show Me Story Zone.