US equity futures are higher into NVDA earnings release after the close, and the risk-on tone in the US yesterday has spread globally with tech giant's earnings a catalyst for maintaining the rally aided by Tech. As of 8:00am ET, S&P 500 futures were up 0.3% as with Nasdaq 100 contracts +0.4%; NVDA is up 0.6% in premarket trading and while blowout results from the company later today may soothe nerves about the AI trade, “even if they have tremendous numbers, we know the markets are really fickle,” said Mahoney Asset Management’s Ken Mahoney. Other Mag7s are also higher ex-AAPL and TSLA with Cyclicals bid, led by Fins/Industrials/Materials while Defensives mostly lower pre-mkt, ex-Healthcare, reflecting the risk-on tone. JPM says to keep an eye on Software if TMT gains positive momentum. European stocks rose 0.5%, hitting a record on a rebound in banks and miners. South Korea pushed past France in stock-market value.Bond yields are +1-3bp, the dollar slipped after President Donald Trump doubled down on his commitment to tariffs, before erasing the move, and commodities are bid led by Metals with precious outperforming base especially silver and platinum. Bitcoin rallied more than 2%. Gold and silver climbed. Today’s macro data releases are light (only Mortgage Applicatgions which rose 0.4%) ahead of tomorrow's jobless claims and Friday’s PPI, but with multiple Fedspeakers. Yesterday we saw better weekly ADP data, weaker regional Fed data, and improving consumer sentiment.
In premarket trading, Magnificent Seven stocks are mostly higher, with Nvidia +0.8% ahead of its report (Alphabet +0.5%, Amazon +0.5%, Microsoft +0.3%, Meta Platforms +0.3%, Tesla +0.4%, Apple -0.2%).
In other corporate news, DoorDash is pulling out of four countries in Asia, a sign that fierce competition and thin margins are weighing on its overseas ambitions. Anthropic has loosened its central safety policy, coinciding with a growing dispute with the Defense Department. AMC plans to close more theaters in underperforming locations.
Expectations are high for Nvidia as customers have announced huge capex plans, but a positive stock reaction is key for the Nasdaq after recent underperformance, said Arnaud Girod, head of cross-asset strategy at Kepler Cheuvreux.“We’re in the thick of uncertainty about the disruption of AI with the market de-rating entire segments of the stock market.”
To reinvigorate its stock performance, Nvidia will at least need to beat its prior outlook and set new targets above current Wall Street estimates. While the company has done this repeatedly, concerns have grown that the AI spending wave isn’t sustainable. “Nvidia’s results are expected to be good given the massive capex announced by its clients, but it’s all about how the market will react,” said Arnaud Girod, head of cross-asset strategy at Kepler Cheuvreux. “The Nasdaq needs Nvidia if it is to limit its current underperformance.”
Another key earnings event on Wednesday is Salesforce, the cloud-based customer-relationship firm whose stock has plunged 30% this year after getting caught up in the selloff of software companies on fears that AI could render their services obsolete. Analysts, on average, project that the company will post its best quarterly revenue growth rate in three years. Still, highlighting the risks for software-as-a-service firms, Workday Inc. slid nearly 10% in early trading after subscription sales fell short of estimates.
Turning to Trump's State of the Union address, the President talked up the economy saying that the nation is back, bigger, better and stronger than before, while he added that we've seen nothing yet and this is the golden age of America.
Out of the 450 S&P 500 companies that have reported so far in the earnings season, 74% have managed to beat analyst forecasts, while 21% have missed. TJX, Bank of Montreal and Lowe’s are among companies expected to report results before the market opens. Wall Street expects TJX’s fourth-quarter results to have received a boost from a strong holiday shopping season, with comparable sales estimate of +3.7% (Bloomberg Consensus). Earnings from Nvidia and Salesforce follow later with Wall Street eager to hear what it has to say about potential disruption to software makers from AI upstarts like Anthropic.
Rates on Japan’s longer-term bonds climbed further after Prime Minister Sanae Takaichi’s government nominated two new Bank of Japan policy board members who are seen as dovish. The yen fell 0.5%, the worst performance among major currencies.
European stocks are higher across the board with the FTSE 100 outpacing peers as post-earnings gains in HSBC send the index to a record high. Mining and banking shares are leading gains. Meanwhile, food and beverage as well as personal care stocks are the biggest laggards. Here are the biggest movers Wednesday:
Source: ZeroHedge News
