Nvida to report earnings amid spending concerns

General market commentary

U.S. equities faced a challenging session on Tuesday, with the S&P 500 and Nasdaq hitting one-month lows, marking their fourth consecutive day of declines. Consumer confidence data showed Americans growing increasingly concerned about the economic impact of President Trump’s policies, particularly the threat of tariffs on Canada and Mexico. This uncertainty, coupled with disappointing forecasts from major tech companies like Microsoft, Amazon, and Alphabet, weighed heavily on investor sentiment. Investors are now closely watching Nvidia’s upcoming fourth-quarter earnings, with shares of the AI chip giant retreating nearly 3% ahead of the announcement. Bitcoin weakness also dragged down crypto shares, while Zoom Communications saw a sharp drop following a poor revenue outlook. On the other hand, Li Auto surged 13.2% after unveiling its first electric SUV, offering a rare bright spot in an otherwise lacklustre market.

Meanwhile, the housing market provided mixed signals, as home prices continued to rise more than expected, with the S&P CoreLogic Case-Shiller 20-City Home Price Index increasing by 4.5% in December. However, this uptick in home prices is likely to sustain pressure on inflation, especially in the shelter component, which remains a significant factor in the Federal Reserve's preferred inflation measure. Consumer confidence also took a hit in February, with the Conference Board’s index dropping to 98.3, reflecting growing concerns about job security and future income. Inflation expectations rose, further dampening sentiment. Despite these headwinds, the market will keep a keen eye on upcoming economic data, including housing reports and the potential impact of tariffs, to gauge the broader economic outlook and consumer behaviour in the coming months.

Latest market and economic update

• Most Asian markets fell on Wednesday, driven by concerns over U.S. President Trump's tariff threats and signs of a slowing global economy, though Hong Kong's markets rose sharply on optimism surrounding China's AI sector. Tech stocks, particularly those with U.S. exposure, were under pressure ahead of Nvidia's earnings report, while broader markets in Asia remained subdued due to weak U.S. data and ongoing geopolitical tensions.

• US equity futures rose overnight, as investors looked to Nvidia's earnings report and key economic data, including the fourth-quarter GDP and PCE price index, for direction. Despite Tuesday’s losses for the S&P 500 and Nasdaq, attention now shifts to whether Nvidia's results can provide a fresh catalyst amidst ongoing concerns about the sustainability of the AI rally.

• European equities closed largely flat on Tuesday, with the STOXX 50 dipping 0.1% and the STOXX 600 gaining 0.2%, as markets weighed the impact of higher government spending and US trade barriers. German carmakers Volkswagen, BMW, and Mercedes Benz saw gains between 1.5% and 3.6%, while banks like UniCredit and BNP Paribas rose nearly 2%, while tech stocks ASML and Infineon fell around 3% following US tariff threats on China.

• The US dollar traded near 106.3 on Wednesday, its lowest level in 11 weeks, weighed down by softening economic data and declining Treasury yields. Against the euro, the dollar weakened further, with the single currency trading at 1.0498, reflecting growing concerns over US economic growth and inflationary pressures.

• Oil prices rose slightly in Asian trade on Wednesday, supported by a surprise draw in U.S. oil inventories, though concerns over cooling global economic growth and trade tariffs from President Trump continued to weigh on the market. Brent crude rose to $73.27 a barrel, while WTI gained to $69.17, but both contracts remained near two-month lows amid worries about softening demand and the potential impact of additional U.S. tariffs.

Equities on the move

The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:

• Supermicro's shares surged 21.7% in after-hours trading on Tuesday after the company filed its delayed financial reports, ensuring compliance with NASDAQ requirements. The filings followed the resignation of its former accounting firm, Ernst & Young, but came alongside strong fiscal 2026 revenue guidance of $40 billion, driven by the ramp-up of its NVIDIA Blackwell servers, boosting the stock by 36% since the update.

• Home Depot's fourth-quarter net sales rose 14% to $39.70 billion, surpassing Wall Street's expectations, with a 0.8% increase in comparable sales, marking its first positive quarterly performance in over two years. However, for the 2025 fiscal year, the company forecast a 1% growth in comparable sales, falling short of analysts' expectations of 1.65%, citing ongoing pressure from higher interest rates and caution around future economic conditions.

• Cava Group forecast annual same-store sales growth of 6% to 8%, below analyst expectations, as weak demand for dining out and inflationary pressures continue to affect consumer spending. Despite this, the company exceeded fourth-quarter estimates with a 21.2% rise in same-restaurant sales and strong revenue of $227.4 million, driven by successful menu items and a revamped loyalty program.

• Instacart reported fourth-quarter results that missed Wall Street expectations, with adjusted earnings of $0.53 per share and revenue of $883 million, while gross transaction value rose 10% to $8.65 billion. Looking ahead, the grocery delivery platform expects order volumes to decline year-over-year, despite forecasting higher gross transaction value and adjusted EBITDA for the first quarter of 2025.

• Cleveland-Cliffs reported a wider-than-expected Q4 loss, with revenue falling short of Wall Street estimates and an adjusted EBITDA loss of $81 million, while also posting a significant cash burn of $677 million. The company expects steel unit cost reductions and a focus on deleveraging in 2025, with analysts predicting the ongoing recovery in steel prices will be crucial for offsetting higher borrowing costs.

• Heidelberg Materials reported stronger-than-expected Q4 results, with revenue up 6% year-on-year and EBITDA rising by 13%, driven by improving margins and cost-saving measures under its "Transformation Acceleration" plan. Despite a decline in full-year net profit, the company remains optimistic for FY25, forecasting a 10% revenue increase and positive demand recovery, particularly in North America and Europe.

• First Solar reported a 13% increase in fourth-quarter profit, posting a net income of $393 million, and raised its sales forecast for the current year to between $5.3 billion and $5.8 billion, surpassing Wall Street estimates. The company also initiated legal action against JinkoSolar for patent infringement related to its TOPCon technology, following the imposition of tariffs on solar panel imports by the Biden administration.

• Tesla's shares dropped 8.4% following a sharp decline in European and UK sales, which fell 45.2% in January, amid increased competition from Chinese rivals and growing pressure from European manufacturers. Analysts suggest that CEO Elon Musk's heightened political visibility may be alienating some European buyers, with expectations for a difficult first quarter and revised delivery projections for 2025.

• Meta Platforms is reportedly in talks to build a new data centre campus for its AI projects, with potential costs exceeding $200 billion, with Louisiana, Wyoming, and Texas under consideration as possible locations. While Meta denied the report, CEO Mark Zuckerberg recently revealed the company plans to invest up to $65 billion in expanding its AI infrastructure this year, following similar large-scale investments by Microsoft and Amazon.

• Eli Lilly has reduced the price of its weight-loss drug Zepbound by $50 or more per vial and expanded its online availability in a bid to compete with compounding pharmacies and rival Novo Nordisk. The move comes as the FDA removes weight-loss drugs like Zepbound and Wegovy from its shortage list, prompting legal action from compounding pharmacies, while telehealth companies like Hims & Hers face difficulties in selling compounded versions of these drugs.

• Unilever's board, including activist investor Nelson Peltz, made the surprise decision to oust CEO Hein Schumacher, replacing him with finance chief Fernando Fernandez to drive the company's turnaround strategy. Schumacher's departure, after less than two years in the role, led to a 3.4% drop in Unilever's shares, despite his earlier positive impact on the company's performance.

• PayPal outlined its growth targets for 2025 to 2027, focusing on transaction margin and non-GAAP EPS growth. The fintech giant also introduced new offerings, such as PayPal Open for merchants, a partnership with Verifone, and plans to expand its Fastlane checkout service internationally.

• Alcoa warned that Trump's proposed 25% tariff on aluminum imports could cost 100,000 jobs and would not be enough to prompt the company to increase production in the U.S. despite its lobbying for an exemption on Canadian imports. The company, which has reduced U.S. output due to high electricity costs, stated that any increase in production would require access to cheap power, and highlighted the potential for global consolidation in the aluminum market.

• Rocket Lab's shares dropped 10% following a critical short report by Bleeker Street Research, which questioned the company's financial health and the timeline for its Neutron rocket, predicting a delay of one to two years. The report also raised concerns about the company's liquidity, development challenges, and the viability of its contracts, particularly its undercapitalised customer, E-Space.

• JP Morgan downgraded Tempus AI to Neutral from Overweight due to concerns over the company's valuation after a significant rally, despite the company’s solid fourth-quarter results and raised 2025 revenue guidance. The brokerage acknowledged the company’s growth prospects but warned that the shares are now overvalued relative to its peers, with a target price increase to $55.

Upcoming data and events

Key economic data releases in the US for today include building permits, new home sales, and crude oil inventories. Earnings reports from major companies such as Nvidia, Salesforce, Snowflake, eBay, Deutsche Telekom, Lowe's, CRH, and Stellantis will also be in focus.

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