- The rally in equities reversed when the US reported upbeat consumer and wholesale inflation figures.
- The Fed might implement its first rate cut later than June.
- Nvidia fell as investors got nervous ahead of its earnings report.
Equities closed lower on Tuesday as investors continued to absorb the shock of higher-than-expected US inflation. US markets stayed closed on Monday due to a holiday. Meanwhile, last week, the rally in equities reversed when the US reported upbeat consumer and wholesale inflation figures. As a result, investors lost hope of early Fed rate cuts and pushed back expectations for the first cut to June. Moreover, the possible size of cuts expected from the Fed in 2024 fell to about 90-bps.
According to a Reuters poll on Tuesday, the Fed might implement its first rate cut later than June. Moreover, inflation will likely take time before reaching the 2% target, so the Fed will be slow to cut rates when it starts.
This week, investors will focus on the FOMC meeting minutes and speeches from Fed officials for more clues on the Fed’s policy outlook.
Meanwhile, on individual stocks, there was a mixed performance. Nvidia was the biggest decliner, contributing to the lower close in equities. The tech giant fell as investors got nervous ahead of its earnings report.
Nvidia (Source: Bloomberg)
Recently, Nvidia has risen to new heights, becoming the third most valuable company. All this is because of its focus on AI, which has drawn a lot of investment and optimism. However, investors are worried the company might be overvalued. Therefore, a poorer-than-expected earnings report could lead to a significant decline. Additionally, some inventors chose to play it safe by locking in profits, leading to a pullback in the stock.
In the retail sector, there was mixed performance, with Walmart making significant gains while Home Depot declined. As inflation remained high towards the end of 2023, consumers avoided big projects requiring big spending. Consequently, Home Depot reported a larger-than-expected drop in sales. Moreover, the company projected more sales declines in 2024, which saw its stock plummet.
On the other hand, Walmart surged after reporting robust Q4 earnings. While consumers avoided big spending, they flocked to Walmart for cheaper food products during the holiday season. Notably, Walmart kept cutting the price of food products in 2023 to attract customers. Moreover, the company expects better sales in 2025, beating Wall Street estimates. Another positive development for the company was an increase of 9% in its annual dividend.
