The U.S. stock market was closed Monday for the Presidents' Day holiday, and investors returned Tuesday with a risk-off mindset. Indeed, the three main indexes closed today with losses ahead of what will be a busy few days on Wall Street.
Most notably is tomorrow night's earnings event from artificial intelligence (AI) chipmaker Nvidia (NVDA). The mega-cap stock has been a market leader over the past 18 months, surging more than fivefold in that time frame amid optimism over sizzling demand for its generative AI chips.
"There aren't enough superlatives to describe the run the stock has been on since its 2022 lows," says Jay Woods, chief global strategist at Freedom Capital Markets.
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Today, though, NVDA slumped 4.4% – losing $78 billion in market value along the way. To put this figure in perspective, that's roughly equivalent to the total market cap of carmaker Stellantis (STLA, -1.1%). The pullback likely comes as investors take profits off the table ahead of the chipmaker's turn in the earnings spotlight.
But investors shouldn't worry about the mega cap's longer-term momentum. According to S&P Global Market Intelligence, analysts expect the company to generate average annual earnings growth of almost 44% over the next 3 to 5 years.
Home Depot reports Q4 beat, boosts dividend
However, Nvidia isn't the only notable name on this week's earnings calendar. Ahead of today's open, results from blue chip stocks Home Depot (HD, +0.06%) and Walmart (WMT, +3.2%) gave investors another check on how retailers and the consumer are faring as interest rates remain high and inflation stays sticky.
Home Depot beat on both the top and bottom lines for its fourth quarter, although its guidance for full-year sales growth of 1% came in below analysts' estimates. The company also hiked its quarterly dividend by 7.7%.
"While it's promising that Home Depot beat earnings, these results are a disappointing end to Q4 and suggest that 2024 may be off to a slower start for the home improvement industry," says Jon Bostock, a home improvement industry expert and CEO at Leaf Home. Still, Bostock is optimistic that the spring and summer real estate market will be strong, and we'll see a rise in sales and spending.
"As boomers start to offload their homes, we'll see an increase in home improvement spending as millennials who are buying boomers' homes make necessary updates," he adds.
Walmart reports strong Q4 results, Vizio acquisition
Walmart, meanwhile, reported higher-than-expected fourth-quarter earnings and revenue. The company also said e-commerce revenue surged 23% over the three-month period, with total sales for the full year topping $23 billion.
Additionally, Walmart said it will buy smart TV maker Vizio for $2.3 billion. In the retailer's earnings call, CEO Doug McMillon said the acquisition will give WMT "the opportunity to reach and serve customers in new ways and connect more dots for those that advertise with us." The Dow Jones stock will undergo a 3-for-1 stock split after Friday's close.
Discover jumps on Capital One buyout buzz
In non-earnings news, Discover Financial Services (DFS) spiked 12.6% after Capital One Financial (COF, +0.1%) said it will buy the credit card company in an all-stock deal valued at $35 billion. The acquisition of DFS will help COF "build a payments network that can compete with the largest payments networks and payments companies," said Capital One CEO Richard Fairbank in a press release.
Still, the merger's not a done deal. Investors should prepare for a longer regulatory discussion, says Kevin Kennedy, analyst at global research firm Third Bridge. "On one hand, it benefits the proponents of the Credit Card Competition Act in providing an alternative routing option to Visa (V, -1.2%) and Mastercard (MA, -3.5%)," Kennedy says. "On the other hand, it significantly consolidates the credit card lending industry in a way that could reverberate antitrust rhetoric from the Federal Trade Commission."
As for the main indexes, the Nasdaq Composite slumped 0.9% to 15,630, the S&P 500 shed 0.6% to 4,975, and the Dow Jones Industrial Average finished 0.2% lower at 38,563.
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