Nasdaq poised to fall 1% at the open as Nvidia weighs on stock market, chip makers

U.S. stock indexes on Friday were poised to end a volatile week of trade on a low note as a decline in shares of chip maker Nvidia helped to dent sentiment in the technology sector, pressuring the Nasdaq-100.

How did the benchmarks fare?

Futures for the Nasdaq-100 NQZ8, -1.06% were down 73 points, or 1%, at 6,842, those for the Dow Jones Industrial Average YMZ8, -0.40% were off 142 points, or 0.6%, at 25,162, while S&P 500 index futures ESZ8, -0.49% were declining 16.75 points to reach 2,718, a drop of 0.6%.

On Thursday, the Dow DJIA, -0.45% avoided a five-day skid to climb 208.77 points, or 0.8%, to 25,289.27, while the S&P 500 index SPX, -0.55% snapped a five-day slide to rise 28.62 points, or 1.1%, to 2,730.20. The Nasdaq Composite Index COMP, -1.13% added 122.64 points, or 1.7%, to 7,259.03.

For the week, the Dow is set to post a loss of 2.7%, the S&P 500 is on track to decline by 1.8%, while the Nasdaq is set to decline 2% on the week, as of Thursday’s close of trade.

What drove the market?

Shares of Nvidia Corp. were declining in premarket trade after reporting disappointing quarterly results late Thursday, contributing to a week filled with negative triggers.

Meanwhile, investors were closely watching developments in the U.K., with Prime Minister Theresa May defiantly pledging her commitment to seeing Britain’s exit from out of the European Union, despite several top-level resignations and growing doubts about her leadership.

Although the events are playing out about 3,460 miles away from Wall Street, the dilemma—should it result in a hard Brexit, or no trade pact for the U.K.—could roil the financial world, some market participants believe.

On top of that, Brexit drama may compound concerns about slowing global growth, after the German government announced Wednesday that its economy contracted in the third quarter for the first time in three years. That follows on a similar report out of Japan this week, which also showed the world’s third-largest economy contracting in the third quarter

Uncertainties around tariff spats between the U.S. and China, however, remain the centerpiece of anxieties for market participants. Throughout the week, quickly shifting narratives around progress in negotiations have whipsawed equity benchmarks.

U.S. Trade Representative Robert Lighthizer’s office on Thursday denied reports that he had told a few people that the next batches of tariffs have been put on hold, which had been an early driver for the session’s climb.

What stocks were in focus?

Nvidia‘s stock NVDA, -18.70% was hit hard in after-hours trade Thursday and remained down 18.1% in premarket trade Friday, following a 2.6% rise Thursday, to close the regular session at $202.39. Nvidia shares had already declined 21.9% in the past three months, as the PHLX Semiconductor Index SOX, +3.34% a popular product for wagering on semiconductor shares, has declined 7.4%.

The Nvidia selloff was sparked by a Thursday-evening earnings release by the company, which showed it missing revenue expectations for the third quarter and issuing forward guidance well below expectations. The selling was compounded by Stifel Nicolaus cutting its price target for the firm from $200 to $250.

Shares chip maker Advanced Micro Devices Inc. AMD, -6.65% also decline in sympathy before the bell Friday.

Nordstrom, Inc.’s stock JWN, -13.71% was tumbling nearly 12% in premarket trade, after the retailer reported earnings for the third quarter well below analysts expectations.

California utilities PG&E Corp. PCG, +30.55% and Edison International EIX, +12.62% are surging in premarket trade after investors fled these stocks earlier in the week on concerns that these companies may be held responsible for the deadly, ongoing wildfires in California.

Investors were soothed by assurances by California State Public Utilities Commission President Michael Picker, made in an interview with Bloomberg, that the state would be very reluctant to allow these firms to go bankrupt. PG&E shares are up more than 46% in premarket action, while Edison International stock is rising 12.3%.

Applied Materials Inc. AMAT, -4.11% stock is in focus, after the company reported guidance Thursday evening that fell short of Wall Street’s hopes. The stock is down 9.8% in premarket action.

Shares of Viacom Inc. VIA, +1.17% are up 3.6% before the open, following a Friday-morning earnings report that showed the media giant beating earnings and sales expectations for the fiscal fourth quarter.

What are strategists saying?

Expect the tech sector to have a bad end to the week after dismal Nvidia earnings, Joel Kulina, analyst at Wedbush Securities, wrote in a note to clients.

Tech sentiment remains very fragile, and rightfully so, given deteriorating trends across multiple end markets, and it’s becoming increasingly clear that many co’s across tech are experiencing declining visibility,” Kulina wrote, warning that in the near-term tech investors should stick to the strategy “rallies are to be sold.”

Theresa May had a disastrous day yesterday, and investors are still on edge over the political situation in the UK,” wrote David Madden, market analyst at CMC Markets U.K.

 

/marketwatch.com

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