Stock futures slip after major averages incur back-to-back losses ...
Traders work on the floor at the New York Stock Exchange on Feb. 7, 2024.
Brendan Mcdermid | Reuters
U.S. stock futures ticked down Wednesday morning after the major averages incurred a second day of losses, fueled by a decline in Nvidia.
Nasdaq 100 futures shed 0.6%. Futures tied to the Dow Jones Industrial Average slipped 84 points, or about 0.2%. S&P 500 futures declined by 0.3%.
In premarket action, Palo Alto Networks shed more than 22% after the cybersecurity company cut its full-year revenue guidance. SolarEdge Technologies lost more than 19%, dropping on weak first-quarter guidance..
A slump in Nvidia — which slid more than 4% Tuesday and was off another 1.7% in the premarket Wednesday — weighed on the Nasdaq and S&P 500 as sentiment soured the day before the chip giant is expected to post its quarterly results. Concerns surrounding Nvidia's high valuation have grown leading up to the company's earnings announcement, slated for Wednesday after the bell. The stock has soared about 225% over the past year.
The broader tech sector is now overvalued, according to Alex McGrath, chief investment officer at NorthEnd Private Wealth. He thinks Tuesday's sell-off of Nvidia and other big tech names could mean investors are coming to terms with "the greater fool theory" — that is, when overvalued assets continue to rise because there are enough investors willing to pay more, until there aren't any more left.
"People continued to pay higher and higher prices for the tech sector throughout [the rally]. It had to have been a core asset allocation, but as you get longer and longer into this, the biggest question is: When do you start to trim?" McGrath said. "And with the Nvidia action today, I think that's what you're seeing."
On Wednesday, Wall Street will also have an eye out for the minutes from the Federal Reserve's January meeting, seeking further insight on where the central bank stands on rates. This comes on the back of hotter-than-expected economic data the previous week.
Other companies slated to announce their quarterly results Wednesday include HSBC, Wingstop and Analog Devices before the bell. In addition to Nvidia, Etsy will also report its results in the afternoon.
In other market news, Amazon shares rose 1% premarket following news that it will replace Walgreens Boots Alliance next week in the Dow. Walgreens shed roughly 3%.
During the regular session, the three major averages had slid, dragged lower by tech. The Nasdaq Composite lost 0.92%, while the S&P 500 fell 0.6%. The 30-stock Dow fell 0.17%
Teladoc shares dropped more than 20% before the bell on Wednesday, the morning after the online health-care company posted worse-than-expected revenue and guidance.
The company reported $661 million in revenue, below the $671 million forecast of analysts polled by LSEG. However, Teladoc saw a loss of 17 cents per share, smaller than the 21-cent figure anticipated by analysts surveyed.
For the current quarter, Teladoc guided revenue between $630 million to $645 million. That's lower than the estimate of $673 million from analysts, per LSEG.
Teladoc shares have dropped almost 5% so far in 2024, underperforming the broader market.
— Alex Harring
SolarEdge shares dropped 20% in the premarket after the company posted mixed quarterly results. The solar inverter maker posted fourth-quarter revenue of $316 million, less than an LSEG estimate of $354 million. It also reported a smaller-than-expected loss for the quarter.
However, first-quarter revenue guidance came in well below analyst expectations.
— Fred Imbert
Check out the companies making headlines after the bell.
Palo Alto Networks – Shares declined nearly 19% after the cybersecurity company's full-year guidance missed expectations. Palo Alto Networks said it predicts full-year revenue growth of 15% to 16%, down from earlier guidance of 18% to 19% growth. The company also reduced its full-year billings forecast. Meanwhile, adjusted earnings and revenue in the fiscal second quarter topped analysts' estimates.
Diamondback Energy — Shares gained 1.6% after the energy company beat on both top- and bottom-lines in the fourth quarter. Diamondback posted adjusted earnings of $4.74 per share on $2.23 billion in revenue. Analysts polled by LSEG had forecasted $4.66 in earnings per share on revenue of $2.17 billion.
Caesars Entertainment — The hotel and resorts stock lost more than 1% after posting a revenue miss in the prior quarter. Caesars reported $2.83 billion in revenue while analysts had estimated $2.85 billion, according to LSEG.
— Hakyung Kim
