US stocks fall as retail earnings disappoint, Nvidia results on deck
Stocks fell on Tuesday, signaling a pause in the November rally as investors awaited results from AI chipmaker Nvidia (NVDA) and the release of Federal Reserve minutes.
As of mid-morning trading, the benchmark S&P 500 (^GSPC) dipped around 0.4%, after the stock gauge closed at its highest level since August. The Dow Jones Industrial Average (^DJI) and tech-heavy Nasdaq Composite (^IXIC) also fell, dropping roughly 0.3% and 0.9%, respectively.
Retail earnings disappointed with shares of companies like Lowe’s (LOW), Best Buy (BBY), American Eagle Outfitters (AEO), and Khol’s (KSS) dropping on Tuesday as a pullback in consumer spending clouded forecasts and registered a hit to sales.
Looking ahead, eyes will be on Nvidia’s quarterly report for an update on the fundamentals behind the AI hype cycle, after the company’s stock notched at a record close on Monday. Expectations are high as the chip giant has become the face of the 2023 AI story, after its last earnings spurred a rally in stocks.
Microsoft’s shares were flat in early trading on Tuesday, after ending Monday’s session at a record high following its recruitment of the abruptly ousted OpenAI CEO. Wall Street saw the tech giant’s move as boosting its AI prospects, which could be buoyed if it ends up benefiting from a threatened exodus of OpenAI employees.
Investors are also watching for minutes from the Fed’s last rate-setting meeting, amid a debate over whether the rate-cut optimism that has powered the stock rally is overdone. In a holiday-shortened week light on economic data, the comments will be closely scrutinized for any hints to policymakers’ thinking.
OpenAI saga: Could Sam Altman return?
The OpenAI drama continued on Tuesday as investors of the ChatGDPT maker said they want to lure ousted Sam Altman back to the company.
According to Bloomberg, Thrive Capital, Khsola Ventures and Tiger Global Management are looking to protect their investments after more than two-thirds of OpenAI’s employees reportedly threatened to resign over Altman’s ousting.
Microsoft (MSFT) CEO Satya Nadella hinted he was open to the idea, despite the company recruiting Altman to lead an in-house AI division. Still, certain stipulations would have to be met, including the resignation of the startup’s current board, along with a change to OpenAI’s governance, according to the report.
“Irrespective of where Sam is, he’s working with Microsoft,” Nadella said in an interview on Monday.
As Yahoo Finance’s Julie Hyman pointed out, this story has massive implications for investors, particularly those who hold Microsoft shares. Microsoft stock closed at a record high on Monday as Wall Street cheered the move to bring Altman fully into the company. At this point, though, TBD if he stays.
Retail earnings disappoint … just ahead of Black Friday
It wasn’t a great earnings season for some retailers as a pullback in consumer spending clouded forecasts and registered a hit to sales. Here’s a roundup of what you should know:
Lowe’s (LOW): Shares of the home improvement giant dipped about 3% after the company cut its full-year outlook amid a decline in consumer spending. Third quarter sales sank 13% while comparable sales fell 7.4%. Lowe’s CEO Marvin Ellison blamed the performance on do-it-yourself, or DIY, customers, who spent less than expected on big-ticket items. “The DIY pressure disproportionately impacted our third quarter comp performance,” he said. Shares of competitor Home Depot (HD) also dropped on the news.
Best Buy (BBY): Shares of the electronics retailer dropped about 4% in early trading after the company posted mixed earnings results with net sales that missed expectations. Best Buy CEO Corrie Barry said in the release that “consumer demand has been even more uneven and difficult to predict.” Yahoo Finance’s Brooke DiPalma has you covered with the full breakdown here.
American Eagle Outfitters (AEO): Despite beating Q3 earnings estimates, shares of the young adult retailer plummeted nearly 20% on Tuesday after its Q4 operating income forecast disappointed investors. The company said it expects fourth quarter operating income to come in a range of $105 million to $115 million. Analysts had expected $114 million. Competitor Abercrombie & Fitch (ANF) also saw shares decline, despite beating earnings estimates and raising its 2024 outlook, as investors demand more from the company’s turnaround plan.
Kohl’s (KSS): The department store saw shares drop more than 10% after reporting declining sales, despite a beat on earnings. Net sales decreased 5.2% while comparable sales fell 5.5%. The company cut its full-year sales forecast by 2.8% to 4%, but did raise its full-year EPS forecast.
Dick’s Sporting Goods (DKS): Bucking other retailers, shares surged about 10% after the company reported a third quarter earnings beat and raised its full-year outlook amid strong demand for sports gear. The strong results come after the company battled retail theft and profit pullbacks in 2023.
Stocks fall at open
Stocks fell on Tuesday with the tech-heavy Nasdaq Composite (^IXIC) leading the early morning declines, down about 0.6% shortly after the opening bell, while the benchmark S&P 500 (^GSPC) dipped around 0.3%. The moves come after both indexes closed at their highest levels since August.
The Dow Jones Industrial Average (^DJI), meanwhile, dropped more than 0.1% as the yield on the 10-year Treasury note ticked down about 1 basis point to trade near 4.41%.
Stock futures fall to signal pause in rally
Stocks on Wall Street pointed to a lower open on Tuesday after closing with gains, with earnings from AI chipmaker Nvidia and Federal Reserve minutes ahead.