As markets prepare for Nvidia's first-quarter earnings due after Wednesday's bell, investors are expecting a meaningful reaction. Options pricing points to a 6.5% move in either direction for the chipmaker's shares - a percentage that may not be historic but translates into roughly $350 billion of market value, an amount larger than the combined worth of about 90% of firms in the S&P 500.
Nvidia, AI spending and elevated expectations
The surge in corporate capital expenditures tied to artificial intelligence reported through this earnings season makes it difficult to take a pessimistic view of what Nvidia might report. Yet the company faces an exceptionally high bar as elevated expectations have already pushed its stock roughly 18% higher this year. That backdrop leaves little room for disappointment.
Chip sector and regional moves
Not all semiconductor stocks are marching higher. South Korea's Samsung fell by just over 1% on Wednesday after its union said it would proceed with an 18-day strike beginning on Thursday. The broader KOSPI index slid 1.7%, and Japan's Nikkei declined about 1.5% on the session.
Bond market stress and policy scrutiny
U.S. equity indexes retreated again on Tuesday as renewed stress in the bond market pushed long-term yields up. Thirty-year Treasury yields spiked to their highest level since 2007, and 10-year yields rose to the highest point of the current presidential term so far. Market participants will be watching a 20-year Treasury auction later in the day for further signals.
The Federal Reserve's minutes from its April policy meeting are also due and could illuminate why three policymakers dissented over what was characterized as an apparent "easing bias" in the Fed's last statement. Fed futures show almost 80% odds priced in for at least one rate hike this year.
Oil, geopolitics and central bank dynamics
Brent crude continues to trade well above $100 a barrel, although it slipped back below $110 per barrel on Wednesday morning after the president again discussed prospects for an end to the Iran conflict. He tempered that with renewed threats of military action should talks fail to produce a peace deal.
Separately, talks between China’s president and Russia’s president began in Beijing, with potential coordination on energy emerging as a topic of interest to observers.
Political sentiment and consumer issues
A new poll shows the president's approval rating has dropped to nearly its lowest level since his return to the White House, driven in part by waning support among members of his own party. The poll indicates that 47% of Republicans approve of his handling of the cost of living, while 46% say he is doing a poor job on that issue. Overall, only about one in five Americans approve of his handling of inflation.
Events to watch today
- U.S. corporate earnings: Nvidia, Target
- U.S. 20-year Treasury bond auction - 1 p.m. EDT
- Release of the Federal Reserve's minutes from its April policy meeting
- Remarks by the Fed's Michael Barr
With AI-driven capital spending already highlighted in this reporting season and long-term yields moving higher, investors will be triangulating corporate news, auction results and central bank detail to determine near-term market direction.