U.S. stock futures saw mixed movements early Monday as investors brace for important earnings reports and navigate the fallout from last week’s market volatility. While Dow Jones futures edged lower, S&P 500 and Nasdaq futures made modest gains. Eyes are particularly on Nvidia, with the AI chip giant’s earnings report looming large in the week ahead.
Trump Trade Falters Amid Market Decline
The stock market rally sparked by expectations of pro-business policies under President-elect Donald Trump began to lose momentum last week. Major indexes suffered steep losses, particularly on Friday, as they tested or breached key support levels. A number of leading stocks experienced sharp declines or reversed course, particularly around earnings season.
The Dow Jones Industrial Average fell 1.2%, while the S&P 500 dropped 2.1%, and the Nasdaq lost 3.15%. The small-cap Russell 2000 tumbled 4%. These moves marked a significant pullback from the earlier market highs, as the S&P 500 closed just below its 21-day moving average, and the Nasdaq dropped beneath this key level. The Russell 2000 managed to hold its position above its moving average, but this shift signals potential volatility.
For investors, this is a time to be cautious. With many stocks reversing gains or underperforming, experts advise against making new buys in the short term. Reducing exposure to underperforming assets and trimming positions in stocks that have seen their gains erode are seen as prudent steps.
Nvidia Earnings and Guidance Key for AI Sector
Nvidia’s earnings report, due Wednesday, is poised to be a major market catalyst. The company, a leader in artificial intelligence chips, is expected to report a significant 87.5% increase in earnings to 75 cents per share, with revenue rising 83% to $33.09 billion. These numbers would mark the end of a five-quarter streak of triple-digit growth, though analyst expectations suggest even higher “whisper” numbers.
The focus will be on Nvidia’s guidance for the future, particularly its new Blackwell AI processors, which are set to begin shipments soon. The company has also been addressing concerns over overheating issues when these chips are used with older server racks. Investors will closely monitor how Nvidia plans to ramp up production and resolve any potential technical setbacks.
Nvidia’s stock fell 3.8% last week, driven primarily by a sharp decline on Friday. Despite the drop, shares held above their consolidation buy point and key moving averages. Nvidia’s performance in the coming days will be critical for both the AI sector and the broader market, with companies like Broadcom and Taiwan Semiconductor also heavily dependent on Nvidia’s trajectory.
Super Micro Faces Nasdaq Delisting Deadline
Super Micro Computer, a key partner of Nvidia, experienced a surge in its stock price after reports surfaced that the AI server maker plans to submit a plan by Monday to avoid delisting from the Nasdaq. The company, which has faced accounting challenges, must submit a plan to address financial reporting deficiencies. The deadline for filing is today, and failure to comply could result in Super Micro’s removal from the exchange. The stock has plummeted 84.9% from its March peak, raising concerns among investors.
Sector Movements and ETFs
In the ETF market, the VanEck Vectors Semiconductor ETF (SMH) saw a sharp 7.5% drop last week, largely due to declines in Nvidia and Taiwan Semiconductor stocks. Meanwhile, the SPDR S&P 500 Metals & Mining ETF (XME) fell 6.1%, and the SPDR S&P Homebuilders ETF (XHB) dropped 2.6%, as rising Treasury yields continued to impact housing and construction stocks.
Conversely, the Financial Select Sector SPDR ETF (XLF) rose 1.4%, reflecting strength in the financial sector. The Energy Select Sector SPDR ETF (XLE) advanced 1%, though it was the exception in a week marked by broader losses.
What Investors Should Do Now
The outlook for the stock market is uncertain as major indexes face key support levels. With the market’s future direction unclear, investors are advised to exercise caution. Avoiding new buys and reducing exposure to underperforming stocks is seen as the best strategy in the short term.
Additionally, investors are encouraged to refine their watchlists and prepare for potential opportunities should the market stabilize. Key sectors to monitor include AI, technology, and cybersecurity, with Nvidia and Palo Alto Networks (PANW) standing out among the leaders in these areas.
While the market’s current state is volatile, focusing on strong fundamentals and setting clear exit strategies for existing positions will help investors navigate this uncertain environment.
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