ASX 200 to fall, S&P 500 stumbles on Nvidia earnings jitters + NAB, Rio Tinto results

ASX 200 futures are trading 21 points lower, down -0.28% as of 8:30 am AEDT.

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S&P 500 SESSION CHART

ASX TODAY

• Companies due to report today include Codan, Domino's Pizza, Iluka Resources, IRESS, National Storage REIT, Rio Tinto, Stockland, Star Entertainment, Super Retail Group, Santos, The Lottery Corp, Woolworths, Wisetech Global and more
• Iluka Resources reports 1H24 NPAT of $343m (-42% yoy) but above $290.4m consensus
• NAB reports 1Q24 cash profit of $1.80bn, down 16.9% year-on-year
• Corporate Travel reports 1H24 underlying NPAT of $57.9m (+162% yoy) which slightly missed consensus, declares interim dividend of 17 cents per share
• Rio Tinto FY23 consensus numbers include underlying earnings of $11.7bn, final dividend of US$4.23 per share and net debt of US$3.06bn
• Lendlease seeks Macquarie Capital to look at its options (The Australian)
• Judo Capital downgraded to Underperform from Neutral at Macquarie, target price cut to $1.00 from $1.05
• Sonic Healthcare downgraded to Underweight from Neutral at JPMorgan, target price cut to $26.00 from $30.00
• Baby Bunting downgraded to Neutral from Buy at Citi, target price cut to $1.70 from $2.15
• Hub24 downgraded to Market-weight from Overweight at Wilsons but target price increased to $42.63 from $40.00

MARKETS

• S&P 500 finishes lower but off worst levels of -1.01%
• Equal-weight S&P 500 held up much better, down just 0.23%
• Semiconductor stocks down 3-10% across the board, Nvidia down 4.4% marking its worst day since October 2023
• Stretched positioning and sentiment indicators remain one of the biggest near-term threats for stocks – BofA’s latest systematic flows monitor noted CTA long positions are likely near max levels
• January FOMC minutes due tomorrow morning, analyst previews expect it to show a pushback against market rate cut expectations, that the Fed is prepared to maintain current range for longer and reinforce hawkish bias given concerns around inflation
• Nvidia reports Q4 results tomorrow – Consensus is looking for US$20.4bn revenue and EPS of US$4.59, implying year-on-year growth of 237% and 422% respectively
• UBS lifts year-end S&P 500 target to 5,400 from prior 5,150 (and up from 4,850 in Dec-23), citing higher inflation trends as providing support for corporate pricing power (Reuters)
• Money market assets continue to climb in 2024 as high yields draw investors (Bloomberg)
• Iron ore slides as concerns over Chinese steel demand fester (Bloomberg)

STOCKS

• Capital One Financial to acquire Discover Financial Services for US$35bn (Bloomberg)
• Adobe's new AI assistant can search and summarise PDFs (CNBC)
• New York Times planning a spring rollout of a GenAI ad-targeting tool (Axios)
• Ford cuts Mustang Mach-E pricing after January sales slowdown (Bloomberg)
• Walmart hits all-time high on better-than-expected Q4 results (CNBC)
• Home Depot shares ease despite better-than-expected

CENTRAL BANKS

• RBA debated whether to hike cash rate by 25 bp at its February meeting (Bloomberg)

GEOPOLITICS

• Biden set to impose major sanctions on Russia for Navalny's death (NBC)
• Putin denies US intel report claiming Russia is developing nuclear space weapons (Bloomberg)
• West pressures Israel to stop planned offensive in Rafah (Reuters)
• Houthis claim to have shot down US drone while mounting strike on bulk carrier and forcing crew to abandon ship (NY Times)
• US weighing sanctions on Chinese companies suspected of aiding Russia (CNBC)

ECONOMY

• Canada's inflation rate slows more than expected to 2.9% in January, bolsters bets on an early rate cut (Reuters)
• ECB says Eurozone wage growth slowed in Q4, easing concerns that wage inflation could fuel a spike in inflation (Bloomberg)
• China 5-year LPR cut by more than expected (Bloomberg)
  
  

China Cut's Rates But Iron Ore Falters

China kept its 1-year one prime rate unchanged at 3.45% but unexpectedly cut its 5-year loan prime rate by 25 bps to 3.95% on Tuesday.

The 5-year is the reference rate used for mortgages, so the idea here is to lower household borrowing costs. Whereas the 1-year serves more like a benchmark for corporate borrowing costs.

The rate cut has failed to drive any gains for iron ore – It's done quite the opposite, with Singapore iron ore futures down 8.9% this week to US$119.60 a tonne. This undercuts year-to-date lows of US$125 a tonne and marks the lowest level since November 2023.

What's interesting is that our iron ore proxy Fortescue (ASX: FMG) has eased just 0.8% this week.

Nvidia and Semiconductor Nerves

Nvidia reports its Q4 earnings after US market close tomorrow and of course, expectations couldn't be any higher. We're already seeing some jitters kick in, with Nvidia shares down 6.0% in the last three sessions and Super Micro Computer (an industry player that almost tripled in market cap this year) down 22% in the last two sessions.

Here are some of the key numbers to watch in its Q4 results:

• Revenue growth of 237% to $20.4 billion
• EPS growth of 442% to $4.59
• Nvidia shares are up more than 50% since its last quarterly result, adding almost US$600 billion in market cap and surpass both Alphabet and Amazon
• Nvidia has topped revenue consensus expectations by an average of 14% over the last three quarters and beaten EPS expectations by an average 22.5%
• If Nvidia hits consensus expectations, Magnificent 7 stocks would have grown sales by 15% year-on-year, lifted margins by 582 bps and boosted earnings by 58%