Premarket: U.S. stock futures steady in lead-up to Nvidia test

U.S. stock index futures were slightly higher on Wednesday, having clocked declines at the start of the week, with investor focus on Nvidia’s earnings later in the day which could prove to be a make-or-break moment for the AI trade.

Nvidia’s earnings, which are due after markets close on Wednesday, are seen as a litmus test for the AI-driven rally that has pushed markets to record highs this year.

Options data from analytics firm Option Research & Technology Services (ORATS) showed an implied move of about 7 per cent for the stock in either direction after the results.

A Reuters analysis found the options-implied move would represent the largest one-day market value change following earnings for the company.

Societe Generale analysts note Nvidia’s earnings come “at a juncture of increased fragility over the outlook, with valuations under pressure as we move closer to year end.”

Shares of the AI giant inched 0.4 per cent higher in premarket trading after falling about 4.6 per cent in the last two sessions.

Other megacap and growth stocks traded in the flat-to-higher band, with Alphabet leading gains at a 1.5 per cent rise.

At 5:14 a.m. ET, S&P 500 E-minis were up 17 points, or 0.26 per cent, Nasdaq 100 E-minis were up 74 points, or 0.3 per cent, and Dow E-minis were up 49 points, or 0.11 per cent.

Heading into the last leg of the quarterly earnings season, results from big-box retailer Target are due before the bell on Wednesday. Rival Walmart is also scheduled to report later this week.

Concerns over high valuations and dwindling expectations of a December interest rate cut have hit the U.S. stocks’ rally off late, with the S&P 500 recording its fourth consecutive day of losses on Tuesday.

As of last close, the U.S. benchmark has dropped nearly 4.4 per cent from its October peak and stands 12.5 per cent higher on a year-to-date basis.

Speaking to Bloomberg News on Tuesday, Goldman Sachs Group President John Waldron said the markets are primed for possible further declines.

The S&P 500 and the Nasdaq both closed below their 50-day moving averages earlier this week, an important technical threshold, for the first time since late April.

Later in the day, minutes from the Fed’s October policy meeting – where the central bank cut rates by an expected 25-basis-points – would be on investors’ radar.

At least three Fed officials, including New York Fed President John Williams, are scheduled to speak throughout the day.

On Thursday, the September U.S. jobs report would be in focus after being delayed because of the long government shutdown, but it may do little more than confirm earlier private market surveys pointing to a cooling labor market.

Among early moving stocks, DoorDash rose 2.7 per cent after Jefferies upgraded its rating on the online food delivery platform to “buy” from “hold.”

Global shares fell for a fifth day on Wednesday, after another selloff driven by nerves over AI valuations, although the mood was cautious ahead of what could be make-or-break earnings from chip titan Nvidia and U.S. jobs data this week.

The STOXX 600 fell 0.2 per cent, having fallen 4 per cent from record highs less than a week ago, while in Asia, Japan’s Nikkei ended the day down 0.34 per cent, bringing losses for November so far, in U.S. dollar terms, to 7 per cent.

MSCI’s All-World index was down another 0.1 per cent, easing for a fifth straight session in its longest stretch of daily losses since August.

Nvidia results could set the tone for risk sentiment for the near term, and not just in equities.

“Given the current positive correlation between equities and the dollar (which reflects perhaps the renewed concerns over a tech/AI-specific correction hitting the broader U.S. economy) a bad earnings report this evening could drive the dollar weaker,” MUFG strategist Lee Hardman said, adding that the focus would likely then rapidly pivot to Thursday’s delayed U.S. employment data.

The dollar has fallen by 8.1 per cent this year, heading for its worst performance against a basket of currencies since 2017. Year-to-date losses topped more than 10 per cent in October, but the dollar has been steadily clawing higher since then, as uncertainty over the economic outlook and persistent inflation have tempered expectations for rate cuts and the stock market bull run has started to stall.

The Japanese yen, which was trading around 155.64 on Wednesday, has given up almost all of this year’s gains against the dollar and prompted officials in Tokyo to warn about the prospect of intervention.

Investors also worry that U.S. President Donald Trump’s falling approval rating could drive fiscal spending and possibly stoke inflation, which has kept safe-haven U.S. Treasuries in check. The benchmark 10-year note was steady at 4.12 per cent, having barely moved so far this month.

Markets are pricing about a 42 per cent chance of a 25-basis point Federal Reserve rate cut in December, something that was priced as a near certainty a month ago.

Meanwhile bitcoin has recovered slightly from Tuesday’s seven-month lows to trade at $91,400. That’s still down about 27 per cent from October’s record high.

“BTC has erased this year’s gains and then some, meaning anybody who acquired in the past 10 months is underwater,” said Justin d’Anethan, head of research at Arctic Digital, a crypto investment and advisory firm.

In commodities, gold, which scaled record highs alongside stocks in October, has also fallen. It was last up 0.4 per cent at $4,080 an ounce, while Brent crude futures eased 0.76 per cent to $64.41 a barrel and soybean futures traded around 17-month highs after China made hefty purchases of U.S. supplies.

Reuters