Traders work on the floor at the New York Stock Exchange on Feb. 7, 2024.
Brendan Mcdermid | Reuters
U.S. stocks ticked down for a third day in a row Wednesday as traders looked ahead to Nvidia’s latest quarterly earnings report.
The Dow Jones Industrial Average traded 111 points lower, or 0.3%. The S&P 500 slipped 0.3%, and the Nasdaq Composite slid 0.6%.
Nvidia is slated to post its fiscal fourth-quarter results after the bell. Concerns surrounding Nvidia’s high valuation have grown leading up to the announcement, as shares of the chipmaker have soared about 230% over the past year.
The broader tech sector is now overvalued, according to Alex McGrath, chief investment officer at NorthEnd Private Wealth. He thinks Tuesday’s sell-off of Nvidia and other big tech names could mean investors are coming to terms with “the greater fool theory” â that is, when overvalued assets continue to rise because there are enough investors willing to pay more, until there aren’t any more left.Â
“People continued to pay higher and higher prices for the tech sector throughout [the rally]. It had to have been a core asset allocation, but as you get longer and longer into this, the biggest question is: When do you start to trim?” McGrath said. “And with the Nvidia action today, I think that’s what you’re seeing.”Â
Elsewhere in corporate news, Palo Alto Networks shed more than 26% after the cybersecurity company cut its full-year revenue guidance. SolarEdge Technologies lost 15%, dropping on weak first-quarter guidance.
Wall Street will also have an eye out for the minutes from the Federal Reserve’s January meeting, seeking further insight on where the central bank stands on rates. This comes on the back of hotter-than-expected economic data the previous week.
