Jensen Huang, co-founder and CEO of Nvidia Corp, during the Nvidia GPU Technology Conference (GTC) in San Jose, California, US, on Tuesday, March 19, 2024.
David Paul Morris | Bloomberg | Getty Images
This report is from today's CNBC Daily Open, the international markets newsletter. CNBC Daily Open keeps investors informed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
What you need to know today
Dow falls 600 points
The Dow Jones Industrial Average suffered its worst day of the year, falling more than 600 points on Thursday. Boeing led the decline on the Dow Jones. Despite reaching record intraday highs earlier, both the S&P 500 and Nasdaq Composite finished the day in negative territory. Nvidia's huge earnings and guidance failed to support markets, with more than 400 stocks trading lower in the S&P 500. Treasury yields extended gains as the Federal Reserve delayed interest rate cuts, while oil prices rebounded again after a three-day decline.
Nvidia pops up
Nvidia shares rose as much as 11% after the artificial intelligence chip maker's earnings beat Wall Street estimates. It also issued strong guidance as demand for AI accelerators remains strong. Shares topped $1,000 for the first time, reaching an all-time high of $1,063.20 during intraday trading, and are up nearly 111% this year.
Musk disagrees with Chinese tariffs on electric cars
Tesla CEO Elon Musk said he does not support tariffs on Chinese electric cars, which President Joe Biden imposed last week. “Neither Tesla nor I asked for these definitions,” Musk said in response to a question from CNBC's Karen Tsu. “Tesla competes well in the market in China with no tariffs or preferential subsidies. I support no tariffs.”
Boeing is sinking
Boeing shares fell 7.6% after Chief Financial Officer Brian West said the company would continue burning cash this year. New aircraft deliveries, a major source of revenue, will not improve in the second quarter. Boeing is facing a host of production issues related to safety concerns. The company spent nearly $4 billion in cash in the first quarter and West believes that number could be similar or “maybe a little worse” in the second quarter.
Asia-Pacific markets slide
Stocks in the Asia-Pacific region fell on Friday as investors weighed inflation data from Japan. The Nikkei 225 index fell 1% as inflation slowed for the second month in a row. While the Bank of Japan is under pressure to raise interest rates, inflation is expected to rise in the coming months. South Korea's Kospi fell 1% after a report said Samsung Electronics' new chip wasn't ready for Nvidia. Samsung shares fell by 2.4%. Hong Kong's Hang Seng Index fell 1.3%, China's CSI 300 Index fell 0.4%, and Australia's S&P/ASX 200 Index fell 1.1%.
(PRO) What's next for Nvidia?
Wall Street analysts are revising their price targets for Nvidia upward following its earnings and guidance. Some had feared demand would slow as Amazon and Microsoft wait for more powerful AI chips from Nvidia. Nvidia's decision to split its stock could provide more upside for investors.
Bottom line
Nvidia's huge earnings and forecasts couldn't stop Wall Street from falling of late. Nvidia held up well, with its stock closing above $1,000, up 9% on the day after reassuring investors that sales of its AI-enabled graphics chips were not just a flash in the pan.
What comes next for Nvidia is a 10-for-1 stock split; Post-split stock trading will begin on June 10. The stock split will help individual investors, put off by the stock price of more than $1,000, buy it for about $100. Nvidia shares are up more than 240% over the past 12 months.
CNBC's Ryan Ermey explains more about the psychology of the move and how the stock split mechanism works.
So what are the upset markets? According to a trader sentiment survey conducted by Charles Schwab, bullish expectations among traders fell to 46% from 53% in the second quarter.
“Traders started the year feeling very confident that the economy was improving and that federal interest rate cuts would quickly follow,” said James Costoulias, head of trading services at Charles Schwab. “But inflation fears have risen significantly.”
Before the latest minutes from the Fed's meeting, which signaled concern about stubborn inflation, some strategists estimated the Fed might cut interest rates at least three times this year as prices decline. Now, traders are lowering their expectations to just one cut, perhaps in September or November.
As the first-quarter earnings season approaches, investors are turning their attention to geopolitical concerns.
“The Fed has been very clear that they're not going to cut interest rates, so you don't have this, 'will they or won't they' scenario keep everyone on edge. We'll start to see that,” said Melissa Brown, managing director of applied research at the Fed. SimCorp: “Switching to some of these geopolitical things, whether that's an election or a couple of wars going on.”
Brown noted that while events such as the US and UK elections do not necessarily lead to economic impacts, they do increase uncertainty.
“People may go from saying, 'I'll just buy now' to, 'Look, I'll wait and see what this turns out to be before I decide to allocate more money to the market,'” Brown said.
The daily open will return on Tuesday as US markets will be closed for Memorial Day on Monday.
CNBC's Hakyung Kim, Samantha Sobin, Ryan Ermey, Jeff Cox, Sophie Kinderlein, Spencer Kimball, Ace Yildirim, Sarah Wheaton and Ryan Brown contributed to this report.
