Market Mulls Nvidia Results After Another Rally

0:00Here is the morning Schwab market update for Wednesday, February 25th. With magnificent seven names in the vanguard, Wall Street attempts to build on Tuesday's rebound, heading into NVIDIA's afternoon results. Before that, several Federal Reserve speakers pepper today's calendar and investors mull mixed results from home improvement retailer Lowe's. A solid outing from NVIDIA, if that is the case, might temporarily ease the anxiety that's torn through the markets or exacerbate it. For instance, if NVIDIA reports very strong revenue growth and raises guidance, as analysts expect, it could raise fears that Magnificent Seven's spending and debt levels continue to rise.

0:44If NVIDIA disappoints, it could suggest the AI spending spree might slow, possibly a pain point for chip stocks and the overall economy. Either way, NVIDIA shares might move sharply before Thursday's open, keeping volatility elevated. On Tuesday, major indexes advanced but stayed in their recent ranges. Software forged gains, courtesy of Anthropic, which said in a presentation it wants partnerships with the industry, not conflict, and demonstrated features allowing companies to integrate its clod agent. Though the presentation briefly allayed AI substitution fears, these concerns continue to drive underlying jitters and rotation, and it's hard to find other reasons why the market is being led by materials, staples, energy, and utilities.

1:32Those aren't sectors that drive innovation. They're defensive in nature and show investors feel stressed. Three things to watch today. Investors await not only NVIDIA later today, but also key software results from Salesforce and Snowflake. These bow at an inauspicious time for the slumping software sector, dogged for weeks by AI substitution fears in a sell-first, ask-questions-later trading environment. Investors gravitated away from these stocks in droves before yesterday's rebound, but hiding places were scarce as similar concerns dogged sectors as diverse as financial services and trucking.

2:14Whatever Salesforce and Snowflakes say today, it's not likely to be the end of the story. Software firms that reported strong results recently, including ServiceNow and Adobe, saw shares dragged down anyway. While their individual stories may not free Salesforce and Snowflake from the general carnage, the companies may use earnings calls to explain how they benefit from AI, something their cohorts have emphasized recently. Salesforce acquired two AI companies late last year, and investors might want to check for updates on their incorporation into the business as well as any other possible acquisition plans.

2:51Last time out, Salesforce delivered better-than-expected guidance but fell short of revenue expectations. Shave and a haircut was once a popular expression, but heading into NVIDIA's results, the phrase on many lips is beat and a raise. Analysts expect 72 % annual earnings growth to$1.53 per share and annual revenue growth of 68 % to$66.1 billion. That's all well and good, but for investors, the key is how much NVIDIA beats by and whether its guidance exceeds certain whisper numbers on Wall Street. Guidance that's in line would conceivably be read as bearish, perhaps a sign that the company can't expand its sizzling pace of growth.

3:36However, that stands to reason considering the law of large numbers. NVIDIA's revenue growth was in the triple digits a few years ago and now is in the high double digits, not unusual for any company, as comparisons with previous numbers toughen. Yesterday's announcement of a major AI deal between meta-platforms and NVIDIA competitor Advanced Micro Devices reinforces how competition can eat into market leaders' growth over time, though NVIDIA has several deals with major spenders, including Meta. Some things to monitor beneath the surface include capital spending trends, inventory levels, and customer concentration.

4:16After last Friday's Supreme Court ruling overturning many of President Trump's tariffs, some politicians suggest the administration should refund taxpayers. It's unclear if that will gain traction, but some corporations are already trying to claw back some of the$175 billion in tariffs they paid under a regime now declared illegal. Litigation is certain, said Michael Townsend, managing director of legislative and regulatory affairs at Schwab. Companies including Costco, FedEx, and Toyota are among dozens with pending litigation seeking refunds. This doesn't mean investors can expect any sort of quick resolution followed by perhaps seeing refunds show up in companies' quarterly reports.

5:01The Supreme Court left unsaid whether paybacks are required and lower courts will have to clarify how and when. Companies may be required to file burdensome paperwork to claim refunds, Townsend said. The process could take months or even years. Though a full list of what specific companies might be owed isn't available, FedEx said last fall that it expects a$1 billion hit in profits due to tariffs in 2026, not all of which are ones affected by the Supreme Court's decision. As far as stocks on the move, Lowe's suffered a 3 % setback before the opening bell, despite earnings per share beating analysts' estimates and revenue meeting consensus.

5:45The problem was guidance, which was below consensus for fiscal 2027 earnings per share. That appeared to outweigh a 10 % quarterly sales rise, at least for investors. GoDaddy plunged 17 % in early trading, even though quarterly earnings beat estimates. revenue met expectations, cautious guidance dragged shares, and bookings were below expectations in the fourth quarter. Workday crumbled 9 % despite earnings that beat estimates and revenue that matched consensus. Investors zeroed in on what analysts called poor guidance. In its call, the company pushed back on ideas that its technology could be replaced by AI.

6:30NVIDIA climbed 0.75 % early ahead of its earnings, but participants should keep in mind that shares of the AI giant have fallen after three of its last four earnings reports. Options trading suggests a possible 5 % swing in either direction for NVIDIA shares when it reports. Circle Internet Group catapulted 17 % in early trading after earnings easily beat analysts' expectations and annual revenue rose almost 77%. Kava Group zoomed up more than 9 % early today as investors munched on better-than-expected results from the restaurant company. They also appeared to find its outlook appetizing as Kava guided for same-store annual sales growth between 3 % and 5 % in fiscal 2026.

7:19First Solar shares dove 15 % in early action as the solar energy firm came up short with full-year sales guidance. In its release, the company referred to a rapidly evolving environment. Oracle climbed 2.5 % in early action after receiving an upgrade to Outperform from Perform by Oppenheimer. The firm argued that Oracle is a strong earnings-per-share compounder and AI winner. PayPal moved up 7 % Tuesday after Bloomberg reported that payments processor Stripe had expressed interest in PayPal. Stripe is a private firm. Salesforce led software names with a 4 % rise Tuesday ahead of its earnings later today.

8:04Other software names on the climb Tuesday included Adobe and AppLevin. A five-year Treasury note auction takes place this morning. Yesterday's two-year auction demand was slightly soft, Briefing.com noted, sending short-term yields higher Tuesday but keeping the tenure unchanged at 4.03%. That's the lowest since late November and has helped the yield curve flatten noticeably over the last week. This might be one source of pressure on financial stocks. The SIBO Volatility Index, or VIX, still hovers near 20, which could reflect investor weariness and indicates that the next breakout of the current 6 ,800 to 7 ,000 range for the S &P 500 index might be lower.

8:50Demand for downside protection remains high and investors are paying up for this. Any move below the 6 ,080 to 6 ,800 range could lead to deeper sell-offs. Bitcoin gained 2.5 % early Wednesday as risk on sentiment improved but remained not far above recent lows. Crypto-related stocks, including Coinbase and Strategy, also climbed ahead of the open. Chances of a Fed rate cut in March are almost nil, according to the CME FedWatch tool. Odds of at least one cut by June are near 50-50, but down over the last week. For now, the Fed looks to be on hold, said Kathy Jones, chief fixed-income strategist at the Schwab Center for Financial Research.

9:35The labor market is the key to future rate moves. Currently, while hiring is slow, the unemployment rate remains quite low. Consequently, there isn't a big motivation for the Fed to change policy near term. While Magnificent 7 earnings have generally continued to look impressive, they're the Rodney Danger field of the market, with their shares getting little respect after they report. Find out why in Schwab's new analysis. Understanding the intricacies of corporate balance sheets can help investors glean underlying trends and spot issues. You can learn more how to pore over these important documents in our latest video.

10:19Looking to the upcoming calendar, tomorrow brings earnings from Warner Brothers Discovery, Vistra, Intuit, Dell, Autodesk, and CoreWeave. The week will round out with the January Producer Price Index, or PPI, and Core PPI. Monday, March 2nd, offers January construction spending and the February ISM manufacturing PMI, as well as earnings from MongoDB. Tuesday, March 3rd, will bring earnings from AutoZone, Target, Best Buy, CrowdStrike, and Ross stores. And midweek, we will get the February ADP employment report, the February ISM services PMI, the Fed Beige Book, and earnings from Broadcom.