Dow falls 600 points, Nvidia soars

Dow falls 600 points, Nvidia soars

NVIDIA Founder and CEO Jensen Huang delivers a keynote speech on the latest innovations in artificial intelligence during a developer conference at the SAP Center in San Jose, California, on March 18, 2024.

Josh Edelson | AFP | fake images

This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. You like what you see? You can subscribe here.

The Dow Jones 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 of the Dow Jones. Despite previously hitting all-time intraday highs, both the S&P 500 and Nasdaq Composite ended the day in negative territory. Nvidia’s successful earnings and guidance failed to shore up markets, with more than 400 stocks in the S&P 500 trading lower. Treasury yields extended gains as the Federal Reserve delays rate cuts, while oil prices rebounded after a three-day slide.

Nvidia appears
Nvidia shares soared as much as 11% after the AI ​​chip maker’s earnings beat Wall Street estimates. It also issued strong guidance as demand for its AI accelerators remains strong. Shares broke above $1,000 for the first time, hitting an all-time high of $1,063.20 during intraday trading, and are up about 111% this year.

Musk disapproves of tariffs on China’s electric vehicles
Tesla CEO Elon Musk said he is not in favor of tariffs on Chinese electric vehicles, which were imposed last week by President Joe Biden. “Neither Tesla nor I asked for these tariffs,” Musk said in response to a question from CNBC’s Karen Tso. “Tesla competes quite well in the Chinese market without tariffs or preferential support. I am in favor of having no tariffs.”

Boeing sinks
Boeing shares fell 7.6% after Chief Financial Officer Brian West said the company would continue to burn cash this year. Deliveries of new aircraft, a major source of revenue, will not improve in the second quarter. Boeing is facing a number of production problems related to safety issues. The company burned through nearly $4 billion in cash in the first quarter and West believes that figure could be similar or “possibly a little worse” in the second quarter.

The United States sues Live Nation
The US Department of Justice, along with 30 states, has sued to dissolve Live Nation, Ticketmaster’s parent company, alleging monopolistic practices. Attorney General Merrick Garland asserted that Live Nation’s anticompetitive conduct harms smaller fans, artists and promoters, resulting in higher fees and fewer opportunities. Live Nation disputes the “absurd” claims, blaming rising ticket prices on factors such as production costs and online speculation. Live Nation shares fell 7.8%.

(PRO) What’s next for Nvidia?
Wall Street analysts are revising upward their price targets for Nvidia after its spectacular earnings and forecasts. Some feared a slowdown in demand as Amazon and Microsoft wait for more powerful artificial intelligence chips from Nvidia. Nvidia’s decision to split its shares could offer more upside to investors.

Nvidia’s successful earnings and forecasts could not prevent Wall Street from falling late. Nvidia held up well, its shares closing above $1,000, up 9% on the day after assuring investors that its sales of graphics chips that power artificial intelligence were not a flash from the pan.

What’s next for Nvidia is a 10-for-1 stock split; Post-split shares will begin trading on June 10. The stock split will help retail investors, put off by the $1,000-plus share price, buy it at around $100. Nvidia shares are up more than 240% in the last 12 months.

CNBC’s Ryan Ermey explains more about the psychology of the move and how the stock split mechanism works.

So what is screwing up the markets? According to the Charles Schwab Trader Sentiment Survey, the bullish outlook among traders fell to 46% from 53% in the second quarter.

“Traders entered the year feeling fairly confident that the economy was improving and that Fed rate cuts were coming soon,” said James Kostulias, head of Commercial Services at Charles Schwab. “But concerns about inflation have increased significantly.”

Before the latest Federal Reserve meeting minutes, which suggested concerns about persistent inflation, some strategists had estimated that the Fed could cut interest rates at least three times this year as prices cooled. Now, traders are lowering their expectations to a single cut, possibly in September or November.

As the first quarter earnings season draws to a close, investors are turning their attention to geopolitical concerns.

“The Fed has been pretty clear that they’re not going to cut rates, so there’s not this (scenario) of ‘will they or won’t they?’ It’s keeping everyone guessing. We’re going to start to see some of these geopolitical issues come up, whether it’s elections or the two ongoing wars,” said Melissa Brown, general manager of applied research at SimCorp.

While events like the US and UK elections don’t necessarily have economic impacts, they do increase uncertainty, Brown said.

“People can go from saying ‘I’m going to buy now’ to ‘Look, I’m going to wait and see how this plays out before I decide to commit more money to the market,'” Brown said.

— CNBC’s Hakyung Kim, Samantha Subin, Ryan Ermey, Jeff Cox, Sophie Kinderlin, Spencer Kimball, Ece Yildirim, Sarah Whitton and Ryan Browne contributed to this report.