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Investing.com - U.S. stock futures retreated slightly Wednesday ahead of key earnings from Nvidia, the tech giant which has been one of the main beneficiaries of the AI craze. Stellantis has appointed a new chief executive, and a poorly-received Japanese bond auction has raised concerns over demand for long-dated paper.
1. Nvidia’s quarterly earnings loom large
The marquee event Wednesday will be the release of quarterly earnings from Nvidia (NASDAQ:NVDA), with the chip giant widely seen as a bellwether for the tech industry.
Nvidia releases its first-quarter results after the close, and is expected to report a 66% surge in revenue to just over $43 billion for the three months to April 31, both up substantially from last year.
The company is expected to have benefited greatly from sustained demand as Wall Street’s so-called AI hyperscalers continued to pour billions into data centers and cloud infrastructure.
That said, the focus is likely to be on Nvidia’s outlook, especially as the company grapples with stricter U.S. controls on chip sales to China. Uncertainty surrounding this major market looms large even as a pullback in other regulations is set to open up new markets.
A shift towards AI inference from training, which is less data intensive, as well as increased interest in less demanding AI models, also stand to dampen future chip demand.
Nvidia’s shares have tended to underperform after the company’s earnings over the past three quarters, given lofty expectations, and traders are bracing for industry-wide volatility, with defensive options contracts on a major semiconductor ETF drawing heavy attention.
2. U.S. futures slip ahead of Nvidia’s release
U.S. stock futures slipped slightly lower Wednesday, handing back some of the previous session’s strong gains ahead of the release of quarterly earnings from AI darling Nvidia.
At 03:40 ET (07:40 GMT), the S&P 500 futures traded 9 points, or 0.2%, lower Nasdaq 100 futures dropped 30 points, or 0.1%, and Dow futures fell 70 points, or 0.2%.
The main average posted strong gains on Tuesday, after President Donald Trump announced the postponement of a 50% tariff on European Union imports to July 9.
The blue chip Dow Jones Industrial Average rallied more than 700 points, or 1.8%, the broad-based S&P 500 gained 2%, and the tech-heavy Nasdaq Composite advanced roughly 2.5%.
Investors are awaiting results from tech giant Nvidia [see above], while there are also earnings due from the likes of Macy’s (NYSE:M), Abercrombie & Fitch (NYSE:ANF) and Dick’s Sporting Goods (F:DKS).
Investors will also keep an eye on the minutes from the May Fed meeting, due later in the session, for clues of future monetary policy amid a period of economic uncertainty.
3. Japanese bond auction raises long-end concerns
Investors will also be watching developments in global bond markets after demand on Wednesday for Japan’s 40-year government bond auction was its lowest since November.
The auction’s bid-to-cover ratio, which gauges total bids against the amount of securities on offer, sank to 2.2 from 2.9 at the previous sale in March.
Long-end yields have surged worldwide in recent weeks on a heavy selloff in bonds as concern mounts over fiscal deficits, particularly in developed nations such as the U.S. and Japan.
The U.S. Treasury Department saw soft demand for a $16 billion sale of 20-year bonds last week, with investors worried about the country’s increasing debt burden as Congress debates a tax and spending bill that is expected to worsen the fiscal outlook.
It comes after Moody’s cut the United States’ sovereign rating from the top "Aaa," adding to previous downgrades from Fitch Ratings and Standard & Poor’s.
Wednesday sees the auction of shorter-dated U.S. two-year floating rate and five-year notes, as well as a German auction of 15-year Federal bonds.
4. Stellantis appoints new CEO
Auto giant Stellantis (NYSE:STLA) has appointed Antonio Filosa as its new Chief Executive Officer, succeeding Carlos Tavares, who departed in December following a steep drop in profits and sales, which raised concerns over his leadership.
Filosa will also be proposed for election to the Board at an upcoming Extraordinary Shareholder Meeting. Until then, he has been granted full CEO authority to ensure a smooth transition.
“The Board selected Antonio Filosa to be CEO based on his proven track record of hands-on success during his more than 25 years in the automotive industry, the depth and span of his experience around the world, his unrivalled knowledge of the Company and his recognized leadership qualities,” Stellantis wrote in the announcement.
Filosa has held several key leadership roles within Stellantis, most recently as Chief Operating Officer of the Americas.
5. Supply concerns help crude prices higher
Oil prices edged higher Wednesday, as concerns over potential new sanctions on Russia raised supply disruption fears, although trading ranges are tight ahead of a pivotal OPEC+ meeting later this week.
At 03:40 ET, Brent futures climbed 0.6% to $63.96 a barrel, and U.S. West Texas Intermediate crude futures rose 0.7% to $61.29 a barrel.
The Organization of Petroleum Exporting Countries and allies, collectively known as OPEC+, are weighing the possibility of another production boost at their upcoming meeting this weekend.
OPEC+ has been in the process of unwinding output cuts, announcing additions to the market in May and June.
As investors prepare for this increased supply, they also digested comments from U.S. President Donald Trump, who said that Russian President Vladimir Putin was “playing with fire”, and Trump is considering new sanctions against Russia.
This could put Russian energy flows at risk and disrupt the global oil supply.
Investors also await the American Petroleum Institute’s weekly inventory report, which has been delayed this week due to the U.S. Memorial Day holiday on Monday.
(Reuters contributed reporting.)