TSX higher as investors await crucial Nvidia earnings

Investing.com - Canada’s main stock exchange ticked higher on Wednesday, ahead of the release of much-anticipated earnings from artificial intelligence-darling Nvidia.

The S&P/TSX Composite gained 0.29% or 87 points to trade at 30,123.49.

ended the previous session down by 0.1% at 30,036.46, falling to its lowest closing level since November 7.

Mirroring concerns on Wall Street, analysts cited Reuters have flagged worries around the sustainability of heavy AI spending by mega-cap tech groups and a potential slowdown in the U.S. labor market.

U.S. stocks higher

U.S. stocks inched higher Wednesday, stabilizing after recent losses with investors remaining cautious ahead of the report from Nvidia and the minutes of the Federal Reserve’s October meeting. 

the Dow Jones Industrial Average gained 10 points, or 0.1%, the S&P 500 index climbed 3 points, or 0.1%, and the NASDAQ Composite rose 30 points, or 0.1%.

The main averages on Wall Street sank in the prior session, extending what has become a multi-day rout in stocks stirred by concerns over often debt-fueled spending on AI and lofty tech sector valuations.  

The S&P 500 fell 0.8% and the Dow Jones Industrial Average slid 1.1%, both recording their fourth consecutive losing days, and the NASDAQ Composite dropped 1.2%, its fifth negative day in six sessions.  

Nvidia’s earnings loom large

All eyes are now on upcoming results from Nvidia (NASDAQ:NVDA), the company whose place at the center of the AI spending bonanza has made it one of the most influential players in the U.S. stock market.

With a market capitalization that stands at $4.41 trillion, Nvidia currently makes up more than 7% of the weighting of the benchmark S&P 500.

While the AI bellwether is widely expected to log a strong quarter after the close, the focus will be chiefly on whether it can justify its massive valuation, as well as provide positive signals on artificial intelligence (AI) spending.  

Doubts over AI were a key weight on tech stocks in recent weeks, as investors questioned whether hype over the technology had formed a bubble in tech valuations. Nvidia has been at the heart of the massive AI-fueled valuation spike over the past three years. 

Beyond the tech sector, earnings from retail chains Lowe’s (NYSE:LOW) and Target (NYSE:TGT) are in focus.

Off-price brand TJX Companies (NYSE:TJX) is reporting today too, while Walmart (NYSE:WMT) will unveil its latest results on Thursday.

Home Depot (NYSE:HD) offered a decidedly gloomy view of the retail sector on Tuesday. Executives at the firm had been hoping that a combination of lower interest and mortgage rates would underpin a spike in demand, but the uptick failed to materialize.

Fed minutes to be studied

Away from the corporate sector, Wednesday’s focus will be squarely on the minutes of the Fed’s late-October meeting for more insight into the central bank’s plans. While officials had almost unanimously backed a rate cut during the meeting, recent comments from policymakers indicated some disagreements among the Fed’s ranks about future decisions. 

Any discord in the Fed is likely to further the case for a hold, with the central bank having flagged persistent caution over the U.S. economy. 

Nonfarm payrolls data for September are due on Thursday and will offer some cues on the labor market, which, with inflation, is a key consideration for the Fed in adjusting rates. 

Crude hit by inventories build

Oil prices slipped lower as higher crude inventories in the U.S., the world’s biggest crude consumer, reinforced concerns of oversupply. 

Brent futures dropped 2.9% to $63.68 a barrel, and U.S. West Texas Intermediate crude futures fell 2.0% to $59.45 a barrel.

Data released Tuesday by the industry body American Petroleum Institute showed that crude stocks rose by 4.45 million barrels in the week ended November 14, while gasoline inventories climbed by 1.55 million barrels and distillate inventories increased by 577,000 barrels.

Official U.S. government inventory data will be released later on Wednesday. 

Gold climbs

Elsewhere, gold prices rose as heightened concerns over stretched fiscal spending in the developed world, especially Japan, helped underpin bids for safe-haven assets.

Uncertainty has also surrounded the Fed’s December rate decision, as policymakers grapple with signs of labor market weakness and an only recently-ended blackout of fresh official economic data.

According to CME’s FedWatch Tool, there is a roughly 50-50 toss-up whether the central bank will opt to cut rates once again next month, after having slashed borrowing costs in October and September. Gold, a non-yielding asset, tends to do better in a low-rate environment.

Minutes from the Fed’s October policy gathering are due to be released later today. At the gathering, officials defended their 25-basis point rate cut as a way to support easing employment growth, although Fed Chair Jerome Powell flagged that another reduction in December was not a foregone conclusion.