Morning in New York: trading will go without sharp fluctuations

Daily review and forecast of events on the U.S. stock market from Mikhail Denislamov, Deputy Director of Freedom Capital Markets Research.

Contradictory investor reaction to Nvidia (NVDA) reports will continue to determine the dynamics during the upcoming session. Despite strong results (revenues exceeded expectations by $2 bln) and optimistic guideline regarding demand for chips, the company's shares were subjected to a sell-off. There is no convincing explanation for this, but the most common justification for the decline in quotations is profit taking on the background of extremely high expectations, embedded in the quotations even before the release. High volatility in NVDA shares will remain today, we do not exclude an attempt of quotes recovery. The company's forward P/E multiple (the ratio of price to projected earnings) has fallen to 22.6x, almost equal to the broad market, while EPS growth is forecasted above 60% YoY.

Another important event of the day will be the publication of the January Producer Price Index (PPI), which will provide additional signal on the short-term dynamics of inflation, the potential trajectory of the PCE deflator. Consensus expects a 0.3% m/m rise in the overall and core reading, after 0.5% and 0.7% a month earlier. Freedom Broker estimates that seasonal upward pressure may persist in the January data, but its magnitude is likely to remain moderate and unlikely to exceed 0.4% mom. Given the traditionally high volatility of PPI, even such a result alone would not mean a sustainable reversal of the inflation trend, but it could increase market participants' caution in assessing the timing of the Fed's return to monetary easing.

Additional investor attention will be drawn to February business activity indicators, including the Chicago PMI (consensus: 52.5 points, January: 54 points), as well as regional surveys, including the service sector activity index from the Kansas City Fed. We expect business activity to remain broadly flat or improve slightly, indicating that the economy remains resilient. In the absence of significant deviations from forecasts, these indicators are unlikely to have much impact on the broad market.

In general, the combination of moderate growth in producer prices and stable indicators of business activity will be perceived as a signal in favor of maintaining the current macroeconomic balance. For risky assets, this will be more of a neutral-positive factor. A stronger-than-expected inflation surprise in PPI could increase caution about the timing of the Fed's rate cut and boost US Treasuries yields.

Energy Fuels (UUUU), BrightSpring Health Services (BTSG), Alpha Metallurgical Resources (AMR), Amneal Pharmaceuticals (AMRX) will report before the opening of trading. Sociedad Quimica y Minera de Chile S.A. (SQM) will release its results after the end of the main session.

Futures on US stock indices demonstrate about zero dynamics. We assess the balance of risks for the upcoming trading session as neutral with moderate volatility amid the publication of PPI data.

- Shares of financial platform Block (XYZ) were up more than 20% in the premarket after strong quarterly results and the announcement of further tightening of cost controls. The company's gross profit increased 24% YoY in the fourth quarter. Management provided a strong outlook for 2026. Additional support for the quotes was provided by CEO Jack Dorsey's announcement of plans to optimize staff by 40% and make greater use of AI tools to improve productivity.

- Netflix (NFLX) quotes are adding about 7% before the opening of mainstream trading after officially dropping out of the battle to buy the assets of Warner Bros. Discovery (WBD). Netflix's decision to withdraw from a potential "bidding war" confirms that management's priority is organic growth and financial discipline. The market interpreted the move as the streaming service's confidence in its ability to retain leadership through its own content. Paramount (PSKY) will attempt to finalize its $111 billion purchase of WBD.

- Dell Technologies (DELL) shares gained about 11% in the pre-market amid strong demand for AI infrastructure. According to management, revenue in the AI-optimized server segment could double in fiscal 2027. This boosted investor confidence in the long-term sustainability of demand for data center equipment. A 20% increase in the cash dividend and an expansion of the buyback program were also announced.

- Quotes of Duolingo (DUOL) before the start of the main trading on Friday collapsed by about 25% after the publication of the guidance for 2026, which was weaker than market expectations and suggests a slowdown in growth. The company beat consensus on revenue and earnings in the quarter.

- Shares of Zscaler (ZS) are down 9% on the premarket, reacting to its quarterly report. While the company managed to exceed expectations on a number of key metrics and its outlook was improved, the market reacted negatively to a combination of a widening net loss and continued caution from corporate clients when making decisions on large IT contracts.

- Securities of Intuit (INTU) met the publication of quarterly results with a decrease of 5%. The company's revenue in the reporting period grew by 17%, which was higher than the average forecasts of analysts. However, the quotes were pressured by the earnings guidance, which fell short of the consensus due to plans to increase marketing expenses in the midst of the tax season. This made the market more restrained in assessing the short-term dynamics of business profitability.

Trades on February 26 on American stock exchanges ended mixed. S&P 500 lost 0.54%, Nasdaq 100 decreased by 1.16%, Dow Jones added a symbolic 0.03%, and Russell 2000 increased by 0.52%.

The market dynamics was determined by a pronounced correction in the technology sector. As it was already mentioned, shares of Nvidia (NVDA: -5.46%) closed in minus, despite the strong quarterly report and positive forecasts. The day was characterized by active capital flows from "growth" stocks to "value" stocks. As a result, the equal-weighted S&P 500 Index (RSP) outperformed the "classic" benchmark by more than 100 bps.

The financial sector (XLF: +1.21%) became the leader of growth on the back of the statement of Michelle Bowman, the Fed's Deputy Chairwoman for Supervision, that the US banking system remains strong and stable. The technology industry (XLK: -1.4%) was the outsider due to the sell-off in the semiconductor segment.

Thursday's macroeconomic statistics confirmed the resilience of the US economy. The number of initial applications for unemployment benefits in accordance with the consensus amounted to 212,000, indicating a stable employment situation.

Treasury bond yields declined by 3-4 bps after the auction of seven-year securities for $44 bln, for which there was a high demand. The geopolitical background remained moderately positive amid news about the constructive nature of negotiations between the US and Iran.

Board of Governors member Stephen Miran favored a 100bp rate cut this year. At the same time, Chicago Fed Governor Austan Goolsbee reiterated the need to make sure that inflation slowdown progresses steadily before easing the MPC. In our baseline forecast, we continue to project a 50bp Fed Funds rate hike by the end of 2026.

- The shares of C3.ai (AI: -18.5%) came under strong pressure after the release of the report for the third fiscal quarter and the announcement of a new restructuring program. An additional negative factor was the company's decision to reduce headcount by more than 25%. This intensified investors' concerns about the business growth rate and sustainability of demand.

-Victory Capital (VCTR: -7%) made Janus Henderson Group (JHG: +6.1%) an offer to buy at $57.04 per share. The deal assumes payment in cash and shares at a premium to the market, which supported JHG quotations. At the same time, market participants see the threat of increased debt burden on Victory Capital, as well as lay in its price integration risks.

- Baidu 's (BIDU: -5.7%) net profit declined 66% YoY in the latest reporting period. The release reinforced assessments of the likelihood of slowing growth in its core business, and also revealed continued competitive pressures in the Chinese technology sector.

- Celsius Holdings ' (CELH: +6.9%) financial results significantly exceeded Wall Street's expectations due to an increase in shipments through the PepsiCo system. The company's management plans to further expand its presence in retail channels and grow market share through 2026.

This article was AI-translated and verified by a human editor