Market snapshot: Nvidia and BP in the spotlight

US markets ended mixed amid growing recessionary concerns, while the tech sector remained under nervous pressure ahead of the latest update from previous market darling NVIDIA Corp (NASDAQ:NVDA).

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The consumer represents the lion’s share of economic growth and a further survey, following on from the one last week which showed signs of emerging tension, did little to lift spirits. In a similar vein, the latest survey was weaker than expected, citing concerns of a possible recession and higher for longer interest rates from respondents. Indeed, the figure was beneath the threshold which implies a recession ahead, and the level of caution was across the board, regardless of age or income levels.

Such fears translated into general weakness across the benchmark index, with the banking sector in the cross hairs of a potentially receding economy. At the same time, the tech sector as a whole was unable to arrest its recent slide and among the so-called Magnificent Seven there was trepidation of Nvidia’s results later today, which was echoed by drops of more than 1.5% for Meta Platforms Inc Class A (NASDAQ:META) and more than 8% for Tesla Inc (NASDAQ:TSLA). The moves leave the main indices in different places, with the Dow Jones and S&P 500 now having added 2.5% and 1.2% respectively in the year to date, while the Nasdaq has now seen a retreat of 1.5% given the recent pressure.

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As such, Nvidia’s results come at what could prove to be a defining moment. Elevated earnings expectations come alongside a punchy valuation, let alone the emerging Asian threats in its space which have recently derailed its hitherto stellar share price performance in raising questions over whether developments in AI could come more cheaply than has been the case until now. Given its leading position, this leaves little room for any areas of disappointment and Nvidia will face the additional challenge of being expected to raise its guidance for the current quarter. In the meantime, this quarter is expected to show revenues rising to $38.3 billion from $35.1 billion in the previous, while the share price has fallen by 8.5% so far this year, although remaining ahead by 60% over the last 12 months.

With less pressure to perform and more room for manoeuvre amid the tech turmoil, Asian markets were mixed to higher with a standout performance coming from the Hang Seng index, driven by technology share gains. While it seems increasingly unlikely that there could be the existential AI threat to US companies which was initially feared, the fact that there may be others to follow, and that Chinese firms are displaying some ability to develop and deliver lower-cost versions of the existing US kingpins has boosted optimism. In addition, recent optimism has been fed by the fact that the Chinese authorities seem to be offering some support to a technology sector which it has subjected to crackdowns for some considerable time.

UK markets were off to a brisk start amid the technological navel-gazing elsewhere. The medical sector received another shot in the arm following strong numbers from FTSE 100 medical products group ConvaTec Group (LSE:CTEC), whose shares added almost 6% after an equally robust performance in the previous session from Smith & Nephew (LSE:SN.). Less positive for the wider pharmaceutical sector was an update from Hikma Pharmaceuticals (LSE:HIK), which sent the shares some 9% lower. While revenues and operating profit rose strongly, at the core level operating profit only rose marginally while margin fell.

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Elsewhere, strength in the mining sector mirrored more of a risk-on approach by investors in early trade, with the banks also receiving some further buying attention as well as the likes of Prudential (LSE:PRU), which may be seeing the benefit of more economic support from the authorities in its key Chinese market. Such broad strength across the premier index lifted the gains so far this year to 6.7% for the FTSE 100, as it continues to catch the eye of international investors.

Meanwhile, interest will intensify as the outcome of the BP (LSE:BP.) strategy presentation to investors unfolds today. The group has promised “a new direction for BP”, although some investors may be wondering whether they have been here before. At the time of the full-year numbers last year, the group was trumpeting its transformation from an International Oil Company to an Integrated Energy Company, with significant investment into the likes of renewables and electric vehicle charging seem set to remain for the foreseeable future, although this is now rumoured to be in the strategic firing line.

Going into the recent fourth-quarter and full-year numbers earlier this month, expectations were low and, unfortunately, BP duly delivered. The pressure will ramp up following the update on both the CEO and the chair, both of whom could be vulnerable if the new stretching targets are missed. Rather more certain is that something needs to change at BP, and quickly – competition is fierce and the group’s rivals are not standing still as BP ponders its new direction. Shell (LSE:SHEL) shares, for example, have added 7% over the last year, during which time there has been a decline of 6.5% for BP.