As the market gears up for Nvidia’s highly anticipated earnings report on Wednesday, there has been notable dispersion within the tech and semiconductor sectors. Investors are positioning themselves cautiously, with mixed performances across key players in the space.

Semiconductor Sector: Mixed Reactions

In the semiconductor sector, ASM International is feeling the pressure, down 65 basis points, though it has recovered 3% from its lows after reporting an orders miss due to weaker demand from China. Meanwhile, ASML is faring better, up 1.75%, bolstered by a strong lead from the U.S. markets. However, despite this relative strength, the sector as a whole is struggling to sustain momentum ahead of Nvidia’s earnings.

Software Stocks Outperform

Unlike semis, software stocks are showing strength, buoyed by optimism ahead of Salesforce’s earnings on Wednesday. Workday is leading the charge, surging 12% in the pre-market, reflecting broader investor confidence in enterprise software.

BP’s Strategy Shift: Market Reacts Cautiously

In the energy sector, BP plc is down 1% following headlines ahead of its long-awaited strategy day at 13:00 UK time. The company announced a shift back to its core oil and gas business, along with plans to sell assets and reduce spending. However, the market reaction has been lukewarm, as much of this strategy shift was already anticipated. Investors were looking for further details on execution, and the stock’s decline appears to be driven more by a “travel-and-arrive” dynamic than fresh disappointment.

Market Flows and Investor Sentiment

Overall, flows remain relatively balanced, with a slight bias toward buying, mainly driven by long-only investors. Hedge funds, however, exhibit a strong sell skew, particularly in BP following the lackluster strategy day headlines. Activity remains concentrated in bank stocks, with two-way flow dominating the action.

Investors are also refraining from aggressively chasing semiconductor stocks higher ahead of Nvidia’s earnings release, reflecting some caution given the sector’s recent volatility. Additionally, there has been some trimming in Rolls-Royce ahead of its earnings on Thursday, with options implying a 6.3% single-day move post-report.

Looking Ahead

With Nvidia’s earnings looming, markets remain in a wait-and-see mode, particularly within tech and semis. The software sector’s strength signals confidence in enterprise demand, while BP’s shift back to oil and gas has left investors seeking more clarity. Expect heightened volatility as earnings season continues to unfold.