Macro Strategy Insights

NVDA Crushes It, Nasdaq 100 Still Lower Than Friday

NVDA crushed earnings yesterday. It is currently at $760 per share, but moving rapidly. Up 12.7% (just outside the +/-10% post-earnings move priced into the options market). At that price, the market cap would be just about $1.9 trillion, up $215 billion in a day, which may be close to a record move.

Putting a few things in perspective.

NVDA is up 1.9% since last Monday. Almost 2% in a week isn’t anything to sneeze at, but it shows that the market was pricing a lot in.

Nasdaq 100 futures are responding positively (up around 2% as I type), which is down 0.5% from levels hit just on Friday.

META, which I think had set a single-day market cap gain record when it gained around $200 billion on February 2nd, had actually closed below that price yesterday (though it looks like it will be above that, by a smidge). A possible indication that the large one-day gap doesn’t necessarily mean we see intense follow through, though each company, stock, and narrative is different.

So, I came into this week saying there was more downside risk than upside risk. See A Market Only a Mother or AI Could Love.

Given that the Nasdaq 100 is still down a touch from Friday and the S&P 500 futures are essentially unchanged since Friday, I shudder to think what would have happened if NVDA missed.

Having gotten past NVDA’s earnings, does my view that there is more downside than upside here change?

I certainly have to think about it. One of the catalysts to a larger, rapid decline would have been a NVDA miss. We didn’t see that, so I’m not sure what catalyst would do that.

Against that:

  • Awful price action in the days leading up to this momentous earnings report. Post earnings, what started as a collective sigh of relief has morphed into total jubilation. How much “dry powder” is there to buy the dips? Especially when there was an air of fear around this recent dip. The first time I’ve had that sense in months.
  • The Fed minutes don’t signal imminent rate cuts. If anything, we might see a reduction in rate cuts on the next “dot plot.” Quantitative tightening remains in place. I understand that the balance sheet will need to be higher than in the past to support bank reserves (something wonky, but I’m told is real), but I’m in the camp (and have expressed it to the Fed, though no idea if they will listen), that they should reduce the balance sheet as low as feasibly possible so long as the market gives them some runway to continue to do so. The Fed also put “what markets do to financial conditions” back on the table – and not in a helpful way.
  • Back to questions around jobs, consumer spending, inflation, so on and so forth.

There is less of an obvious catalyst for a 5% to 10% move to the downside, but if positioning is very one-sided the catalyst doesn’t have to be large, nor does it need to be obvious.

With everything else going on, I’m reloading to full bear mode (because the 3% move to the downside we already had in the Nasdaq 100 had presented a good time to take some short risk trades off the table).

Look for higher yields. Maybe some upside pressure in stocks, but as the celebration fades, I cannot help but see more downside than upside, which so far has been the case.

Good luck and I’m excited to be a guest host on Bloomberg TV tomorrow during the 6am ET hour.