Market Note (Feb 21)
All eyes on NVDA
US equities are jittery at the open as investors await a key tech bellwether. S&P 500 and NASDAQ are lower by 0.25% and 0.70%, respectively, adding to the losses from yesterday’s session. The small-cap index (Russell 2000) is back in the red year to date after finishing 1.4% lower in yesterday’s session.
NVDA is trading 1.7% lower at the time of print, after losing 4.3% in yesterday’s session. The stock has gone from being the 5th largest company in the US to initially the 4th and then the 3rd largest but it slipped back to the 5th again. This was the worst daily performance since last October. Option implied move suggests a swing of ~11% in either direction. Given its high weight in the S&P 500 index, this implies a potential 0.45% impact on the index.
Overnight, Chinese stocks rose (CSI 300 closed +1.35%, Hang Seng +1.57%) driven by the property sector. Reports that banks have approved $17bn of loans for some property projects after the 5y LPR cut, led to some optimism in this space.
Thomas Barkin, President of the Federal Reserve Bank of Richmond, commented on the current economic situation, noting that while there has been an overall improvement in inflation, certain sectors still exhibit high price pressures. Recent government data indicated a decrease in consumer prices for goods in January, but this was outweighed by increases in shelter and service prices. Barkin expressed concern that once the deflation in goods prices ceases, the elevated prices in shelter and services could pose a problem. He emphasized the importance of focusing on short-term inflation figures rather than year-over-year data. Barkin, who is a voting member on monetary policy decisions this year, previously stated that the Federal Reserve should delay any interest rate cuts until there is substantial evidence that inflation is consistently moving towards the central bank's 2% target. This stance is in line with the views of several of his colleagues. In the discussed interview, he did not make specific comments about the future path of interest rates.
There wasn’t too much data yesterday, although the US Conference Board’s Leading Index fell for a 22nd consecutive month in January, with a -0.4% decline (vs. -0.3% expected).
In other news, the US mortgage rates have risen back above 7% as hopes of a near-term rate cut diminished and the latest economic data suggested that rates could remain higher for longer.
For today’s economic releases, FOMC minutes print this afternoon. From investors’ perspective, the minutes at this point are stale as we saw strong activity and hot inflation reports since the meeting. However, any insights on the QT discussion could give us some more color on the monetary policy.
Other news:
Palo Alto Networks shares fall 25% after revenue warning FT
Nvidia-linked stocks drew big bets days before filing sparked rally FT
HSBC profits plummet 80% after charge on Chinese bank stake FT
Private equity turns to new fundraising tactics in tough market FT
Private Equity Payouts at Major Firms Plummet 49% in Two Years BBG
Biden’s EV Dreams Are a Nightmare for Tesla and the US Car Industry BBG
Homebuilder Toll Brothers Hits Record With Strong Demand Outlook BBG
U.S. to Invest Billions to Replace China-Made Cranes at Nation’s Ports WSJ
Lessons From a Three-Decade-Long Stock Market Disaster WSJ