MARKET WRAP

The SPX ended regular trading essentially flat, a disappointing end to the day that included an attempted morning rally. Midday weakness came from more tariff headlines, and perhaps traders concerned about the asymmetrical market risk/reward into Nvidia’s report. At the close: SPX unched, QQQ +0.2%, IWM +0.2%, 10y Yield 4.25%, VIX 19.

On the earnings front, CRM and NVDA are both slightly in the green after hours. CRM initially declined about 6% but recovered. NVDA’s move has been muted throughout and we may not truly know the market reaction until tomorrow. (Very similar to last quarter’s reaction.)

On today’s shows: Guy and Dan discuss today’s mid-day reversal, what’s next in NVDA, and how concerned we should be about yields and equities moving in unison.

MRKT MATRIX: February 26, 2025

Today’s Top Stories:

• Nvidia Earnings Release (CNBC)

• S&P 500 ekes out gain on Wednesday, ending four-day run of losses (CNBC)

• Fundstrat bull Tom Lee sees stocks rebounding after ‘flesh wound’ pullback (CNBC)

• The Federal Reserve's favorite recession indicator is flashing a danger sign again (CNBC)

• GM Boosts Investor Payout With New Buybacks, Dividend Hike (Bloomberg)

• Bitcoin ETFs Are Hit by a Record $1 Billion Outflow in One Day (Bloomberg)

• Traders are pouring into gold ETFs at record pace as trade and inflation worries grow (CNBC)

• Tesla Feels the Wrath of Anti-Elon Musk Backlash (Bloomberg)

• DeepSeek Slashes Off-Peak Prices to Balance Out AI Demand (Bloomberg)

• Anthropic’s latest flagship AI might not have been incredibly costly to train (TechCrunch)

• Meta Discusses AI Data Center Project That Could Cost $200 Billion (The Information)

• Amazon eyes new direction for Alexa with AI overhaul (Reuters)

• China says Taiwan seeks to give away chip industry to US (Reuters)

• Trump to Offer ‘Gold Card’ Visas for $5 Million to the Rich (Bloomberg)

• Tax Cut Chances Rise as House Passes Budget Targeting Safety Net (Bloomberg)

• Ukraine Agrees to Mineral-Rights Deal With U.S. (WSJ)

Today’s MRKT Call is Presented by CME Group

Nvidia Earnings: Final Predictions Ahead Of Tonight's Report

• Today’s Trading: Equities faded mid-day after an early bounce. Defensive stocks struggled—raising the question of where leadership comes from next. 10-year yield: How the new administration might view it as a key economic indicator. The "Fateful Eight": Why declining treasury yields aren’t providing the usual boost.

• NVDA Earnings

• Preview Technical Check-Ins: SPX & QQQ e-mini charts. Salesforce (CRM) ahead of earnings. Chart of the Day: GM - Plus, a look at EV stocks and how BYD is impacting TSLA.

• Macroeconomic Concerns: Growth slowdown & recession fears—where they’re surfacing in risk assets. Russell 2000 (IWM): Falling alongside treasury yields.

• Earnings Season Insights: Highlights from John Butters' FactSet report on EPS trends.

• Final Market Moves: BTC’s recent breakdown. A last check on NVDA before earnings.

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Today’s RiskReversal Podcast is Presented by Betterment and iConnections

Nvidia Earnings On Tap, Meme Stock Mania & DEI Demands

Dan Nathan and Guy Adami discuss NVIDIA's anticipated earnings report, including potential market reactions and investor expectations. They also explore broader market movements, examining why yields have fallen and speculating on the influence of recession fears. The hosts touch on diversity, equity, and inclusion (DEI) policies in major U.S. companies, highlighting Bank of America's pullback and Apple's commitment amidst external pressures. The show ends with a discussion on major meme stocks like Tesla and AppLovin, detailing recent stock movements and short reports predicting their future performance.

• Timecodes 

• 0:00 - Intro

• 1:50 - Nvidia Earnings

• 10:34 - Yield Picture

• 13:43 - DEI Demands

• 17:55 - Meme Stock Mania

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What’s Next?

With NVDA earnings out, the focus now shifts to how the market ends the week. We have a bit of economic housekeeping to attend to over the next few days, particularly Friday’s PCE report.

Expected Moves for the Rest of the Week:

• SPX/SPY: 1.3%

• QQQ: 1.8%

These moves are based on today’s close and factor in NVDA’s potential impact. But to give you a sense of near-term volatility expectations, those moves for just two days are more than what entire week expectations were just 10 or 15 days ago. Here’s what’s next:

Tomorrow: US GDP: Tomorrow’s GDP report is a revision and typically garners less market reactions than the preliminary number, however with growth concerns currently at the forefront, any signs of economic deceleration on a revision are unwelcome.

Friday: PCE Inflation Data: On Friday we get the Personal Consumption Expenditures (PCE) index, the Fed’s preferred inflation gauge, for the latest signs of whether inflation is cooling at all or sticking around. Given that this report comes just two weeks after the CPI and PPI releases, it’s unlikely to bring major surprises, but do remember that the market rallied following the hotter than expected CPI/PPI combo due to extrapolation forward to the PCE. .

Potential Market Reactions (Hat tip to Peter Boockvar):

• Hotter-than-expected PCE:

  • Likely puts pressure on both equities and treasury yields, as markets price in a more persistent inflationary environment, confirming some of the recent consumer sentiment fears.

• Cooler-than-expected PCE:

  • Could spark an equity rally while potentially sending yields even lower, reinforcing the idea that inflation could still be easing amidst the tariff worries.

• In-line with expectations (most likely scenario):

  • If the data is largely in line with recent CPI and PPI extrapolations, the market reaction is likely dependent how extended the moves in equities and yields are into Friday morning.

As Peter has noted, consumers typically focus on the absolute price levels, while markets are more concerned with the rate of change in prices. However, recent sentiment data indicates growing concerns about the inflationary impact of tariffs, which could influence consumer behavior and has contributed to recent market volatility. The most likely outcome is that inflation estimates come in as expected, with market reactions depending on how stretched prices in yields and equities are heading into the report.

We once again closed at an important level in SPX of 5950. The market has found buyers in this area over the past few weeks. We’ll see if that remains the case or the momentum takes us lower to end the week. Keep an eye on implied vols as a move lower from here would likely take the VIX into the low 20’s where a sharp move lower (or higher) could exceed some of the recent (less than 1%) daily moves.

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