This Week

Last week was a wild one—big swings, a vol spike, and a fresh layer of fear across equities—only to finish, somewhat amazingly, basically unchanged. This week is dominated by Nvidia’s report Wednesday after the close, but the FOMC Minutes that afternoon take on added weight given the sharp drop in December rate-cut odds we saw last week. We’ll also finally get a resumption of U.S. economic data, starting with the delayed September jobs report on Thursday. More on the week ahead in a minute, but first, a quick roundup of weekend news, including an interesting nugget about a New York Fed meeting last week with Wall Street dealers. As of now, not much change from Friday’s close, with Sunday night futures opening unchanged:

• Nvidia, Walmart earnings, and the return of jobs numbers: What to watch this week (Yahoo Finance)

  • With the longest US government shutdown on record finally ending late Wednesday, the question now becomes what the economic cost will be when investors — and Federal Reserve officials — get the long-delayed updates on the US economy.

    On Thursday, the government will begin playing catch-up with the release of the September employment report, originally scheduled for release on Oct. 3, delivering the first official update on the US labor market since September.

• New York Fed convened meeting with Wall Street firms over key lending facility (FT)

  • New York Federal Reserve president John Williams convened a meeting with Wall Street dealers this week over a key short-term lending facility, underscoring officials’ concerns about strains in US money markets. The hastily arranged meeting, which has not been previously reported, took place on the sidelines of the Fed’s annual Treasury market conference on Wednesday, according to three people familiar with the matter. It comes at a time when banks, investors and officials are concerned about signs of stress in an arcane, but vital corner of the US financial system. Williams solicited feedback from primary dealers, mostly banks that underwrite the government's debt, on the use of the Fed’s standing repo facility, which central bank officials describe as a crucial pressure relief valve to help them keep short-term borrowing costs within their target range. A representative from many of the 25 primary dealers was in attendance, the people said. They noted that the attendants were broadly members of banks’ teams specialising in fixed-income markets.

• A simple reason why the market’s biggest investors say they aren’t worried about AI bubble, tech stock selling (CNBC)

  • Tech stocks have been volatile in recent trading as fears about ‘Mag 7’ concentration in the S&P 500 and AI valuations have pressured trading. But stocks still remain near all-time highs, and Warren Buffett’s Berkshire Hathaway revealed a stake in Alphabet, a company it said not too many years ago it had already missed the opportunity to invest in. The heads of two huge investment firms, $118 billion General Atlantic and $71 billion Coatue Management, explained why they are not worried about tech stocks at CNBC’s Delivering Alpha conference this past week.

• AI Is Making Big Tech Weaker (WSJ)

  • The biggest tech companies are in strong financial shape. But spending on artificial intelligence is weakening them—and altering the dynamics of their businesses in ways that should change how investors view them. Believing that AI is going to transform the tech landscape and the global economy, Microsoft Google and Amazon.com have gone on spending sprees over the past three years. Those companies together will have spent over $600 billion between 2023 and this year, if forecasts from the companies and analysts hold.

• Nvidia Helped Spark the AI Rally. Its Earnings Could Revive It. (Barron’s)

  • Nvidia’s earnings report in the spring of 2023, months after the launch of OpenAI’s ChatGPT, marked the start of a new era for both the chip maker and the broader market’s awareness of the likely effects of artificial intelligence.

• Bessent says Trump's $2k 'dividend' checks would need Congress vote (Bloomberg)

  • Treasury Secretary Scott Bessent said President Donald Trump’s proposal to send $2,000 “dividend” payments from tariffs to US citizens would require congressional approval. “We will see,” Bessent said Sunday on Fox News. “We need legislation for that.”

The SPX saw a 3.5% range last week, and there’s a lot of scar tissue within volatility expectations into this week. All of these expected moves are wider than last week’s:

This Week’s Expected Moves:

• SPX/SPY: 1.9% (6600-6875)

  • QQQ: 2.8%

  • IWM: 2.7%

  • TLT: 1.2%

  • USO: 3.2%

QQQ options are pricing in nearly a 3% move this week, and that’s really a combo of a few things: the pickup in volatility over the past two weeks—especially in the Mag7+ names that have been moving in unison a lot—and the added kicker of NVDA earnings this week, which could swing the market on its own and drag a whole swath of semis and AI-related names along with it.

As for the economic calendar, FOMC Minutes usually don’t move markets much, but this week could be different given how much of last week’s volatility hinged on December rate-cut odds collapsing below 50%. A lot of that shift came from Fed speak, so the Minutes may offer some extra color on what’s actually happening inside the committee:

Economic Calendar: 

• Monday

  • Fed Speak: Williams, Jefferson, Kashkari, Waller

  • 8:30m - Empire Manufacturing

• Tuesday

  • Fed Speak: Barr

  • 9:15am - Industrial Production

• Wednesday

  • Fed Speak: Williams

  • 8:30am - Housing Starts

  • 2pm - FOMC Minutes

• Thursday

  • Fed Speak: Cook, Goolsbee

  • 8:30am - Initial Jobless Claims

  • 8:30m - Sept NFP (Originally scheduled Oct 3rd)

  • 10am - Existing Home Sales

• Friday

  • Fed Speak: Williams, Barr, Jefferson

  • 9:45am - S&P Global PMIs

  • 10am - UoM Consumer Sentiment

Nvidia is obviously the big name reporting this week. One word of caution on the NVDA earnings hype is we’ve seen many situation in the recent pst where NVDA didn’t have a large move on earnings, only to make a run higher or lower in the days and weeks to follow. As for the rest of the week, some check-ins on the consumer with the HD, WMT and TJX reports.

Earnings (with expected moves):

• Tuesday

  • Pre-market: HD 4.2%, BIDU 7.2%

• Wednesday

  • Pre-market: TGT 9%, TJX 4%, LOW 4.7%

  • After-hours: NVDA 6.5%, PANW 7%

• Thursday

  • Pre-market: WMT 4.5%

  • After-hours: GAP 12%, ROST 6%

One last note: Implied vol probably got a little too stretched on Friday, and the late-day compression made sense — but that’s now two straight Fridays where a reversal kept things from getting ugly, and the market can only pull that trick so many times without better news. Nvidia could be that news on Wednesday: at Friday’s lows several megacaps, including NVDA, had round-tripped all the way back to late-summer levels. A positive reaction to NVDA could be exactly what the market needs to re-ignite the year-end rally and even breathe new life into some of the second-tier AI names.

But if investors treat the print as another chance to take profits, it could set the stage for a more meaningful correction with very little left (with the Dec rte cut now in doubt) to support much of a rally into year end.

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