The Nvidia Wait Is Over. The Real Test Starts Now.
Wednesday was meaningless action ahead of the Nvidia ($NVDA) report after the bell. The indexes finished close to flat after the market got a bit too negative early and recovered late. Breadth was only 44% positive, oil was higher, and bonds were down slightly.
There is not much to take from a session like this. Nobody was making decisions. Everyone was waiting.
What Actually Happened Wednesday
The PCE report came in slightly hot and the market shrugged it off, which is its own small piece of information. A month ago a warm inflation number would have moved yields and pressured the growth names. Wednesday it did nothing, because a report from the largest company in the market was coming after the close and no other input mattered.
Meta Platforms ($META) provided the one real story, settling with 29 states for approximately $18 billion over claims that its platforms harm children. However, the stock finished up just 1% as it faded quickly following the headline.
There was some good news for clothing retailers Abercrombie & Fitch ($ANF) and American Eagle Outfitters ($AEO) that offsets some of the recent weakness in the group from Walmart ($WMT) and Dick’s Sporting Goods (DKS), but the health of the consumer is still a major uncertainty.
Beyond that, there is nothing, but here comes Nvidia.
Nvidia Earnings
Nvidia reported second-quarter earnings of $2.22 against a FactSet consensus of $2.09, on revenue of $96.22 billion versus the $92.27 billion expected. Both numbers are beats.
The initial reaction to the report is selling, with some bounce off the lows, but the stock is still lower than the close. This may be a beat but it is not a blowout.
Nvidia went into this report having been sold for six straight sessions before Tuesday’s bounce, its longest losing streak since 2022. That selling was positioning rather than conviction, which means expectations have come down but apparently not enough given the reaction.
We’ll see if there is anything on the conference call to change the picture, but this does not look like a report that is going to restore Nvidia to its glory as the leader of the AI pack. The question is what the repercussions will be for other areas of the market.
Game Plan
My positioning has not changed and a flat day does not change it. Cash is high and I am working the shopping list.
However the Nvidia report shakes out, the reaction Wednesday night will not be the reaction that matters. The one that matters develops over the following days, and then Kevin Warsh speaks Friday morning at Jackson Hole, which can override all of it.
I have no interest in guessing at any of this. The setups I want come out of the volatility rather than ahead of it. The news is of interest but as far as I’m concerned it isn’t tradable.
Have a good evening. I’ll see you Thursday.
At the time of publication, Rev Shark had no positions in any securities mentioned.
