Everything was looking really good Friday… until it wasn’t. The S&P 500 and Nasdaq Composite were on track for their 17th weekly gain in the last 19 weeks before NVIDIA (NVDA) — the life of the party over those 17 weeks — spoiled the party by abruptly reversing course.
NVIDIA had been up 5.1% at its high on Friday, but finished the session down 5.5%, swinging nearly 100 points between that high and its closing level. That move sucked the wind out of the rally effort, as it pulled down other momentum stocks, but frankly, it didn’t blow the market over.
The market-cap weighted S&P 500 ended the day down just 0.6% while the equal-weighted S&P 500 dropped just 0.2%.
Today, then, is going to be a test of buy-the-dip interest, and at the moment there doesn’t appear to be much interest.
The S&P 500 futures are down 20 points and are trading 0.2% below fair value, the Nasdaq 100 futures are down 97 points and are trading 0.4% below fair value, and the Dow Jones Industrial Average futures are down 159 points and are trading 0.3% below fair value.
There isn’t any corporate news of note really to account for the negative disposition. There also isn’t any real interest rate movement to account for the negative disposition. Treasury yields are little changed across the curve.
It’s really a trade of attrition following a huge run. A consolidation period is to be expected and that is what the market is up against after seeing Friday’s reversal in NVIDIA. It is grappling with the idea that perhaps the consolidation period everyone has been calling for is at hand given Friday’s price action in NVIDIA.
Today’s price action in NVIDIA is another reminder. Shares of NVDA are down another 1.1% in pre-market trading, which is creating a drag for the S&P 500 and Nasdaq 100 futures.
Another drag — or deterrent — is the recognition that Tuesday will feature the release of the February Consumer Price Index. There are high expectations that this release will mitigate the disappointment associated with the higher-than-expected inflation readings for January. In any case, the specter of the CPI data has fostered some wait-and-see action that is detracting from buying efforts at this juncture.
Separately, there will be some inflation data in play today. The New York Fed will be releasing inflation expectations data at 11:00 a.m. ET that will garner some increased attention in front of the $56 billion 3-year note auction at 1:00 p.m. ET. Other than that, there is no notable U.S. economic data on the calendar today.
China for its part released some CPI data for February that was higher than expected. A 1.0% month-over-month gain (0.7% expected) was the first increase in CPI in six months.
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Originally Posted March 11, 2024 – A trade of attrition for now
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