Warning: Nvidia’s gains mask broader market weakness

Stocks fell slightly on the day, but some declines were masked by strength in Nvidia (NASDAQ:). This means that the market cap-weighted index has only increased by 11 basis points, while the equivalent weighted index has fallen by around 50 basis points. Meanwhile, the market without Nvidia fell 30 basis points.

Nvidia has indeed distorted the index and made the S&P 500 useless in some respects. When a stock can offset an index by a significant amount on a daily basis, that index is not accurately indicative of the entire market. The S&P 500 rose nearly 6 points, while Nvidia contributed to a nearly 16-point gain. So, without Nvidia having increased by almost 5% on the day, the index would have fallen by around 10 points. If this happened on a one-off basis, it’s no big deal, but it seems to happen almost daily.

It is what it is, but if you’re not considering these things and thinking about their potential impacts, you’re missing an important risk factor that needs to be addressed. The data shows that many more stocks were down that day than up.


US Dollar Falls on Weak Data

Meanwhile, the index was down sharply on the day, following a “weaker” than expected report. The ISM report on the manufacturing sector has been quite weak for a long time; its use to assess the health of the economy has not performed well for some time.

Yesterday’s figures suggest that real GDP is growing at around 1.7%, which is acceptable but certainly not recessionary. This likely suggests the dollar has fallen too much, but the rest of the week’s data will be just as important.

Crude oil prices aim for $70

Rates nevertheless fell sharply, mainly due to the fall in oil prices. fell following the announcement that OPEC production cuts were being extended until the end of the year, but that some voluntary cuts could be eased by October.

Oil prices fell 4%, plunging to around $74, and now face a major test of support. A break of support at $74 would potentially lead to an even further price decline to around $70. Suddenly, technicals look less favorable than when oil was testing the $80 level early last week.

Peso drops

It’s not a good day for the Mexican peso, which rose more than 4% after the election. The peso is more of a risk indicator than anything else, and yesterday’s rise will make me wonder what comes next and whether CDX high yield credit spreads and the 1-month implied correlation index increase in sympathy.

At least over time, the S&P 500 and USD/MXN have had an inverse relationship, and if this relationship continues, then the aftershocks of yesterday’s peso movement could be felt in the days to come.

Because in the end, it’s still the same job.

Original post

Leave a Reply

Your email address will not be published. Required fields are marked *