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Why Nvidia’s stock surge may not bode well for the market

Nvidia (NVDA) recently posted its first quarter earnings, beating revenue expectations and seeing its share price soar. However, the general rally did not exactly follow, challenging market expectations.

Yahoo Finance Reporter Josh Schafer joins Catalysts to break down what Nvidia's recent earnings could signal for the broader market moving forward.

For more expert insight and the latest market action, click here to watch this full episode of Catalysts.

This post was written by Nicholas Jacobino

Video transcript

Video blowing past expectations in its most recent earnings report.

Shares have since rallied just about 20% off just a fraction today.

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But you can see that five day chart of just around 19%.

And while many had expected the general market rally to follow, well, that hasn't exactly happened.

So here to explain what this could signal here going forward.

Our very own, Josh Shaffer and Josh, it could be a bit worrisome here just in terms of what the signals for the broader market.

Yeah, going into the NVIDIA earnings report, we wanted to talk about all the other stocks.

It was gonna help, right?

NVIDIA is gonna beat and raise and then the S and P 500 is gonna rally.

The NASDAQ 100 is gonna rally which the NASDAQ 100 did rally, but the S and P 500 didn't, right.

And it was interesting to sort of think about what, what that's actually telling us kind of about the market right now.

Evercore I SI S green and Emanuel highlighted that you pretty much never see this.

So NVIDIA rallied 20% NVIDIA is a top five market cap holding in the S and P 500.

When a stock that is that high in the S and P 500 waiting rallies 20% after earnings, the S and P 500 always goes up literally going back in history.

He didn't find another time that you have seen a stock this big in the S and P rally like this and the index not go higher.

What he thinks this means is we're starting to see a shift in sort of the macro narrative and what's driving the S and P 500 here.

So if NVIDIA isn't going to be able to bring the market higher, it might mean that we're starting to move on from the A I narrative a little bit and perhaps spreading out to a macro narrative which we know is normally more choppy, right?

That means the market is looking at economic data releases every morning at 8:30 a.m. and starting to move off.

That, that means the market is starting to move a little bit more off every comment that we get from a fed official and going into the June fed meeting is gonna move more off.

Things like that broadway essentially just means more volatility in a little bit less of a clear path here.

Because for the past year, it had been when a video goes higher, the market goes higher, it was near 1 to 1 correlation, which was pretty fascinating and we've sort of decoupled from that.

I wonder what that's also going to do.

It's also important to point out that Julian Manuel, his target for the S and P is pretty low, right?

4750.

So he's been waiting for a pullback.

I was gonna say, I wonder how much in terms of and comparing just the action that we've seen over the last, what is it?

3 to 4 trading days here ever since we got Nvidia's results, comparing that to the bullish narrative that was out ahead of those results.

When we, when we heard a number of Belski included raising his year end target.

I wonder in terms of whether or not that's causing some to just recalibrate some of the expectations of the returns that they're expecting to see, especially if we don't get more of a broadening out picture.

Like many are expecting.

I think it comes back to moves and yields a little bit, right?

Because no one that has a 5600 call on the S and P 500 is saying they think we get there with the 10 year above 4.5% right?

And that's been the key move over the last week.

The 10 year hasn't moved a ton, but it's moved about 10 basis points and it moved off economic data.

It moved on the day after Nvidia's earnings, right?

What drove the market on that day was a hot eco data release and a spike in the 10 year and then NVIDIA went up 10% but the market actually cared about the ECO data.

And so I think that's sort of the key driver now and it will be interesting to see if we do sort of get relief in the rise in yields because most people that do have a bullish call on the S and P think yields are coming down because they also think we're probably getting cuts at some point.

Right.

We'll see how this all plays out, time's going to tell.

All right, Josh Shafer.

Great stuff.

Thanks so much.