In Notable Shift After Nvidia Earnings, Investors Are Becoming More Selective
It was another strong day for the market as investors focused on picking stocks rather than market capitlizations.
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A mediocre earnings report from Nvidia NVDA was unable to slow down the market momentum. The Nvidia report beat expectations, but it wasn't as good as hoped, and caused some minor pressure on the stock. The primary issue with the stock is that sales of chips to China are still a murky issue that won't be clarified for a while.
The market could have used this report as an excuse for some broader profit-taking, but market players simply rotated into other areas of the market. The Russell 2000 small-cap index IWM was green once again, and the Nasdaq 100 QQQ managed a 0.65% gain due to strength in some key growth names like Datadog DDOG and Applovin APP.
Breadth was slightly negative, but there were 250 new 12-month highs. What is most notable about the market right now is that it is working very well for stock pickers. So often in the past few years, market strength was primarily a function of just a few mega-caps that lifted the indices. What we are seeing now is that investors are being much more selective, and they are doing well by picking individual stocks with good charts and solid fundamentals. Quality matters more than market capitalization, which is a very refreshing change.
We have a PCE inflation report on Friday morning that will be an interesting test of the market mood. Economic issues just haven't mattered much, especially after Jerome Powell's dovish tilt last week at Jackson Hole. A spike in inflation could still cause some problems, but investors are confident that a rate cut is coming even if things run a bit hot.
The contrarian bears will tell us that this action is too complacent and that volatility measures are too low. Maybe so, but if you are using those arguments to call a market top, you are going to have some timing problems.
It is a good time to reflect on the old adage "the trend is your friend, until it ends."
Have a good evening. I'll see you tomorrow.
At the time of publication, DePorre had no positions in any securities mentioned.
