📈 Nvidia fails to spark rally

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Good Morning! 

So, Nvidia’s earnings came in strong, the stock pumped 10%, and investors are happy about the 10-for-1 stock split. Everything is great, right?

Well, not quite. Despite analysts watching Nvidia all week, the markets failed to find any momentum off the back of the data, and it’s all down to how strong the U.S. economy is.

Grab your cortado and let's get into it! ☕️👇️

Markets

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MARKETS

What’s next for the markets?

Nvidia Shines, But Not The Markets

Nvidia's blockbuster earnings had everybody cautiously optimistic. But instead, it was like lighting a match in a windstorm.

Despite Nvidia (NVDA) pulling off an impressive earnings report that surpassed Wall Street's sky-high expectations, the broader market still declined.

• Nvidia's Performance: The tech giant saw its stock rise nearly 10% on Thursday.

• Market Reaction: Despite Nvidia's robust performance, all three major indexes closed in the red.

  • Nasdaq Composite fell about 0.4%.

  • S&P 500 dropped nearly 0.8%.

• Market Sentiment: The excitement around Nvidia wasn't enough to lift the rest of the market, showing a clear disconnect between individual stock performances and broader market trends.

The Fed's Reluctance to Cut Interest Rates

The U.S. economy is strong, but that strength is making the Federal Reserve hesitant to cut interest rates. At the start of the year, Investors had high hopes for multiple rate cuts, but now they're expecting just one.

• Fed Expectations: Markets have adjusted from expecting six rate cuts to just one quarter-point cut for the year.

• Economic Indicators: The robust U.S. expansion is a double-edged sword:

  • Good News: Strong economic performance.

  • Bad News: Persistent inflation makes the Fed cautious about cutting rates.

• Global Impact: The Fed's hesitance sent ripples worldwide:

  • Major Asian markets, including Tokyo, Seoul, Hong Kong, and Shanghai, saw losses of more than 1%.

PMI Data: A Double-Edged Sword

Recent PMI data did show that U.S. business activity has started to surge, especially services. Whilst growth is great, it’s brought mixed feelings to the market.

• Business Activity Growth:

  • The fastest growth in over two years, led by the service sector.

  • Manufacturing also showed stronger growth.

• Employment Trends:

  • Lower employment continued but the rate of job losses moderated.

  • Improved business confidence and higher order book intakes were positive signs.

• Cost Pressures:

  • Both input costs and output prices rose at faster rates.

  • Manufacturing emerged as the main driver of price growth recently.

The recent market movements highlight the complex interplay between individual stock performances, broader market trends, and macroeconomic indicators.

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