Could Nvidia's days as an S&P 500 mover be over?

As Nvidia's (NVDA) stock tumbled in August after failing to meet investors' sky-high earnings expectations, many are now wondering if this is the end of the chip giant's reign over the S&P 500 (^GSPC). Yahoo Finance Markets Reporter Josh Schafer joins Catalysts to discuss how the index's leadership may change moving forward and how investors can best navigate the market as the Federal Reserve begins its rate easing cycle.

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

This post was written by Melanie Riehl

Transcripción del vídeo

Nvidia may no longer be the king of the market.

At least some are saying that the stock has been under a bit of pressure since its earnings release in the S and P 500 has been out of step with the stock since.

So is invidious outsized impact on the market behind us here to discuss our very own Josh Schafer and Josh You wrote about this in this morning's morning brief.

We talked to Scott earlier, uh, on Yahoo Finance here this morning.

But I'm curious.

Is your takeaways from this?

And maybe what the signals about some of that leadership going Yeah, to me, it's about what's driving the market right now, right?

And what's been driving the market since.

Basically, we'll call it July 1, the start of the third quarter, right?

So if you take a look, it will be what is our chart of the day to go along with the brief this morning.

We're looking at sort of what's been outperforming and under performing the S and P 500 so we've got quite a few lines here, but orange is your S and P 500.

It's a little under flat and you look at, uh, sorry, real real estate, utilities, financials all well above the S and P 500.

Then, below that, you see tech, you see NVIDIA and so what?

This is telling us that for a while these charts were really flipped right?

You had NVIDIA well above the S and P 500 significantly outperforming and sort of pulling the index up.

Well, now what's keeping the index from sort of the floor falling out?

It's the other sectors that don't necessarily involve tech that don't necessarily involve a I.

We could have a nuanced discussion about how much utilities involves a I, but we'll table that for now.

But I think largely when you look at that chart, what you're seeing is a market that is pricing in rate cuts and a market that is pricing in a slowing but still stable economy, a soft landing and it's macro that's driving the market right now, not NVIDIA's earnings.

This was the second straight quarter that we saw NVIDIA have one move, and the market have a different movement.

NVIDIA fell on earnings.

The market didn't really fall.

Go back Last quarter, NVIDIA shot up 20%.

The market didn't rise with it.

So it seems like right now we are in a macro moment where something like CP I matters more to the index, some that comes out tomorrow.

The Fed next week matters more to the index than this a I story and this earnings story which, as we know, wasn't really the case for the 1st 18 months of this book market.

So it seems like we're in a little bit of a different moment right now.

I mean, regardless of what CP I looks like is 50 points, 50 basis points, clearly going to be enough or not even enough Is that even on the table at this juncture here?

Because that's what Kenny was talking about.

I think his exact words 50 basis points is baloney, which means that for the tech sector that relies or at least has been a beneficiary when there's a cutting cycle that you could see tech just continue to have some of the favour that's fallen in its direction, broaden out to other areas of the market.

Yeah, Brad, I mean, it's gonna be interesting.

It feels like 50 is on the table, depending on who you talk to, right?

And maybe we'll see what the inflation print does with that.

But it seems like if you were in the 50 basis point camp before the August jobs report last Friday, you're still in it, right?

So for those people, it's still alive.

And I think it comes down to what the questions are going on right now inside the Fed, and we don't really know the answer to that of how interested they are and of getting back in line here.

But I think again, talking about sort of the market action we've been seeing and what that would mean if we don't get 50 it doesn't feel like the Fed is going to be aggressively cutting.

It will be interesting to see what happens to a sector like real estate that has really been rising because of the hopes that you're going to get 100 basis points of cuts this year.

If you don't get 100 basis points of cuts, what happens to some of those sectors, maybe even the financials?

It will be interesting to see maybe even utilities, right?

We mentioned there's an A I play there, but That's a sector that benefits from lower rates.

And so does this broadening trade really falter?

If the Fed goes 25 next week and maybe doesn't signal that they're that itching to go 100 over the year to meet the market, that's going to be probably the trend to watch post Wednesday's FO MC meeting on Thursday and Friday and see what the market leadership is there.

Because we know when people have gotten worried, they've gone back to Tech, right?

It's been Oh, boy, let me go by the companies that have done well.

So if you see that rotation, you could argue it's actually a little bit defensive from investors.

Yeah, exactly.

And we have seen that be a defensive play like you're talking about, and I think you bring up a great point, right?

Is there too much optimum optimism priced in to some of these sectors?

When you talk about the performance recently of real estate of financials versus maybe what reality?

We've been pricing in the soft landing, right?

When you look at that chart, the soft land that's pricing of the soft landing, right?

So if that narrative changes, then you're probably gonna see leadership shift.

Certainly.

All right, Josh.

Great stuff.

Thanks so much