Things you need to know.
– Stocks tested/breached intermediate trendline support but rallied back.
– The Mag 7 index is now in correction territory.
– Individual names go further….
– Today is all about NVDA….
– Bonds rally, yields plunge – but what’s the message?
– Gold retreats on a possible Russia/Ukraine deal.
– Try the Frittata di Pasta.
Ok – here we go…. In Friday’s note I ended it with this comment:
“…..- today will be key – if we rally and bounce (which it appears we will – recall that futures were all higher) then it will be a reprieve and will give investors a chance to re-assess market dynamics…but if today is just a dead cat bounce – then I would expect us to breach trendline support – and that could take us to the 5800 range….
And it appears that it was just a Dead Cat Bounce – stocks struggled after the opening…..investors, traders and algo’s just not sure – and by the closing bell on Monday – the S&P failed to hold and then breached ‘trendline support’ (6009) ending the day down 30 pts at 5983….……and then again on yesterday the broader market went lower still – now while the Dow (30 stocks) ended higher – up 160 pts or 0.4%, the S&P lost 28 pts to end the day at 5955…..the Nasdaq continues to get slammed falling another 260 pts or 1.3%, the Russell down 8 pts or 0.4%, the Transports down 6 pts, the Equal Weight S&P up 10 pts while the Mag 7 Index fell 592 pts or 2.25% taking that index into official correction territory – now down 12.3% off the December high while the Nasdaq is only down 6.5%. The moves leaving many of the fan favorites wounded but not out…. NVDA – 18%, PLTR – 28% and almost filling that gap that we discussed last week! AVGO – 19%, TSLA – 40%, AMD -50%, QCOM – 28%…. these names and many others now well into ‘correction territory’ meaning they are down at least 10% off of their most recent highs…. all while the index appears to be in the normal trading range –
But NONE of this should surprise you…. we have been talking about this for months now…. …. A shakeout is overdue…….and maybe it was the news over the weekend about Uncle Warren’s big CASH pile that spooked everyone…… Whatever it is, it is….but that does not mean you (as a long term investor) need to panic or hit the sell button.
And today is D-Day – at 4:05 pm – Jensen Huang will take the global stage to report on the ‘state of his union’ and investors, traders and algo’s are on the edge of their seats…. You would think it is the only company reporting today – that is not true – we’re gonna get about 40 companies reporting today – but no one seems interested!
Put it in context – NVIDIA’s performance is seen as a bellwether for the AI industry. Despite recent concerns about cost-efficient AI alternatives, major clients’ reaffirmed spending plans (e.g., Meta, Alphabet, Amazon) and NVIDIA’s 90%+ dominance in AI chips suggest resilience. The report will likely clarify whether the Blackwell launch and sustained hyperscaler demand can propel NVIDIA past short-term market noise.
Here are the KEY points that they will be looking for from Jensen…. – understanding that the options market is pricing in an implied move of + or – 10%. The stock’s reaction will hinge on beating expectations and providing bullish guidance. NVIDIA’s consistent outperformance (beating estimates in 16 of the last 18 quarters) sets a high bar, but the recent 11% stock declines from January highs add pressure to reassure investors. At 6:30 am – the stock is quoted UP $3 at $129.75.
Revenue Performance:
Analysts expect record quarterly revenue of approximately $38.32 billion, a 73% increase year-over-year from Q4 FY2024. This exceeds NVIDIA’s own guidance of $37.5 billion (±2%) provided in their Q3 earnings. The growth is driven by strong demand for AI-focused data center chips, particularly the new Blackwell platform.
Earnings Per Share (EPS):
Consensus estimates project $0.84, with net income expected to reach $21.08 billion, up from $12.84 billion in Q4 FY2024. NVIDIA has a history of beating EPS estimates (e.g., by 5.6% to 11% in recent quarters), so investors will watch for another potential upside surprise.
Blackwell Platform Rollout:
This quarter marks the initial commercialization of NVIDIA’s Blackwell architecture, a highly anticipated AI chip platform. The company previously forecasted “several billion dollars” in Blackwell revenue for Q4, with CEO Jensen Huang describing demand as “insane.” Updates on production ramp-up and sales will be critical, as Blackwell is seen as a cornerstone of NVIDIA’s future growth.
Data Center Segment Strength:
The Data Center segment, which includes AI chips like the H200 and Blackwell series, is expected to continue its dominance. In Q3 FY2025, it generated a record $30.8 billion (up 112% year-over-year). Analysts will look for confirmation of sustained or accelerating growth, fueled by hyperscaler investments from companies like Microsoft, Meta, and Amazon.
Guidance for Q1 FY2026:
Investors are keenly focused on NVIDIA’s revenue outlook for the next quarter (February–April 2025). Analysts forecast nearly $42 billion, and guidance exceeding this could dispel recent concerns about AI demand softening (e.g., due to DeepSeek’s low-cost model claims). Strong guidance would signal confidence in continued AI infrastructure spending.
Response to DeepSeek Concerns:
Recent market volatility stemmed from a Chinese startup, DeepSeek, claiming it trained a competitive AI model for $6 million using older NVIDIA GPUs, raising fears of reduced demand for premium chips. NVIDIA may address this by emphasizing the importance of high-performance GPUs for inference workloads and ongoing investments by major clients (e.g., Meta’s $65 billion and Microsoft’s $80 billion planned AI spending in 2025).
Gross Margin Trends:
NVIDIA’s gross margin has been robust (e.g., 73.5% non-GAAP in Q3), but the Blackwell rollout’s complexity could pressure margins slightly, with the company previously noting a dip to the low-70% range. Investors will assess whether profitability remains strong amid the transition.
Capital Allocation:
NVIDIA has been aggressive with shareholder returns, spending $15.4 billion on buybacks and dividends in the first half of FY2025, with $7.5 billion remaining in its repurchase authorization (plus a new $50 billion approved in August 2024). Updates on cash flow and capital return plans will be noteworthy.
The market is also expecting him to highlight advancements in its AI ecosystem (e.g., NVIDIA NIM microservices, robotics initiatives from CES 2025) and partnerships like the $100 billion Stargate project with SoftBank, OpenAI, and Oracle, where NVIDIA is a key tech provider.
I pointed out that it had already breached short and intermediate term trendlines and that it was about to test the long term trendline at $126…..and it did that yesterday…in fact – it breached it trading down to $124.50 before rallying back….to end the day at $126.63.
Ok – let’s move on –
Bonds are exploding higher…..now a look at the TLT chart – reveals that they are breaking out……on the 21st – the TLT busted up and thru trendline resistance at $89.15 and it’s been on a tear ever since….closing at $91.42 yesterday and likely going higher in the days ahead – and all that means is the bond yields should continue to decline…..the 2 yr is now yielding 4.12% (down from 4.28%) and the 10 yr is down an astonishing 50 bps – currently yielding 4.31%.
Now the driver behind falling bond yields appears to be investor nervousness about an economic slowdown rather than confidence in a stronger economy. Here’s why:
First, economic data is mixed: while GDP growth was solid at 2.3% in Q4 2024 (down from 3.1% in Q3), consumer sentiment and service sector activity have reportedly weakened. Investors are interpreting this as a potential stall, especially with inflation still above the Fed’s 2% target (core PCE at 2.8% as of February).
Second, policy risks are looming. Proposed tariffs and job cuts tied to incoming administration rhetoric could disrupt growth, prompting a flight to safety.
A stronger economy typically pushes yields up, as investors demand higher returns amid growth and inflation expectations—That’s not the case now. Instead, the yield curve’s recent flattening (short-term yields nearing long-term ones) hints at recessionary worries, though it hasn’t fully inverted—it is a classic slowdown signal.
So, the decline in bond yields leans heavily toward investor nervousness about a slowdown. They’re piling into bonds for safety, not because the economy’s roaring ahead. That said, it’s not a full-blown panic—yields aren’t plummeting to crisis levels (yet).
Now the VIX – fear index – continued to push higher yesterday …. Up another 2.2%. leaving it just below the highs seen in January. The rise in VIX is putting more pressure on stocks as futures trend lower. This morning – the VIX is lower and that is helping futures trade higher.
Gold is finally taking a break…..it has fallen $50 from $2971 to $2921…..over the past 2 days…Recall – I told you that the chart suggested it was either going to break out or break down….I pointed to headlines coming out of Russia/Ukraine as a catalyst…and it appears that is true…..Zelensky has agreed to the mineral rights deal that Trump proposed and it appears that the conflict is closer to an end than not…and so gold traders are taking profits after the dramatic move higher. I said that a settlement in the Russia/Ukraine war will take the pressure off of the ‘safety trade’ and that may cause gold to pull back – testing the $2850/$2900 range…. Yesterday – we tested $2908….and while it is bouncing this morning my gut says it will trend a bit lower still.
US futures are rallying…. The Dow +120, S&P’s +25, the Nasdaq up 135, while the Russell is up 7. European markets are also higher…..as the world awaits………The reality is that we need Jensen to settle it all down….it is important that the numbers are good and the outlook is strong……if he shows a hint of something negative, the tone will shift swiftly….Now, while I am not concerned, it is amazing what some people focus on….looking for something they can point to that says “He missed it!”
The S&P closed at 5955 – down 28 pts. Intermediate trendline support was at 5945 which I did not think would hold – and it didn’t – yesterday the S&P traded down to 5908…..before rallying back…It appears that the mkt is expecting Jensen to deliver and if he does – then watch the buy algo’s go into hyper overdrive…
Remember – make your plan and then stick to it…call me to discuss. 561-244-2504.
Take good care,
Sources: Bloomberg, CNBC, Reuters, Wall Street Journal
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The market commentary is the opinion of the author and is based on decades of industry and market experience; however, no guarantee is made or implied with respect to these opinions, which may not necessarily align with our firm’s standpoint.
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Frittata di Pasta
This is a great dish – that you will never see in a restaurant…It’s more comfort food…from my kitchen to yours….
For this you need: Butter, Olive Oil, Eggs, s&p, parmegiana, cubes of provolone, cubes of salami and the cooked spaghetti.
Start by cracking 6 eggs in a large bowl, Scramble,
Now add in the parmegiana, provolone, salami and season with s&p. Mix well.
Next add in the cooked ½ lb. of spaghetti. Mix well.
In a large non-stick frying pan – melt the butter and some olive oil. When it is nice and hot – add the spaghetti mixture and spread it out. Leave it to cook. Once it comes together and the bottom is golden – flip the frittata – by placing a large plate over the pan – flip it over on the plate and then slide it back into the pan so that the other side cooks and gets golden.
Once it’s all cooked – remove and flip back onto the plate. Allow it to cool for 5 mins and then slice it up and enjoy. Yum.
Buon Appetito
