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“Alcohol may be man’s worst enemy, but the bible says love your enemy.” – Frank Sinatra

Morning stock market summary

Below is a snippet of commentary from today’s Morning Lineup.  Start a two-week trial to Bespoke Premium to view the full report.  

Heading into the big inflation report this morning, futures were firmly higher and rates were lower as traders anticipated a weak print, and the result was only a very modest disappointment.  While the headline print came in slightly higher than expected (0.1% vs 0.0%) m/m, the core reading was right in line with forecasts (0.3%) and the year/year readings were right in line with forecasts. In the immediate aftermath of the report, there has been no change in the tone of equity futures or rates.

Yesterday was an interesting day in the equity market.  While the stocks of the seven largest companies by market cap, which collectively account for more than 28% of the entire S&P 500, were all down at least 0.78% and as much as 2.24% in the session, the index itself finished the day higher by 0.39%.  For investors in favor of a broadening out of the rally, this was exactly the type of action they wanted to see.

Within the semiconductor industry sector, we witnessed a similar type of move.  The Philadelphia Semiconductor Index (SOX) traded sharply higher all day, and for most of the session, all but one of the index’s 30 components was higher. That lone holdout? Nvidia (NVDA).  The stock opened lower on the session, and outside of the first half hour of trading, it was down at least 1% the entire day and as much as 3.5%.  When the closing bell rang, the SOX finished the day up 3.4%, NVDA was down 1.85%, and the only other stock in the index that finished lower on the day was Wolfspeed (WOLF) which closed down 0.35%.

Like the magnificent seven in the S&P 500, NVDA and its market cap of $1.15 trillion accounts for over 28% of the total market cap in the SOX.  For the stock to trade down nearly 2% on a day when the SOX trades significantly higher is extraordinary.  Looking back over time, since the start of 2010, there have only been three other days where the SOX rallied at least 2% on the day while NVDA traded down over 1%, and the last occurrence was in January 2021. In each of those periods, NVDA wasn’t even the behemoth in terms of market cap that it is now.  The charts below of the SOX and NVDA show each prior occurrence, and while there’s a temptation to read into these types of events as a significant turning point, there was no clear trend of performance for either following these prior occurrences.

Think about it this way. In week 9 of the 2020 NFL season, the Tampa Bay Bucs were creamed 38-3 by the New Orleans Saints for their first home loss of the season. Tom Brady had a lousy day with just 209 passing yards and 3 picks.  As bad as that one game was, though, three months later it was the Bucs, who as a three-point underdog, crushed the Chiefs 31-9 in Super Bowl LV. Even the best on the field can have an occasional bad day.

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