Global Stock Markets Experience Another Day of Decline
The US and European stock markets faced a significant downturn on Tuesday, resulting in a loss of over $1.5 trillion in global equity valuations. This decline occurred as investors eagerly await the highly anticipated earnings report from Nvidia. The S&P 500 fell by 0.8% to 6,617, while the Dow shed 1.1% to 46,091, marking four consecutive losing days for both indices. The Nasdaq also declined by 1.2% to 24,503.
Sector Performance
The performance of various sectors diverged sharply, with consumer discretionary and technology stocks leading the declines, falling 1.9% and 1.6%, respectively. On the other hand, energy and healthcare sectors showed resilience, with gains of 0.8% and 0.6%, respectively. The VIX recently hit 22, indicating an anxious market ahead of Nvidia’s earnings report, with options implying a potential 7.0% move in either direction for the stock.
Technical Setup
A notable technical setup is worth keeping an eye on, as it has proven to have a good track record. The VIX has closed north of the upper Bollinger Band, and the daily price of the S&P 500 recently formed an AB=CD pullback to 6,594. This technical confluence often delivers a dip-buying opportunity.
UK Inflation Cools in October
In the FX space, the UK inflation data was a key focus, with the October figures landing largely in line with consensus. The year-over-year headline inflation was 3.6%, easing from 3.8% in September, while the year-over-year core inflation was 3.4%, softening from 3.5%. The month-over-month services print was lower than expected at 0.2%, although it improved compared to the previous month’s 0.3% fall.
Implications for the BoE
The inflation data is significant, as it suggests that inflation has peaked, in line with the Bank of England’s (BoE) forecasts. The data also supports the expectation of a rate cut next month, with investors assigning around an 80% probability of a 25 basis point reduction to 3.75% from 4.00%. However, it is essential to note that the November inflation report and the Autumn Budget, to be released next week, could impact the BoE’s decision.
Fed Officials Maintain a Cautious Tone
Recent Fed speak has been cautious, with Governor Christopher Waller advocating for lowering the Federal funds rate next month. However, the lack of official data and elevated inflation, which remains above the Fed’s 2.0% target, has led to a tentative stance. This approach is sensible, given the Fed’s data-dependent, meeting-by-meeting strategy.
All Eyes on Nvidia’s Earnings
Today’s focus is on Nvidia’s Q3 earnings report, with options implying a potential 7.0% move in either direction. The report is expected to be released after the market closes, and analysts anticipate an adjusted EPS of $1.25 on revenue of $55 billion. The chipmaker’s earnings will be a significant test of whether AI infrastructure spending will deliver meaningful returns, and the results could determine the trajectory of the AI-fueled sector.
Conclusion
In conclusion, the global stock markets experienced another day of decline, with the US and European markets losing over $1.5 trillion in equity valuations. The highly anticipated earnings report from Nvidia is expected to be a significant factor in determining the market’s trajectory. The UK inflation data and Fed officials’ cautious tone also contribute to the uncertainty in the market. As investors await the earnings report and future economic data, it is essential to remain vigilant and adapt to the changing market conditions.
