Are you as perplexed as I am by NVIDIA’s (NASDAQ:) inscrutable ascent? Sure, the stock soared, clearing the resistance at $750 and climbing to $785. But did it truly deserve such an astronomical leap? With a $2 billion margin over expectations, the stock’s $277 billion gain in market cap yesterday seems quite heft. It’s almost as if a modest guide improvement, even at 20x times sales, can propel shares to unprecedented heights in a single day.
As per the options market, there were hints of the potential advance to $800 following the results, contingent on the stock breaking above $750. And guess what? It did.
Yet, amidst all this hullabaloo, did anything substantial change for the broader market? At first glance, it seems not much has shifted.
The Nasdaq 100 is still propped at 14, while the and rates have remained relatively stable. Even the closed below the February 12 highs of around 18,000, leaving us to ponder whether it can surmount this resistance and bridge the gap today. It’s either forming a broadening wedge or shaping up to be a potential double top.
Meanwhile, the technology ETF experienced a 3% surge yesterday, merely filling the gap from February 13.
What truly stood out yesterday was the noticeable uptick in fixed strike implied volatility for both March OPEX and the implied volatility three months down the line.
Similarly, the 1-month implied correlation also surged, a rare occurrence to witness both the and the 1-month implied correlation index spiking simultaneously.
Furthermore, 1-year inflation breakevens catapulted by 3.6% yesterday, reaching their highest level in a year, while 1-year inflation swaps also surged.
Amidst this maelstrom, in the realms of bond and volatility, real yields rebounded to 2% yesterday for the first time since the chaos ensuing the December FOMC meeting.
Curiously, despite the clear signs of tightening financial conditions in the bond and volatility space, credit spreads defied expectations by declining instead of ascending.
It all seems like a plunge into the unknown, an enigma wrapped in peculiarity. NVIDIA’s favorable earnings might have propelled the stock to considerable heights yesterday, but whether they suffice to alter the grander narrative remains uncertain. But that’s precisely why we show up at the game every day.
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