The Market Brief
U.S. futures were mostly neutral as traders awaited NVDA earnings for an update on the artificial intelligence boom that has powered equity gains this year.
Impact Snapshot
🟥 NVDA 0.00%↑ Earnings (after close)
Macro Viewpoint
The tech sector has been under pressure in recent weeks, with a broad selloff as investors rotated out of megacaps ahead of Jackson Hole. The Nasdaq fell sharply mid-week before rebounding on Powell’s remarks, but cautiousness remains.
With Nvidia now accounting for ~8% of the S&P 500, its Q2 earnings release is one of the most important events, which is likely to set the tone for the AI trade and broader tech sector.
Majority of investors are bullish on Nvidia's upcoming earnings, yet retail speculation has faded compared to the past.
Fundamentally, EPS forecast has stalled, leaving the market hungry for fresh evidence of acceleration.
The market is pricing in uncertainty and protection before the earnings release.
S&P 500 market breadth is extremely narrow
Mirroring the elevated degrees of concentration, gross leverage, and short interest in the market, U.S. equity market breadth remains extremely narrow.
Although the aggregate S&P 500 index trades near a record high, its median constituent is still 11% below its 52-week high. This gap represents the narrowest market environment since late 2023.
Other experiences of sharply narrowing market breadth in the past have signaled near-term risk of a short squeeze.
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