Weekly Trader's Outlook

Nvidia helps propel stocks to fresh all-time highs. Now what?

February 23, 2024 Nathan Peterson
Most of the majors notched fresh all-time highs this week, with the help of robust earnings from AI-darling Nvidia, but a lack of near-term catalysts may lead to some consolidation of recent gains.

The Week That Was:

If you read last week's blog, you might recall that my outlook for this week called for a "Slightly Bullish" outlook for the first half of the week and "Slightly Bearish" for the back half of the week. As you are likely aware, basically the exact opposite occurred as investors decided to take profits in tech stocks in the two days leading up to Nvidia's report, and then poured money back into tech following Nvidia's stellar results (which I cited as a risk to this week's forecast). Following the report, most of the U.S. major indices (SPX, DJI, NDX) rallied to fresh all-time highs on Thursday. Nvidia delivered its fourth consecutive 'beat-and-raise' quarter (Q1 revenue guidance was about $2B above consensus estimates, similar to the prior two quarters) and the message that this expectation discrepancy seems to be sending to markets is this: analysts are still behind the curve on this AI secular growth story which warrants additional upside price discovery in AI stocks. At some point this gap will close and Nvidia will provide "in-line" guidance, but this could be several quarters away. In the meantime, multiple expansion in those tech stocks that are expected to benefit from this AI investment cycle continues. The strong performance from the technology sector has largely contributed to fresh all-time highs in stocks. Furthermore, stocks have continued to maintain "melt-up" mode despite rising bond yields and a more hawkish reset of Fed policy expectations. Perhaps the message markets are sending is that higher-for-longer yields are not a problem provided the economy remains strong and the race to build out AI offerings continues to exhibit momentum.

Outlook for Next Week:

As I look out to next week, I'm asking myself whether the bullish momentum in tech can continue with Nvidia's earnings behind us? Although there are still some key tech earnings reports still to come (such as CRM and SNOW next Wednesday), investor bullish sentiment has been stretched for a while, some technical indicators suggest momentum is waning (more in this in the "Technical Take" section below), and seasonality still favors the bears (February is the worst-performing month for technology stocks). The counter to this view is that there is enough bullish momentum in place, driven by investor FOMO within the technology space, to push stocks higher into all-time high territory. However, taking the above factors into consideration, from a near-term risk/reward assessment I believe some caution is warranted heading into next week. I don't necessarily have a strong bearish stance next week, as we could possibly undergo a period of consolidation by moving sideways for a certain timeframe. But I believe the potential for a profit-taking pullback is developing and ultimately, stocks will be slightly lower by this time next week. Therefore, my outlook for next week is "Slightly Bearish." One other potential catalyst to watch for is Thursday's Personal Consumption Expenditures Price Index (PCE). Although warmer inflation hasn't really deterred bullish sentiment, it could provide an excuse to take profits if the report comes in above expectations [earlier this month both Consumer Price Index (CPI) and Producer Price Index (PPI) came in hot]. What could challenge this outlook? In short, bullish momentum in tech continues to propel the indices higher.

Next Week's Potential Market-moving Catalysts:


  • Monday (Feb. 26): New Home Sales
  • Tuesday (Feb. 27): Consumer Confidence, Durable Goods Orders, FHFA Housing Price Index, S&P Case-Shiller Home Price Index
  • Wednesday (Feb. 28): Advanced International Trade in Goods, Advanced Wholesale Inventories, EIA Crude Oil Inventories, GDP – Second Estimate, MBA Mortgage Applications Index
  • Thursday (Feb. 29): Chicago PMI, Continuing Claims, EIA Natural Gas Inventories, Initial Jobless Claims, PCE Prices, Pending Home Sales, Personal Income, Personal Spending
  • Friday (Mar. 1): Construction Spending, ISM Manufacturing Index, S&P Global US Manufacturing PMI, University of Michigan Consumer Sentiment


  • Monday (Feb. 26): Fidelity National Information Services (FIS), Domino's Pizza (DPZ), Workday (WDAY), Zoom Video Communications (ZM), Unity Software (U)
  • Tuesday (Feb. 27): American Tower (AMT), AutoZone (AZO), Republic Services (RSG), Agilent Technologies (A), Extra Space Storage (EXR), First Solar (FSLR)
  • Wednesday (Feb. 28): Baidu (BIDU), TJX Companies (TJX), Salesforce (CRM), Snowflake (SNOW), HP Inc. (HPQ), Okta (OKTA)
  • Thursday (Feb. 29): Anheuser-Busch Inbev (BUD), Hormel Foods Corp. (HRL), Best Buy (BBY), Autodesk (ADSK), Veeva Systems (VEEV), Zscaler (ZS)
  • Friday (Mar. 1): RadNet (RDNT), Plug Power (PLUG)

Economic Data, Rates & the Fed:

We didn't get a lot of economic data this week with the Federal Open Market Committee (FOMC) Minutes from the meeting that took place on January 30-31st. In summary, the minutes reiterated the patient stance that Fed officials have been conveying this year regarding the potential for rate cuts at future FOMC meetings. The forecasts showed that Federal Reserve officials expect PCE inflation to decline in 2024 and settle close to their 2% target by 2026. The Fed doesn't want to start cutting rates too soon and wants to feel confident that inflation is moving sustainably towards their 2% target. What's important to note is that these minutes do not include the strong January Nonfarm Payrolls report (317K vs. 155K estimate) that was released February 2nd or the hotter-than-expected CPI and PPI data that came out earlier this month.

We are still seeing strength in the U.S. labor market as this week's Initial Jobless Claims declined 12K from the prior week to 201K, representing the lowest print in over a month.

The other economic data points this week came from the S&P Global Flash US Composite PMI for February. We saw relative strength in the Manufacturing PMI which came in at a 17-month high of 51.5 (vs. 50.5 estimate and up from a prior read of 50.7) while the Services Business Activity Index slowed to 51.3 from a prior read of 52.5, and below the 52.0 expected. The survey showed that cost pressures eased for manufacturers and service providers as input prices rose at the weakest pace since October of 2020.

Bond yields are flat on a week-over-week basis but have remained around three-month highs, driven by stronger economic data and warmer inflation data. Yields on the 10-Year Treasury (TNX) closed at the highest level (4.325%) since late November on Wednesday but have subsequently eased to the current level of 4.287%.

Lastly, Fed rate cut expectations continue to get pushed out further in time. On a week-over-week basis, the Bloomberg probability for a Fed rate cut in May has dropped to 23% from 38% while June currently stands at 82%. The "higher for longer" theme doesn't seem to be rattling investors as stocks have managed to rally to fresh all-time highs. As long as the U.S. economy continues to convey strength, and corporate profits continue to grow, it appears that markets are willing to forgive stubbornly high yields, at least for now.

Technical Take:

S&P 500 Index (SPX + 9 to 5,096)

First, let's acknowledge that the S&P 500 index (SPX) rallying to fresh all-time highs is bullish. (Also worth noting is the fresh highs we saw across the pond in both the in the Nikkei 225 and STOXX 600). Additionally, let's acknowledge that new highs in the SPX is primarily being driven by the rally in mega-cap tech (which make up roughly 25% of the market-cap weighted SPX). Can the SPX continue to move higher via rotation if/when we get a profit-taking correction in tech? It's tough to say right now, but it's important to note the importance of the tech sector for the stock market at large. I pointed this out last week but there is still a negative divergence in the Relative Strength Index (RSI), which suggests that momentum is waning (read more on RSI here). This divergence doesn't tell us the timing of a potential consolidation move lower, but it's worth noting. Because technology has been the driving force for the SPX recently, and the potential "air pocket" of catalysts in tech with NVDA's earnings out of the way, coupled with the negative divergences in both the SPX and NDX, I'm feeling cautious heading into next week. Near-term technical translation: slightly bearish.

Source: ThinkorSwim trading platform

Past performance is no guarantee of future results.

Nasdaq 100 Index (NDX - 45 to 17,959)

As referenced above, the concern I have for the NDX, at least on a near-term basis, is a) the lack of near-term catalysts for tech (aside from CRM and SNOW earnings next Wednesday) with NVDA earnings behind us b) slowing upside momentum as measured by the RSI and c) bearish seasonality for tech during the month of February. The problem with negative divergence however is it doesn't tell you when a potential pullback will occur and to what extent. I could have pointed out the negative divergence last week and yet the NDX rallied to fresh all-time highs this week. However, taking the three factors I referenced above into consideration, the current risk-reward set-up feels skewed to the downside. Near-term technical translation: slightly bearish.

Source: ThinkorSwim trading platform

Past performance is no guarantee of future results.

Market Breadth:

It was a bit of a mixed bag this week in terms of market breadth this week. The SPX breadth showed broader participation while the Nasdaq and Russell breadth both narrowed from last Friday. Below is a Bloomberg chart showing the current percentage of members of the S&P 500, Nasdaq Composite, and Russell 2000 that are trading above their respective 200-day Simple Moving Averages. Compared to last Friday, the SPX (white line) breadth moved up to 75.55% from 72.89%, the COMPX (blue line) moved down to 48.86% from 51.69%, and the RUT (red line) showed a sharp decline to 54.79% from 62.08%.

Source: Bloomberg L.P.

Market breadth attempts to capture individual stock participation within an overall index, which can help convey underlying strength or weakness of a move or trend. Typically, broader participation suggests healthy investor sentiment and supportive technicals. There are many data points to help convey market breadth, such as advancing vs. declining issues, % of stocks within an index that are above or below a longer-term moving average or new highs vs. new lows.

This Week's Notable 52-week Highs (241 today): Abbvie Inc (ABBV + $1.18 to $177.93), Abercrombie & Fitch Co. (ANF - $1.22 to $120.00), Cummins Inc. (CMI - $0.70 to $262.18), Dick's Sporting Goods Inc. (DKS + $1.65 to $170.53), JP Morgan Chase & Co. (JPM + $1.24 to $184.31), Meta Platforms Inc. (META - $1.13 to $485.00), Nvidia Corp. (NVDA - $2.06 to $783.32)

This Week's Notable 52-week Lows (109 today): Agco Corp. (AGCO + $1.64 to $108.74), Cable One Inc. (CABO - $44.07 to $431.99), Chewy Inc. (CHWY - $0.04 to $16.04), Mobileye Global Inc. (MBLY - $0.51 to $23.75), Peen Entertainment Inc. (PENN + $0.21 to $16.82), Teladoc Health Inc. (TDOC - $0.46 to $14.75), Wolfspeed Inc. (WOLF - $1.01 to $24.27)

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