Market continues to recover post CPI figures and strong comment from NVDA CEO

Following Wednesday's slightly better than expected CPI figures the Market continued to recover after last week's fall - driven in large part by Mag7 and NVDA in particular. NVDA was strong following upbeat CEO comments at a Goldman Sachs conference. The CPI figures showed inflation of 2.5% vs 2.6% expected, the lowest since 2021, although core inflation was higher. Today the August producer price index figures are released - expectations are for 0.2%. Last week's initial jobless is also released today - 225k expected.

The VIX remains relatively muted and fell back to 17.7 - it hit 65 intraday on 5 August, its highest level since Covid in 2020. DJIA +0.31%, S&P 500 +1.07% and Nasdaq +2.17% (on the back of Mag7 +2.59%). On an equal weighted basis (our measure) the overall market was broadly up +0.63%. Breadth was 51% (vs 12% on 5 August and a high of the mid 80s% at the end of July) and slightly better daily volumes of 8.4b (the average daily volume over the last year of 7.9b).

One day returns as follows - equal weight basis: Mag7 +2.59% (NVDA +8.2%, AMZN +2.8%, MSFT +2.1%), large +0.93%, medium +0.63%, small +0.45% and micro +0.65%. On a 1 and 2 week equal weight basis; Market -0.6% and -2.2%, Mag7 +3.1% and +0.8%, Large caps -0.2% and -0.6%, Medium cap -0.9% and -2.0%, small cap -1.5% and -3.2% and finally Micro cap flat and -2.1% respectively.

Our risk monitor remains in favour of the larger cap stocks. This performance differential in favour of large cap was magnified after the poor July nonfarm payroll figures and the associated wider Market retreat. Much of the adverse differential reversed in the middle of August. Interestingly the Small and Micro have held up fairly well relative to Large cap post the August nonfarm figures.