Nvidia beat Q2 and shares fall.. but it's all about the economy

The indices were all down yesterday ahead of Nvidia's results (released after hours), Market volumes remain soft reflecting the 'holiday' season. NVDA's Q2 results beat expectations though likely missed some of the high end ones. Revenues of $30b +122% yoy (vs consensus $28.4) they also raised Q3 revenue guidance to $32.5b (vs $31b consensus). The NVDA share price was down 2.1% on the day and a further 4.6% after hours. NVDA sentiment is presently driving the Market but the key pieces of news over the coming few weeks are next Friday's August nonfarm payroll release and the interest rate decision on 18 September. These will likely set the tone of the Market for the rest of the year.

The VIX hit 17 - it hit 65 intraday on 5 August, its highest level since Covid in 2020. DJIA -0.39%, S&P 500 -0.60% and Nasdaq -1.12%. On an equal weighted basis (our measure) the overall market was down -1.07% reflecting softness in the smaller end of the Market, breadth was 31% (vs 12% on 5 August and a high of the mid 80s% at the end of July) and daily volumes of 7.2b (vs the average daily volume over the last year of 7.9b).

One day returns as follows - equal weight basis: Mag7 -1.16% (NVDA -2.1%, TSLA -1.7%, both of these stocks remain the most volatile of the Mag7), large -0.54%, medium -0.67%, small -0.93% and micro -1.41%. On a 1 and 2 week equal weight basis; Mag7 -3.4% and +1.4%, Large caps flat and +2.9%, Medium cap +0.1% and +3.7%, small cap +0.5% and +4.7% and finally Micro cap -0.3% and +4.7%.

On a weekly basis the market was flipping between favouring large caps to back to small/micro the following week. Our risk monitor remains in favour of the larger cap stocks. Micro Cap stocks had positive relative momentum four weeks ago, this reversed post release of the July nonfarm payroll figures. However over the last two weeks the Market has increasing favoured Small and Micro stocks. The wider Market still seems too volatile for the Small and Micro stocks to outperform over a longer period.