Stock Losses Accelerated Despite Nvidia’s Standout Earnings
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Our Views
- I think the weakness in crypto has the signs of market makers really being hampered or limping along. They’re the central banks in crypto.
- They’re the ones providing liquidity, doing a lot of trading, and they’re pulling back is like QT for crypto. And on top of that, we have got a hawkish Fed.
- So it’s like a double whammy for crypto. Now it’s arguably not going to last forever because in 2022, it took 6-8 weeks for the market makers to recapitalize. And we’re six weeks into this process.
- As discussed, the breadth and momentum remain issues for US stock indices, and now Technology’s weakness has resulted in trend failure for SPX and QQQ.
- While I respect Elliott-wave theory, Cycles, and DeMark all seem to converge on late November as providing support and a rally, Thursday’s decline was not encouraging and will likely result in fear starting to creep back into the market.
- Overall, the next 3-5 days certainly have the potential to show more volatility. However, I am betting on a low in Technology by Wednesday of next week, which should help the broader market bounce into December.
- Bitcoin’s rolling 30-day return is in the 6th percentile since 2020, the 7-day return is in the 3rd percentile, and its deviation from the 50-day moving average has reached a z-score of roughly -2.8.
- These readings have only appeared during major stress events and historically tend to coincide with exhaustion in selloffs and the setup for multi-week bounces.
- Spot Bitcoin ETFs have seen >$4 billion dollars of net outflows over the prior 30 trading days, rivalling prior capitulatory periods.
- With legislation to release the Jeffrey Epstein files approved, the Department of Justice now has 30 days to make the files largely available to the public.
- As the files are released, the possibility exists that well-known and influential Wall Street names might make an appearance within, potentially sparking a response in the markets.
- Meanwhile, Congress has left DC, and its scheduled Dec. 2 return and Dec. 22 Christmas break give the legislature not much time to deal with a multitude of time-sensitive budget issues.
Wall Street Debrief — Weekly Roundup
Key Takeaways
- The S&P 500 ended the week down 1.9% to 6,602.99 points. The Nasdaq Composite slipped 2.7% to 22,73.08. Bitcoin was at USD 84,491.73 on Friday afternoon.
- Fundstrat Head of Research Tom Lee says the stock market is closer to a bottom here.
- Head of Data Science Ken Xuan says that even if the Federal Reserve doesn’t cut rates at the December meeting, it doesn’t really affect investors’ long term view.
“Do you know what we call opinion in the absence of evidence? We call it prejudice.” ― Michael Crichton, State of Fear
Good evening,
AI juggernaut Nvidia’s earnings blew through obscenely high expectations, but it wasn’t enough to overturn the bearish sentiment prevalent this month.
The S&P 500 lost 1.9% this week, while the Nasdaq Composite declined 2.7%.
Stocks declined to start the week, but there was hope that Nvidia’s earnings after the close on Wednesday could help turn the tide.
And they did, for a short while at least. It reported record third quarter sales of $57 billion, up 62% from a year ago, which beat expectations. It also upped its guidance for fourth quarter revenue, expecting it to hit $65 billion.
Even better was the “monster” data center revenue, according to Fundstrat Head of Data Science Ken Xuan. It rose 25% from the previous quarter and 66% from a year ago.
About an hour after the market opened on Thursday, however, Nvidia quickly reversed its gains, and there was no particular reason for it. Since it’s the S&P 500’s biggest weight, its sharp declines also took down the rest of the market.
“Thursday was disappointing,” Fundstrat Head of Research said in his Macro Minute video. “But I think that there were some things in the orbit that were contributing to the weakness.”
(1) A series of tweets from President Trump in the morning that said that democratic veterans urging service members to refuse to follow unlawful orders would be considered “seditious behavior,” which of course, “rattled markets.”
(2) Investors are nervous if a famous markets individual is named in the Epstein Files, which could be leading someone to liquidate their position.
(3) Crypto has been “bleeding lower” since Oct. 10, and there is a sign of market makers really being “hampered.”
(4) Oracle’s credit-default swaps, a measure of risk, are exploding, which is also contributing to rattling the markets. Our Chart of the Day has more details:
(5) A surge in VIX contributed to investors de-risking. It surged to a one-month high of 28 and could go even higher. The last time it was this high was back on Oct. 10 when crypto faced a big liquidation event.
Nvidia’s unraveling has dragged the S&P 500 down 3.5% this month, but Lee said that “I still think we’re closer to the bottom here.”
He recommends that investors buy the dip.
September jobs report
The U.S. economy added 119,000 jobs in September, according to a shutdown-delayed jobs report. That was more than economists’ expectations of a 50,000 increase. The unemployment rate, however, nudged up to 4.4%, the highest level in four years.
Xuan said during the weekly huddle that the report isn’t very timely, so it “doesn’t really tell us too much about what happened over the last month.” And another notable point is that the report supports the Federal Reserve to hold interest rates steady because the “job market’s not that bad.”
Fed minutes on Wednesday showed that central bankers remained divided, with many market participants supporting a cut and others backing a pause.
As a result, odds of a pause during the Fed’s December meeting skyrocketed Wednesday, but by Friday, those bets declined to 26% from 61% on Thursday.
Xuan said that cutting in December or January doesn’t really make a difference.
“If you’re a long term investor, you should zoom out. I don't think a cut is really changing much for the overall trajectory,” he added.
Head of Technical Strategy Mark Newton is bullish, as well. He wrote, “I still feel like the final six weeks of 2025 have the potential to show a rally, and that 2026 would be the more likely time for a lengthier decline, not into and throughout December.”
Elsewhere
President Trump met with New York City mayor-elect Zohran Mamdani on Friday. It’s a somewhat funny turn of events because before Mamdani’s election victory, Trump was vocal about not supporting him. Instead, the president threw his support to former governor Andrew M. Cuomo and threatened to withhold funding from the city if Mamdani, a democratic socialist, won. But the president and Mamdani seemed to both change their tune after their meeting, with Trump adding that “I feel confident he can do a good job.”
The U.S. has a peace deal suggestion for Ukraine, but as a part of it, Ukraine would have to give up the Donbas region and limit its military size. Kyiv didn’t get to contribute to the peace deal suggestion. “Now the pressure on Ukraine is one of the heaviest,” said Ukrainian President Volodymyr Zelenskyy. He is worried that if he agrees to the U.S.-backed peace deal, then it could leave Ukraine without freedom, dignity, and justice. The US president is pursuing an “aggressive timeline” to end the conflict.
Netflix, Comcast and Paramount Skydance have submitted bids to buy Warner Bros. Discovery, according to an exclusive story by The New York Times. Warner Bros owns HBO, CNN, and the Warner Bros. movie and TV studios. Whoever ends up buying Warner Bros will be its fourth owner in seven years. Its shares have rallied sharply this year in anticipation of a new owner.
New York Fed president John C. Williams voiced his support for an interest-rate cut at the Fed’s upcoming December meeting. He called rates “restrictive” and said the central bank has the scope to lower borrowing costs “in the near term” until we get to a “neutral stance.” “My assessment is that the downside risks to employment have increased as the labor market has cooled, while the upside risks to inflation have lessened somewhat,” he said at an event in Santiago, Chile. “Underlying inflation continues to trend downward, absent any evidence of second-round effects emanating from tariffs.
Of interest: Weather prediction is about to get a whole lot better. Google’s got AI-powered weather forecasts that it’s planning to incorporate into its phones and search. It is expected to outperform the state-of-the-art physics-based systems in predicting the course of this season’s Atlantic hurricanes, which will help make it a selling point of the Android ecosystem.
