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S&P 500 and Nasdaq 100 Glide Lower After Nvidia’s Revenue Warning Spooks Markets

S&P 500 and Nasdaq 100 Glide Lower After Nvidia’s Revenue Warning Spooks Markets

Diego Colman, Contributing Strategist


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  • S&P 500 and Nasdaq 100 finish the day modestly lower as tech stocks slide
  • Nvidia’s revenue warning spook investors, prompting traders to cut risk exposure to semiconductors
  • The July U.S. inflation report will steal the limelight on Wednesday

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Most Read: S&P 500, Nasdaq 100, Dow Jones: Grinding into Key Resistance

U.S. stocks began the week on the back foot, extending Friday’s subdued performance in a session characterized by higher-than-normal volatility. For context, the main equity benchmarks were posting strong gains in the early trade Monday, but then reversed their advance and took a turn to the downside as investors digested negative news from Nvidia, the 11th biggest company by market capitalization in America.

When it was all said and done, the S&P 500 inched down 0.12% to 4,140, with information technology and financials underperforming. The Nasdaq 100, for its part, declined 0.0.37% to 13,159, wiping out a rally of as much as 1.4%, dragged down by a 6.3% plunge in Nvidia shares.

Although a sharp decline in U.S. consumer inflation expectations across all time horizons in a survey produced by the Federal Reserve Bank of New York buoyed Wall Street sentiment initially, concerns about slowing activity ultimately outweighed positive data on the price front.

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Fears about the health of the economy increased after Nvidia, one of the world's largest chipmakers, warned of a steep decline in sales in response to gaming weakness, indicating that quarterly revenue would fall about 19% sequentially to $6.7 billion in a preliminary financial results report, well below guidance of $8.1 billion.

Cooling demand for semiconductors, a highly cyclical space, suggests that gross domestic product continues to slow, undermined by softening consumption in the face of four-decade high inflation. While the outlook is incredibly challenging, the economy is not yet falling off the cliff and can still avoid a major downturn, thanks in part to the resilience of the U.S. labor market.

To avert a hard landing, the Fed may eventually have to pivot to a less aggressive monetary policy stance, but the timing of that scenario is still uncertain and largely depends on the evolution of consumer prices. We will get a better picture of the inflation profile Wednesday when the U.S. Bureau of Labor Statistics releases last month’s data.

July CPI is seen printing at 0.2% m-o-m following a 1.3% increase in June. With that result, the annual rate is expected to ease to 8.7% from 9.1% previously, a welcome directional improvement, but still an extremely high number, more than four times above the central bank's 2% target. In any case, the lower the CPI figures, the better for sentiment and stocks, especially those in the tech and growth space.

US 500 Mixed
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 1% 0% 1%
Weekly -3% 2% 1%
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The S&P 500 has been stuck around key resistance (4,160-4,175) over the past few days as the tug-of-war between the bears and bulls remains unresolved. Traders should keep a close eye on this technical area in the coming days, as price reaction may provide clues as to near-term direction.

In terms of possible scenarios, if we see a decisive break above 4,160-4,175, bullish momentum could resume, setting the stage for a rally towards channel resistance at 4,300. On the flip side, if sellers regain control of the market and spark a strong bearish reversal from current levels, initial support appears at 4,065. On further weakness, the focus shifts to 3,920.


S&P 500 technical chart

S&P 500 Chart Prepared Using TradingView

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