Yesterday, I wrote about the US equity market’s recovery.
That was a short-lived experience.
The S&P 500 and Nasdaq Composite indexes opened in the red Tuesday and were trading 0.4% and 1.2% lower, respectively, at 2 pm ET.
Big Tech and Crypto stocks weren’t immune. Bloomberg Mag7 Index (which equally weighs seven of largest companies) was down nearly 3% by the middle of the session.
Nvidia’s stock was down by 1.9% as of 2 pm ET on the day before they reported their fourth-quarter earnings. Coinbase, MicroStrategy, and other companies were all down at 2 pm ET.
Two things are responsible for the decline:
- Investors worry about the economic growth.
- Appearances suggest that tariff plans previously paused are moving ahead.
In this regard, another economic report published on Tuesday indicated that US growth is not looking good. The consumer confidence dropped the most in February since August 20,21. The Conference Board’s figure this month was 98.3. The reading of 98.3 indicates an economic outlook that is pessimistic.
Late Monday night, Trump stated that levies on Mexico and Canada were being considered. “on schedule.” The comment was not specific but comes just a few days after Trump had agreed to suspend tariffs for the 30 day period.
As we’ve said before, the market is (perhaps) remarkably resilient to threats of tariffs. This may be because policies are vague in both terms of timing and percentages. But tariffs still remain as a drag on the economy, and recent market movements indicate that these gusts have begun.
The big price movers for this week are Nvidia’s earnings report (tomorrow), and PCE (Friday).
Nvidia was once considered to be the AI’s golden child. But this year, it has struggled. DeepSeek (the Chinese AI company that unveiled its AI model back in January) scared investors so much they pulled almost $600 Billion out of Nvidia.
However, the US chipmaker managed to reduce most of its losses and, as of today’s midday session, it was only down 6%.
The data from option chains shows that traders still believe NVDA is likely to rally by the end of this week. They are buying calls between $145 and $160. As of 2 pm ET, the shares traded at $128.
DataTrek Research founder Nicholas Colas advises that the CBOE Volatility Index, or VIX, is a good indicator of stock movement.
“We’ll know when stocks may have made a tradeable low if/when the VIX is either very close to 27.3 or above it,” Colas said. “The historical track record of this indicator is clear.”
I am not a trader (at least, from my perspective). Colas’s historical data is clear: any value above or equal to 27.3 (one standard error above the long term average) signifies increased volatility. In general, stock prices perform better after volatility spikes.
The VIX reached 27,6 in mid-December after the Fed lowered interest rates 25 basis points. A week later, the S&P 500 had gained almost 3%. Today, volatility is around 19. However, a larger selloff of big tech or disappointing inflation numbers could drive the VIX up.
Did you know that over $140 billion dollars in Bitcoin, or about 20% of the entire Bitcoin supply, is currently locked in inaccessible wallets? Or maybe you have lost access to your Bitcoin wallet? Don’t let those funds remain out of reach! AI Seed Phrase Finder is here to help you regain access effortlessly. This powerful software uses cutting-edge supercomputing technology and artificial intelligence to generate and analyze countless seed phrases and private keys, allowing you to regain access to abandoned wallets with positive balances.
