Did you know that the stock market’s reaction to earnings reports isn't always as straightforward as it seems?

Sometimes, the numbers themselves are less important than the expectations that surround them.

Here’s what you’ll find in this issue:

• Why Nvidia’s Post-Earnings Stock Drop Wasn’t A Problem For The Market: First, we’ll discover why Nvidia's recent dip wasn't as alarming as it first appeared 😌

• As Nvidia Goes, So Goes The Market? Next, we’ll explore the relationship between Nvidia and the broader market 🤔

• Stronger Growth And Lower Inflation: Finally, positive economic revisions highlight stronger-than-expected growth and lower inflation 💪

Our highest goal is to offer you key insights into the stock market, helping you stay informed and ahead of the curve. Have a great weekend!

Why Nvidia’s Post-Earnings Stock Drop Wasn’t A Problem For The Market 😌

Every hero eventually takes a fall—and that’s as true for Nvidia.

The stock market can handle the hit.

The stock market is the best gauge of whether the numbers “disappointed,” and with Nvidia stock down more than 6% on the day, it would be easy to argue that Nvidia missed the mark ❌

The only problem, the options market was priced for a move of 10% up or down, which means that investors found far less to get excited about than they had expected.

As Nvidia Goes, So Goes The Market? 🤔

Nvidia drives the market.

That’s been the narrative for the stock market.

However, the narrative might need an adjustment.

For starters, Nvidia earnings don’t usually move the market the way investors seem to think they will 🤷

Nvidia and the S&P 500 have moved in the same direction the day after the release in just four of the last eight earnings reports.

Ironically, Nvidia and the S&P 500 have moved in the same direction three quarters of the time on the day before the earnings release, suggesting that the actual numbers mean less than the speculation beforehand.

What’s more, Nvidia seems to hold less sway over the market than it has in past years 📉

The correlation between the stock and the S&P 500 has recently climbed to 0.658, according to Bloomberg data, its highest since last year—a correlation of 1 means two assets move in complete lockstep, and -1 means they move in total opposition.

Still, that is far below the 0.851 hit right at the beginning of 2022.

This suggests that the S&P 500 is less sensitive to Nvidia’s cues than it had been a couple of years ago.

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Stronger Growth And Lower Inflation 💪

Yesterday data revisions for the second quarter showed that the economy grew by 3% rather than the initially reported 2.8%.

Also, inflation came in at 2.5% rather than the 2.6% that was first indicated.

This is all good news for the outlook for stocks 🤑

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