Nvidia Results and AI Trade Independence Send S&P 500 Futures Lower
U.S. stock futures are experiencing mixed results overnight, with Dow futures climbing 0.04%, while S&P 500 and Nasdaq-100 futures fall by 0.08% and 0.19% respectively. This comes after all three benchmark indexes closed higher on Tuesday, with the Dow Jones Industrial Average gaining 0.30%, S&P 500 adding 0.32%, and Nasdaq Composite rising 0.66%. The upcoming quarterly results from Nvidia Corp., set to be released on Wednesday, are being closely watched as a bellwether for the broader market.
The Kobeissi Letter noted that the AI trade is becoming increasingly independent of the broader market, citing a 40-day correlation between the US Broad AI Index and S&P 500 ex-AI Index at -0.60, its lowest on record since late June. This marks only the second negative reading on record after July 2024.
The Federal Reserve's annual symposium in Jackson Hole, Wyoming, is also set to take place this week, with Chairman Kevin Warsh's speech on Friday expected to provide insight into plans for stabilizing long-term Treasury yields and cues on policy path. U.S. Treasury yields moved lower on Tuesday amid reports that the Treasury could tap its nearly $1 trillion General Account to fund an expanded government bond buyback program.
The move has sparked debate, with Stanley Druckenmiller suggesting in an opinion piece for The Wall Street Journal that the Treasury's decision to double long-dated bond buybacks was a policy error. The market's response was swift and correct, he said, with this being 'price management, and a mistake far larger than $4 billion suggests.'