Nvidia Takes Back Seat to Macro

With earnings largely behind us and the limits of Nvidia's (NVDA) reach coming into view, market narrative should be driven by macro themes this week.

There are two notable things that have happened in the market over the past five days: Nvidia has failed to spur a broader stock rally, and Treasuries are selling off again.

Despite a huge rally on earnings last week, the A.I. Kingmaker sits uniquely alone on the throne. Nvidia is now up 20% since it's report, and the S&P 500 is down about 1%. The broader semiconductor group is up 5%, and the rest of the market is way behind, with the equal-weight S&P 500 still trading below its April high. That this is happening even as Nvidia approaches the biggest market cap in the world highlights the clear limits of market breadth right now.

That's where bonds come in. The 10-year Treasury last week unwound its post-CPI rally from earlier in the month and now selling off again with conviction. The yield back above 4.5% doesn't have to cause panic, but it does appear to be applying some limits to the bull run, as smaller-cap and lower-quality companies remain susceptible to the higher-for-longer regime – and it's clear that's what we're getting.

Fed speakers and the FOMC minutes over the past week have made it clear that data dependency cuts both ways, and if inflation data stay warm, rate-hikes could be a non-zero probability. One thing I'm watching is the gap that's emerged between the U.S. dollar and yields. The dollar's been surprisingly soft compared to yields and if stocks are going to come off, the greenback is probably due for a rally.