Traders pray for Nvidia boost as stocks dip red
Many traders remain optimistic that NVDA will rally at the end of the week, with calls hitting $145 to $160
Igal Vaisman/Shutterstock modified by Blockworks
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This time yesterday, I was writing about how US equities had started down the road to recovery.
Well, that was short-lived.
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 were not immune. The Bloomberg Mag7 Index, which equally weights seven of the largest companies, was down almost 3% midway through the session.
Nvidia, on the eve of reporting its fourth quarter earnings, was down 1.9% at 2 pm ET. Coinbase and MicroStrategy were down 7.2% and 12.1%, respectively, at that time.
We’re attributing the decline to two things:
- Investors are worried about economic growth.
- Previously paused tariff plans are, apparently, moving forward.
On this first point, yet another economic report on Tuesday signaled that the US growth outlook isn’t looking stellar. Consumer confidence in February fell by the most since August 2021. The figure, reported by The Conference Board, came in at 98.3 this month. A reading below 100 indicates a pessimistic economic outlook.
In terms of tariffs, President Trump said late Monday that levies against Mexico and Canada are “on schedule.” He didn’t get specific, but the comment comes a few weeks after Trump agreed to pause tariffs on the countries for 30 days.
We’ve written before that the market has been (perhaps remarkably) resilient to tariff threats, likely because the policies have so far been vague, both in terms of timeline and details on percentages. Tariffs are still a headwind, though, and today’s market moves signal that the gusts are starting up.
In terms of more immediate price action, the big market movers this week will be Nvidia earnings (tomorrow) and PCE data (Friday).
Nvidia, not too long ago considered the golden child of AI, has faltered this year. DeepSeek, the Chinese AI firm that debuted its AI model in January, spooked investors enough to pull almost $600 billion out of Nvidia last month.
The US chipmaker was able to pare most of the losses, though, and as of midway through today’s session, shares were down only 6%.
Option chain data shows that many traders remain optimistic NVDA will rally at the end of the week, with calls hitting $145 to $160. Shares were trading at $128 at 2 pm ET.
In terms of future stock moves, DataTrek Research co-founder Nicholas Colas says to keep an eye on the CBOE Volatility Index (the VIX).
“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.”
This is not trading advice (from me, at least). But here’s the historical track record Colas is talking about: Any value at or above 27.3 (one standard deviation above the long-running average) indicates heightened volatility. Generally, stocks perform well after volatility spikes.
In mid-December, the VIX hit 27.6 after the Fed cut interest rates by 25 basis points. A week later, the S&P 500 had gained almost 3%. Volatility today is hovering around 19, but a bigger selloff in big tech and/or disappointing inflation data could send the VIX higher.
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