Speaking of Nvidia, the AI diva’s results this week will be a test of its sky high valuations and a price to earnings ratio of no less than 96.
The chipmaker’s $570 billion increase in market cap this year accounts for more than a quarter of the S&P 500’s gains, so any disappointment would be a black eye for the whole index.
Options imply a risk the shares could swing 11%, or $200 billion, in either direction on the results.
Then again Nvidia does have a very fat net profit margin of 42% and, as of October, a cash pile of $18 billion, so it can easily weather the vagaries of one result.
It is also riding the most powerful force in markets – momentum. Why is it going up? Because people are buying it. Why are people buying it? Because it’s going up.
For Europe, there is no major data today but flash PMIs will be important later in the week, along with business and consumer sentiment surveys. Analysts are counting on the European Central Bank survey of consumer inflation expectations to resume its downtrend after a slight uptick in November.
The ECB’s wage data are also of note given how much policymakers have warned about high wage growth, even though it is a well known lagging indicator.
There are plenty of ECB speakers out and about, including President Christine Lagarde at a Eurogroup press conference on Friday.
Federal Reserve speakers this week include the always influential Fed Vice Chair Philip Jefferson and Governor Christopher Waller.
The Fed also releases on Wednesday minutes of its last meeting, though they have rather been overtaken by events given the high readings for consumer and producer prices.
There are ugly forecasts around that core PCE inflation could rise 0.5% in January, when markets had looked for only 0.2%.
Fed futures now only imply a 36% chance of a rate cut in May, when it was more than fully priced a couple of weeks ago. The market has less than 100 basis points inked in for the year, having taken out two quarter point cuts.
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