Equities Soar Following Blowout Nvidia Earnings

Short term rates rise while Nvidia’s earnings power equities to historic levels. Today’s risk-on sentiment was largely fueled by Nvidia’s impressive Q4 revenue and optimistic outlook, which saw its stock soar over 16% and its market cap rise $277B, a single-session record. Equities soared to all-time highs, with the SPX (+2.11%) back above 5,000 and the DJIA (+1.18%) above 39,000. The NASDAQ had the best day of the three indices after a near 3% rally to ~16,000. Short term rates rose on the sentiment as investors piled into riskier assets, while hawkish commentary from Fed Vice Chair Jefferson and strong PMI data contributed as well. Short term rates climbed ~5bps while long term rates fell as many as 3bps.

U.S. manufacturing activity expands at multi-year record pace. February S&P Manufacturing PMI data released today showed that U.S. manufacturing activity expanded at the fastest pace in 17 months, with the index climbing to 51.5 from 50.7 in January. The climb was driven by higher factory output and the strongest increase in new orders in over 1.5 years. Commenting on the data, Chief Business Economist at S&P Global Chris Williamson said, “The early PMI data for February indicate that the US economy continued to expand midway through the first quarter, pointing to annualized GDP growth in the region of 2%.”

European service sector expands, but German manufacturing activity weighs on economic growth. Overall European private-sector activity climbed to an eight-month high, according to February S&P Composite PMI data, driven by services which expanded for the first time after 6 consecutive months of contraction. On the other hand, overall manufacturing activity declined, driven by a German slump. Germany’s outsized manufacturing sector has experienced significant weakness, dragging down a European economy which has flirted with recession in recent quarters, and complicating things for the ECB which is trying to tame inflation while avoiding a deeper economic downturn.