Nvidia: The Big Question Changed
President Trump made nice with China, the S&P 500 hit 7,500+ for the first time ever, and the 10-year yield is rising like a phoenix.
So it's time to look at the 5 things you need to know right now:
1. Nvidia Earnings Are About to Hit. JR Still Loves the Stock.
AI kingpin Nvidia (NVDA) reports earnings on Wednesday, May 20 after the close.
The stock is up nearly 40% from the March lows, and expectations look higher.
Earnings estimates have been rising and AI capex spending by hyperscalers like Alphabet (GOOGL), Microsoft (MSFT), and Amazon (AMZN) just keeps going up.
A couple of years ago, a common question was “how long can these companies keep spending more money?”
Now it feels like there's no limit.
JR Romero, who recently launched the new Premarket Pit VTF®, told us again why he thinks Nvidia is going to $258:
You can learn about JR's other services, including Sultans of Swing Trading, in this new video.
2. The Fed Is a Mystery Machine
Inflation remains stubbornly high, judging by this week's CPI and PPI report, making it hard for the Fed to cut rates.
And thanks to the Iran war, oil looks mighty strong:
The market is now pricing in a 48.7% chance of a single 25 bps rate cut this year, and a mere 0.4% chance of 50 bps in cuts. That's according to the CME's FedWatch tool:
Meanwhile, the Fed is about to undergo a major transition when Jerome Powell passes the ball to Kevin Warsh, who is calling for a regime change at the FOMC.
And if Warsh doesn't play ball with President Trump on rate cuts, that could set the stage for another White House vs. Fed rivalry, raising fresh concerns about the independence of the FOMC.
3. Robinhood May Be the Best Crypto Play
If you're bullish on Bitcoin and Ethereum (I have no opinion myself), take a look at Robinhood.
The stock is down -32% this year, drastically underperforming peers like Interactive Brokers (IBKR), Charles Schwab (SCHW), and Coinbase (COIN).
Why? Because Robinhood's crypto revenue fell off a cliff.
Meanwhile, Interactive Brokers has been the industry dominator, riding strength in equity markets and announcing new initiatives like its new Prediction-Market Platform.
(note: IBKR is one of my biggest personal holdings and I have zero plans of selling)
So if you believe in a crypto comeback, Robinhood may be an interesting way to play.
Because the market would price in a rapid rebound in the company's crypto revenues.
4. Earnings Season Has Been a Monster
89% of S&P 500 companies have reported Q1 earnings and the numbers are fantastic, according to FactSet data.
-Q1 EPS growth is trending to 27.7% vs. 13.1% expected back on March 31
-10 of 11 sectors have beaten expectations
-84% of names beat EPS estimates well above historical norms
However, there is one dark side.
The market is punishing misses more than it is rewarding beats.
The average return after an earnings miss is a -4.9% decline. Look at the right side of the chart.
The average return after a beat is just +1.1%.
So while the numbers are amazing overall, if you pick a bad name, you're getting spanked hard.
And interestingly this amazing earnings season came with relative high expectations because of rising analyst estimates, and the Iran war spiking oil prices.
5. Investors Are NOT Bulled Up
The lastest AAII Sentiment Survey showed that 38.3% of investors are bullish.
This is the 3rd straight week of neutral-ish sentiment despite equities making a string of new highs.
Meanwhile, CNN's Fear & Greed Index is at 65 showing modest greed.
The CBOE Equity Put/Call ratio is hovering around 0.50. That means options traders are optimistic, but not overly so.
The overall theme here is that market participants are cautiously optimistic.
They are not falling over themselves to declare this the best market ever, even after a big rally from the March lows.
ATTN: Serious Options Traders
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