To The Moon

Investors got strong earnings from $NVIDIA(NVDA)$ and sold stocks anyway.

The broader market pulled back Thursday as tech underperformed sharply:

• $S&P 500(.SPX)$ : -0.5%

• Nasdaq Composite: -1.2%

• Dow Jones Industrial Average: +0.03% (up 17 points)

• Hot Stock: $Paramount Skydance Corp(PSKY)$ (+10.0%) Biggest Loser: $Universal Health(UHS)$ (-11.4%)

• Best Sector: Financials (+1.3%) Worst Sector: Information Technology (-1.8%)

The divergence highlights growing skepticism around AI-related capital spending, even after another headline earnings beat.

Nvidia Drops 5.5% After Strong Results

Stocks

Despite delivering better-than-expected results and upbeat guidance, Nvidia shares fell 5.5%.

Strategists point to concerns about the sustainability of elevated capital expenditures for AI infrastructure and data-center buildouts.

Investors appear to be asking:

• How long can hyperscalers sustain massive AI spending?

• Are peak margins already priced in?

• Is AI enthusiasm overextended?

When expectations are extremely high, even strong numbers may not be enough.

Software Outperforms, Tech Rotation Emerges

Interestingly, software stocks continued to rally, posting a third consecutive day of gains.

That rotation suggests investors may be shifting from AI hardware beneficiaries toward enterprise software names perceived as more attractively valued after recent volatility.

Meanwhile:

• Financials led all sectors (+1.3%)

• Information Technology lagged (-1.8%)

Earnings Season: Beats Are Strong, But Valuations Matter

With roughly 90% of S&P 500 companies reporting:

• 75% have beaten estimates

While that’s historically solid, elevated valuations mean continued earnings growth will be necessary to justify further upside. Markets are no longer rewarding “good enough.”

Inflation Watch: PPI in Focus

Attention now turns to inflation data. The Bureau of Labor Statistics will release January’s Producer Price Index (PPI) on Friday.

Economists expect:

• Headline PPI: +0.3% month over month

• Annual PPI: +2.6% (down from 3.0%)

• Core PPI: +0.3% month over month

• Annual core: ~3.0%

However, some economists warn of upside risk, forecasting:

• 0.5% monthly gains

• Annual core inflation closer to 3.2%

A hotter-than-expected print could reinforce concerns that inflation remains sticky.

Fed Implications: Cuts on Hold?

Stronger wholesale inflation would likely keep pressure on the Federal Reserve ahead of its March 17–18 meeting.

Current market pricing suggests:

• ~96% probability of rates staying unchanged in March

• Roughly 50/50 odds of a move by July

Sticky inflation remains a growing concern among policymakers, even as labor market conditions remain stable…

[Salute]

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This summary is for informational purposes only and does not constitute financial advice. Investors should conduct their own research before making investment decisions.

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