Why Nvidia's stock surge doesn’t bode well for the market

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Nvidia Nouvelles

Stock Market,Julian Emanuel,Earnings Release

Normally, when Nvidia stock goes up, so does the market. That wasn't the case this past earnings season.

) is now off more than 0.5% since the chipmaker's earnings release after the closing bell on May 22. To Evercore ISI's Julian Emanuel, this brings an end to a yearlong trend of"NVDA no longer being 'The Stock That Is The Market' will likely end the market’s low volatility 'hush' of the past two weeks," Emanuel warned in a note to clients on Wednesday.

on Wall Street at 4,750, noted that a stock with a top-five weighting in the S&P 500 has never surged 20% in the three days after earnings with the index not also ending that time period higher. So, the most recent divergence in directions is starkly different from Nvidia's near-perfect correlation with the S&P 500 over the past year, per Emanuel, and could mean the market is poised for a pullback.

Emanuel pointed out that Nvidia's decoupling from the market comes as large-cap stocks as a whole have become less correlated with each other as of late. At a reading of about 12 on Tuesday in the CBOE Implied Correlation Index The S&P 500 could plunge as much as 70% this cycle as markets hit a 'motherlode' of FOMO extremes, famed fund manager says

 

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