Could NVDA earnings be the deciding factor for 25 or 50?
August 26, 2024
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–Powell said “the time has come for policy to adjust”. That was last week’s story. This week the focus will be on NVDA earnings on Wednesday, or at least that’s what I am led to believe by scanning financial sites this morning. Dan Ives of Wedbush says NVDA earnings make this the most important week for the stock market of this year, and maybe beyond. I view that as somewhat fanciful, but we’ll see.
–New low settles on Friday in near SOFR calendar spreads. SFRU4/Z4 3-month spread settled -69, down 4 on the day (9509.5/9578.5). SFRU4/SFRU5 one-yr settled -168.5, down 7 on the day (9509.5/9678). While the market is undecided about whether the first ease next month will be 25 or 50 (currently leaning for 25) the easing post-election is being priced forcefully. The high contract on the SOFR strip is SFRM6 at 9697. I continue to view 3% as a soft cap on the forward part of the strip. It might not ultimately be the “terminal rate” but I think the market will be reticent to price for anything sub-2.5% in this cycle.
–2s, 5s and 7s are auctioned Tues, Wed, Thursday. PCE prices are Friday.
–Treasury rolls are in full swing, with about 550k TY rolled Friday, 32% complete as of Friday’s close.
