Nvidia, Fed's rate outlook, CPI: Tuesday's Market Takeaways

While Google's (GOOG, GOOGL) newly announced Axion chip based on Arm (ARM) components could give chip giant Nvidia (NVDA) a run for its money, tomorrow's Consumer Price Index (CPI) inflation print is at the top of investors' minds.

Yahoo Finance's Madison Mills breaks down the top takeaways from Tuesday's market activity, including bond market volatility and whether markets are pricing in earnings season and potential Federal Reserve interest rate cuts equally.

For more expert insight and the latest market action, click here to watch this full episode of Market Domination Overtime.

Editor's note: This article was written by Luke Carberry Mogan.

Video transcript

MADISON MILLS: Hey, guys. Well, seeing a lot of these stories that I had selected from earlier today changing up a little bit here. So that's always fun when you walk on set.

I was thinking that we were going to see a big rally in the chip space because of some news this morning from Google announcing that they have new AI chips that could be utilized in their data centers using these AI chips that are going to announce an ARM-based central processor. We are seeing movement in Alphabet, but that is not enough to feed through to the overall IT sector. And we're not seeing that necessarily translate into gains across the major indices because we are seeing a sell off in some of the other names that I would have anticipated would have been up on this news.

The number one trending ticker on the Yahoo Finance platform right now, NVIDIA down over 2% today. Perhaps seeing traders taking a little bit of profit before CPI. Not necessarily sure what that's about, but still seeing the Philadelphia Semiconductor Index up on the day over 1%.

So watching what's happening in the chip space, Julie, you had mentioned that we're not seeing much of a lift given to stocks even though bonds are up and yields are down, falling six basis points to 4.36 this afternoon on the 10 year. So 4.5% is going to be the big next test for the 10 year moving forward. We are seeing this volatility in the bond space, potentially an indication to me that we're not sure yet what we're thinking in terms of Fed rate cuts and when that's going to come. So I'm curious to see--

JULIE HYMAN: Yeah, we didn't get any clarity from Bostic a little while ago either in a conversation with our Jennifer Schonberger. When pressed on his comment or his dot, if you will, in the fourth quarter of the year seeing a cut, she said, well, could we see no cuts? Could we see more cuts? And he said-- I'm going to summarize, meh, I don't know.

JOSH LIPTON: Yeah, risks are balanced.

JULIE HYMAN: The risks are balanced to my outlook.

JOSH LIPTON: Yeah.

MADISON MILLS: And that continues. I mean that feels very parody of what we hear from Jay Powell was a big meh as well. We're data dependent, but what if the data isn't giving you a central thesis to ride on? What does that even mean moving forward? That's interesting though given, didn't he just say one cut probably?

JULIE HYMAN: He did and I think--

JOSH LIPTON: That's his base case still, yeah.

JULIE HYMAN: --that's still his base case. But she sort of said, are the risks more tilted to none or to more? And he said they are balanced--

MADISON MILLS: He said meh.

JULIE HYMAN: Effectively. Yeah, I don't know is effectively what he said. But it seems like the market too to your point also doesn't know, right? But that stocks are willing mostly to rally even given that there is not that precise knowledge.

MADISON MILLS: Well, this is a question I've been repeating to a lot of our guests in the morning show is, what matters more this week, inflation data or the start of earnings? Because we keep saying that the Fed matters so much and, of course, they do, whatever. But if we have earnings growth, isn't this market, kind of, willing to look past any of the scary signs in the macro data to just continue to rally off of that momentum because why would you not? And then we have Chris Harvey raising his price target and saying valuations don't matter anymore. So why would you worry too much about higher for longer if valuations can go as high as possible and nobody cares?

JULIE HYMAN: Yeah.

MADISON MILLS: I think was that, kind of, Dr. Ed's point to us. We asked him whether no cuts this year, would that be a problem for the market? And he seemed to suggest it's really the focus is on--

JULIE HYMAN: Earnings.

JOSH LIPTON: Economy and profits.

JULIE HYMAN: Yeah. And he said because earnings are going to hold up relatively well. That said, he is still keeping valuations in a corner of his mind. That's why he hasn't increased his price target beyond $5,400 for the year. But he seemed pretty optimistic because of the earnings outlook.

JOSH LIPTON: I thought it was interesting we asked him what is one big risk when Dr. Ed's talking to clients. I thought it was interesting he mentioned geopolitics front and center.

JULIE HYMAN: Because of oil specifically.

JOSH LIPTON: And kind of, rising tensions between Israel and Iran. And that was, kind of, the one big bogey he had out there and what it would mean for the oil market.

MADISON MILLS: And I wonder to what extent we're going to hear from the Fed about the run through of commodities to inflation because that's not something that they can really control with higher rates. And also, it's not necessarily part of what they look at when they strip out energy and shelter. But if Americans are feeling a pricier pump, what does that do to consumer sentiment? What does that do to the feeling about inflation?

JULIE HYMAN: Yeah, what does it do to inflation expectations and their willingness to pay more?

MADISON MILLS: Right.

JULIE HYMAN: Yeah, there's a uncertainty.

JOSH LIPTON: A lot of questions, Madison.

MADISON MILLS: A lot of questions out there. I can't wait for CPI tomorrow to answer them all for us.

JOSH LIPTON: All right, thank you. Appreciate it, Maddie.