Equities: Tech gains conceal broader market weakness - Deutsche Bank

Deutsche Bank strategists note that Nvidia’s post-earnings surge drove a sharp rally in technology stocks, lifting the S&P 500 by 0.72% and the Nasdaq by 1.57%. However, market breadth remained weak, with more than two-thirds of S&P 500 constituents falling and every major sector except information technology ending lower, while European equities also came under pressure from higher energy prices and weakness in French banks.

Nvidia-led rally masks soft breadth

"Markets put in a very mixed performance yesterday, as investors grappled with several competing trends. On the upside, Nvidia’s results led to renewed optimism around AI, and the resulting bounce in tech stocks pushed the S&P 500 (+0.72%) to its best day in three weeks."

"Yet even as the bond story was fairly consistent yesterday, equities saw an incredible divergence on both sides of the Atlantic. In the US, the primary driver was Nvidia’s earnings the previous day, with their share price up +8.74% in response."

"Indeed, it was Nvidia’s best daily performance after an earnings release since May 2024, and it makes a change from the previous 4 quarterly results, when Nvidia fell the following day. Meanwhile, the optimism around AI helped other tech stocks more broadly, with the NASDAQ up +1.57%, whilst the S&P 500 (+0.72%) closed back within 1% of its record high."

"However, the strength in tech masked plenty of equity weakness elsewhere. In fact, over two-thirds of the S&P 500’s constituents fell yesterday, with every major sector group falling except information technology (+3.40%), and the equal-weighted S&P 500 fell -0.29%."

"Meanwhile in Europe, the story was also pretty weak thanks to the latest rise in energy prices, which raised concerns about faster inflation. So the STOXX 600 (-0.69%) saw its worst performance in a month, and there was a particular underperformance for France’s CAC 40 (-1.68%). That came as multiple French banks fell back, with BNP Paribas (-4.79%), Crédit Agricole (-3.97%) and Société Générale (-4.99%) all lower."

"Meanwhile for equities, we’ve also seen a mixed performance overnight. Looking forward, US equity futures are little changed however, with those on the S&P 500 down just -0.04%."