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The S&P 500 and Nasdaq ended a three-day losing streak on Tuesday, buoyed by a 7% rebound in Nvidia (NVDA) shares after a $430 billion selloff. Equities extended their June gains, with the giant chipmaker leading the charge among the "Magnificent Seven" mega-cap stocks. Nvidia's recovery follows a three-day decline that had pushed the stock into technical correction territory.

Treasuries saw little movement in the bond market after a $69 billion two-year US Treasury auction met expected yields and showed strong demand, kicking off this week's trio of auctions. Wednesday's $70 billion five-year sale will provide further insight into underlying bond demand at current yields.

While often considered pricey by many metrics, the "Magnificent 7" isn't the most expensive "sector" in the index, provided the group achieves its projected 17% EPS growth over the next few years.

However, skeptics might argue this assumption is a bit circular. They would remind us that part of what made the dot-com bust so devastating was the failure of leading companies to meet lofty expectations. But Assuming today's leaders will meet their expectations, and why shouldn't we, there isn't much room for debate.

The narrative for mega-cap companies remains consistently positive each quarter, aside from a few turbulent reports in 2022. Generally, these corporate giants continue to meet or exceed financial expectations. They have become integral to daily life in both developed and developing nations, representing a significant part of everyday existence. While occasional performance dips occur, very few quarters are truly negative in absolute terms. The perception of a "bad" quarter often hinges on relative or subjective measures rather than actual balance sheet shortcomings.

Nvidia frequently finds itself in the financial media spotlight, thanks in part to the charismatic leadership of Jensen Huang. However, it's crucial to remember that the stock market and the economy are much broader than just Nvidia. The relationship between the stock market and the real economy is intricate and often challenging to comprehend fully. In 2024, Nvidia's performance represented a substantial portion of the global equity market.

While Nvidia's influence is undeniably significant, it's essential to maintain a balanced perspective that considers the broader market and economic conditions. As the focus remains on this tech giant, keeping a vigilant eye on the broader economic landscape and the various factors that influence it is essential.

I've been burned this year on rates-sensitive assets like FX and Bonds using the recessionary smoke signals from surprise indexes or soft economic survey data post-COVID; critical hard economic data like CPI and NFP, have consistently beaten expectations, especially at the beginning of the year. While it's tempting to say, "This time is different," there are still numerous economic warning flags to be mindful of.

The recent unexpected negative outcomes across various data sets( Bloomberg Surprise Index & Citi Surprise Index) are the most significant since March 2019. This raises doubts about the perceived strength of the US economy. In a previous discussion, we highlighted what might disrupt the current situation. The primary concern was the possibility that the emerging weaknesses in the less concrete economic data and Citi's US Economic Surprise Index could escalate into a more severe issue if the Fed continues to maintain tight credit policies.

For the Fed to achieve a soft landing, it must act preemptively before economic conditions deteriorate. At his most recent press conference, Fed Chair Jerome Powell emphasized that the Fed does not intend to wait for the labour market to falter before easing monetary policy. The Fed is committed to navigating this delicate balance to fulfill its dual mandate of promoting maximum employment and stable prices. However, executing this strategy is easier said than done if inflation does not play ball.

Nvidia Shareholder Meeting: Insights and Developments

Nvidia's upcoming shareholder meeting on June 26 is crucial for investors eager to hear management articulate a forward-looking vision for AI. Previously, NVDA stock surged on the strength of its processors powering advanced artificial intelligence protocols. Increasingly, both corporations and government agencies are adopting Nvidia chips to develop cutting-edge generative AI solutions.

NVDA Stock: 3 Things to Watch Ahead of the Nvidia Shareholder Meeting

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