Nvidia Corp. is set to report earnings on Wednesday, and investors are eagerly watching for signs of momentum. The stock has been mostly flat since June, despite bouts of volatility. Will this report be the catalyst for a breakout, or will lingering concerns keep investors on edge? Bullish Sentiment: A Rally Waiting to Happen? Mizuho analyst Jordan Klein sees a potential surge ahead, noting that “a lot of money on the sidelines” could rush in if Nvidia (NVDA -3.09%) delivers strong results. He expects the stock to move “higher before lower” following its recent stagnation. A key reason for his optimism? Demand for Nvidia’s new Blackwell lineup is significantly outpacing supply. With production ramping up in the second half of the year, Klein believes Nvidia is well-positioned for continued growth. Concerns Loom: DeepSeek and Microsoft Uncertainty Despite the bullish outlook, some investors remain cautious. One source of concern is Chinese AI firm DeepSeek, which has sparked debate over whether future AI development will require less hardware—potentially impacting Nvidia’s long-term dominance. Another worry stems from Microsoft (MSFT -1.03%), which reportedly canceled some data-center leases. While this has added to market jitters, Mizuho’s Vikram Malhotra suggests it may simply be a “course correction” rather than a sign of reduced AI infrastructure investment. Skepticism Persists: No Immediate Catalyst? Stifel analyst Ruben Roy believes Nvidia’s earnings may not be the game-changer some investors hope for. With market uncertainty still lingering post-DeepSeek, he doubts earnings alone will drive a strong upside move. The Bigger AI Picture: A Long-Term Win for Nvidia? Melius Research’s Ben Reitzes takes a broader view, arguing that demand for AI chips is already being validated. Tech giants are in an arms race to dominate AI, and Nvidia stands to benefit from this relentless spending. Reitzes likens Nvidia’s hardware to Ferraris—elite, high-performance chips that companies like Elon Musk’s xAI highly value. Despite the short-term noise, he believes Nvidia will remain the go-to choice as AI workloads continue to grow. Bottom Line: Make-or-Break Moment for Nvidia? With earnings approaching, Nvidia finds itself at a crossroads. Will strong demand fuel a stock rally, or will lingering concerns weigh on investor sentiment? Either way, Nvidia’s role in the AI revolution is far from over.

Interest-Rate Volatility Normalizing, Says J.P. Morgan’s Phil Camporeale Investors are showing less concern about rising interest rates, though key market risks remain. “The biggest risk is inflation making a comeback in the second half of this year,” said Phil Camporeale, portfolio manager for J.P. Morgan Asset Management’s global allocation strategy. He warned that inflation could not only remain persistent but also accelerate due to wage growth or rising prices in sectors like lodging and dining. On Friday, U.S. stocks fell sharply, with the Dow Jones Industrial Average experiencing its worst week since October. Investors analyzed economic data, including a consumer survey indicating heightened inflation expectations driven by tariff concerns. The upcoming week brings fresh inflation data from the Federal Reserve’s preferred measure, the personal-consumption expenditures (PCE) price index. Recently, stock markets have found relief as rate volatility has eased to levels last seen in early 2022—before the Fed’s aggressive rate hikes began. “Nothing worries equity investors more than interest-rate volatility,” Camporeale noted. However, with inflation slowing, prompting the Fed to adjust its monetary policy with rate cuts last year, rate volatility appears to be stabilizing. So far in 2025, the Fed has maintained its benchmark rate, pausing rate cuts in January. “The Fed is on the back burner now,” said Camporeale. “Nobody is calling for immediate action.” Investor focus has shifted from the Fed’s next move to fundamental drivers of the equity markets. Markets seem to accept inflation running slightly above the Fed’s 2% target, but investors remain cautious. The University of Michigan’s latest survey indicated that tariff-related developments have heightened inflation concerns. “Consumers are bracing for a resurgence in inflation,” said Joanne Hsu, director of the survey. “If these concerns persist, they could pose challenges for policymakers.” Investors will closely watch the Fed’s favored PCE gauge, due on February 28. Some analysts believe the Fed may now opt for an extended wait-and-see approach. “Bond-market volatility is no longer the key issue,” said Sameer Samana, head of global equities and real assets at Wells Fargo Investment Institute. He pointed to the ICE BofAML MOVE Index, a measure of bond-market volatility, which has dropped to its lowest level in three years despite a brief uptick on Friday. Over the past six months, the MOVE Index has declined nearly 18%. Despite last week’s market decline, the S&P 500 remains close to its all-time high from February 19, closing Friday at 6,013.13—just 2.1% below its record. The current bull market has broadened beyond technology stocks, with financials playing a key role. While the S&P 500’s technology sector has dipped 0.3% year-to-date, financials have gained 4.8%, according to FactSet data. Investors will also watch Nvidia’s quarterly earnings report on February 26. “It’s a significant shift from a market dominated by tech to one where financials and other sectors are driving gains,” said Samana. Equity Risk Premium at Historic Lows The U.S. stock market’s equity risk premium has fallen to multidecade lows, according to a Wells Fargo Investment Institute report. “Stocks aren’t as attractive as they were last year,” said Samana. However, he still sees the S&P 500 as more appealing than bonds, especially with the 10-year Treasury yield hovering around 4.5%. On Friday, the yield on the 10-year Treasury note fell 8 basis points to 4.419%, its lowest level since mid-December. “There’s little incentive to buy a 10-year Treasury when a money-markets fund offers a similar yield without duration risk,” said Camporeale. Camporeale remains overweight on equities, favoring U.S. stocks. He has reduced exposure to core bonds, including Treasurys, in favor of high-yield corporate credit and equities. Following the U.S. presidential election in November, he added value and midcap stocks to his portfolio. Looking ahead, he anticipates “low-double-digit returns” for the S&P 500 this year.

A team of strategists at Ned Davis Research has been analyzing market trends, and their findings suggest U.S. stocks are pausing for breath after two blockbuster years—much to investors’ frustration. For the past two and a half months, the S&P 500 (SPX) has been stuck in a tight trading range, signaling a period of “consolidation,” according to the Ned Davis team. Despite this, the index has still managed to reach new record highs, most recently on Wednesday, per FactSet data. However, the pace of gains has slowed considerably compared to 2024, while European and Chinese stocks have surged ahead. Given ongoing concerns over tariffs, widespread federal layoffs, and high stock valuations, the market’s resilience has been notable. “So far, markets have largely brushed off the tariff threats and [President Donald] Trump’s geopolitical drama this year,” said Burns McKinney, portfolio manager at NFJ Investments, in an email to MarketWatch on Thursday. Still, investor sentiment is beginning to show signs of strain. Vanguard’s investor confidence metrics recently saw their steepest drop since 2022, according to Andy Reed, head of investor-behavior research at the firm. He noted that concerns over record-high egg prices are overshadowing enthusiasm for the stock market. However, history suggests that indecisive trading periods like this often resolve quickly—typically followed by stronger gains. The Ned Davis team analyzed the S&P 500’s performance since early December, comparing it to past episodes of sideways trading. While historical patterns show some variability, they suggest that choppy trading could persist in the short term before stocks resume their upward momentum. “Whether the past 2.5 months mark a consolidation phase within an ongoing bull market or the start of a downturn depends on factors like inflation and earnings,” said Ed Clissold, chief U.S. strategist at Ned Davis, in a report shared with MarketWatch. “Right now, the data still supports the bull market case—until proven otherwise.” Investors’ concerns were evident in Thursday’s market action, as disappointing earnings guidance from Walmart Inc. (WMT) rattled confidence in consumer strength. The S&P 500, Nasdaq Composite (COMP), and Dow Jones Industrial Average (DJIA) all ended the day lower.