Nvidia Market Reaction Shows US Rally Is Over, Morgan Stanley’s Wilson Says
The drop in US stocks on Thursday despite a bumper report from Nvidia Corp. shows the rally this year is “exhausted” and portends more declines to come, according to Morgan Stanley’s Michael Wilson.
The bearish strategist — who recently conceded that he was too pessimistic in his outlook for 2023 — said the broader market reaction to the US chipmaker’s blowout forecast was a perfect indicator of a market peak. The S&P 500 had started the session higher, but sank 1.4% — its biggest decline in three weeks — by the close as higher bond yields overshadowed the buzz around artificial intelligence.
“Markets top on good news and they bottom on bad news,” Wilson said in an interview on Bloomberg Radio. “I can’t think of any better news than what we got from that company,” he said, referring to Nvidia. The failed boost “is another negative technical signal that the rally is exhausted. And now we’re going to need a new story to get people excited and I don’t know what that story is.”
US stocks are set for their first monthly decline since February as investors worry that central banks will remain hawkish for longer amid signs of resilience in the economy. The focus now is on Federal Reserve Chair Jerome Powell’s address at the Jackson Hole economic symposium later on Friday for clues around the path of interest rates.
Wilson said he expects Powell to reiterate that rates are likely to remain higher for longer until inflation is under control. “That’s not a bad thing for the market but also not a good thing,” the strategist said. “I wouldn’t look to today’s comments to save the day.”