This Week in Markets - Feb 24: NVIDIA Week
Supreme Court nukes tariffs, GDP misses hard, and the AI king reports Wednesday. The most important week of February, and it's not even close.
Welcome back to another weekly market prep with The Dividend Journal! If this is your first time here, great timing. This newsletter is your one stop shop to stay ahead of the market and step into the week fully prepared.
This is going to be the most important week of February. I think a lot of the market's direction for the rest of Q1 hinges on one single earnings report: NVIDIA. More on that below.
We also have to digest a LOT of macro news from last week. The Supreme Court struck down Trump's tariffs, GDP missed consensus by a mile, and the internal divergence between growth and value continues to widen. Let's get into it.
📊 Last Week Recap
Friday was a wild one. The Supreme Court struck down Trump's tariffs in a 6-3 decision, ruling that the executive branch can't unilaterally impose them under IEEPA. This was massive for tech and retail names as Amazon jumped 2% on the news, and AEO 0.00%↑ went green. On top of this, the Nasdaq closed up 0.41%.
But here's the catch: the advance estimate for Q4 GDP came in at just 1.4%, massively missing the 2.5% consensus. That's a sharp slowdown from Q3's 4.4% print. The government shutdown and declining government spending dragged the number down, but regardless, the economy is clearly cooling.
So we have a weird setup heading into this week: tariffs gone (bullish), but growth slowing (bearish). The market closed mixed with the Nasdaq up and the Dow down 104 points. The internal divergence between growth and value continues. There’s also the issue of tariff “revenue” already collected and how to reconcile this now that tariffs have been shot down.
Sector leadership continues to tell the story. Energy, Healthcare, Industrials, and Financials are leading. Software and high growth tech are in their own bear market, with many names still 40 to 60 percent off their ATHs from the “SaaSpocalypse” we talked about a couple weeks ago. SPY 0.00%↑ is holding up mostly because of this defensive rotation, not because everything is healthy underneath.
📅 This Week's Economic Calendar
Monday, 2/24: Factory Orders (December)
Tuesday, 2/25: Consumer Confidence (February), Housing Price Index, State of the Union address from POTUS
Wednesday, 2/26: Crude Oil Inventories
Thursday, 2/27: Unemployment Claims
Friday, 2/28: PPI, Chicago PMI
Consumer Confidence on Tuesday matters more than usual this week. If it prints weak then it reinforces the stagflation narrative that started building after last week's GDP miss.
But let's be honest, Wednesday after the bell is the only thing anyone really cares about this week.
Earnings this week, courtesy of Earnings Whispers:
🔥 The Main Event: NVIDIA Q4 Earnings
NVDA 0.00%↑ reports Wednesday after the close. This is probably the single most important earnings report of the quarter.
Wall Street consensus is calling for $65.6 billion in revenue (up 65% YoY from $39.3B) and $1.52 EPS (up from $0.89 last year). Both numbers are in line with NVIDIA's own guidance from last quarter.
For context, last quarter (Q3) NVDA 0.00%↑ did $57B in revenue, beating estimates by roughly $2B. CEO Jensen Huang described Blackwell demand as "off the charts" and said cloud GPUs were sold out. Despite that massive beat, the stock still sold off 3% the next day on profit taking. That should tell you something about how high the bar is right now (to be fair this high bar has been set since the start of the semi craze).
The market needs another jaw dropping beat PLUS strong Q1 FY27 guidance to reignite the growth trade. Anything that's just "good" could lead to a sell the news reaction, similar to what we saw after Q3.
I think there are three realistic scenarios to game plan around this week:
Bull Case: NVDA 0.00%↑ beats big and guides up aggressively. NVDA 0.00%↑ gaps up 5-10% and drags QQQ 0.00%↑ and SMH 0.00%↑ higher with it. Sympathy plays like AVGO 0.00%↑, MRVL 0.00%↑, SMCI 0.00%↑, TSM 0.00%↑ and VRT 0.00%↑ move likely as well. The beaten-down software sector bounces on renewed AI optimism, and we potentially see the start of a growth rotation. If this plays out, I'd be looking for daily trend line breaks on oversold tech names. The IGV 0.00%↑ rebound is something to keep an eye on.
Neutral Case: NVDA 0.00%↑ beats but only by a small margin, and guidance is in line but nothing special. This is honestly the most likely scenario. NVDA chops around, maybe gaps up 2-3% then fades as sellers take profits. The broader market shrugs and stays range-bound. Software names don't get the relief rally they need. In this scenario, the defensive rotation keeps grinding and we stay in this stock picker's market. Not exciting, but we chop until a catalyst forces price to break to either side.
Bear Case: NVDA 0.00%↑ misses or guides weak. NVDA 0.00%↑ gaps down 10%+ and takes the whole market with it. The defensive rotation into XLV 0.00%↑ , XLE 0.00%↑ and XLF 0.00%↑ accelerates even further. If this happens, staying in cash or playing the short side of QQQ/SMH is the move. Don't try to catch the knife.
💰 Other Earnings to Watch
Besides NVDA 0.00%↑ , we have CRM 0.00%↑, INTU 0.00%↑ and DELL 0.00%↑ all reporting this week. These are critical for the software sector narrative. As we talked about, software names have been absolutely obliterated, down 40-60% from ATHs, largely on fears that AI is going to disrupt their businesses. The reactions off these reports will tell us whether that fear is fully priced in or if we're just getting started with the selling.
