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NVIDIA (NASDAQ:NVDA | NVDA Price Prediction) is still driving Wall Street this morning. Shares were up about 2.3% in premarket trading by 5:30 a.m. ET. On Thursday, Jensen Huang’s resignation as CEO sent the stock down 4.3% and pulled all three major averages lower. Futures point to a slightly higher open. Two things still stand between stocks and their best week since early August: a 10-year Treasury yield above 5% and a fresh wholesale inflation report.
Where the Major Indexes Stand Before the Bell
At 6:28 a.m. ET, Dow futures were up 68 points, or 0.1%.
S&P 500 futures were up 0.2% and Nasdaq-100 futures were up 0.1%. Here is how the cash indexes closed Thursday:
| Index | Thursday Close |
|---|---|
| S&P 500 | Fell 0.35% to 7,592 |
| Nasdaq Composite | Fell 0.4% to 25,366 |
| Dow Jones Industrial Average | Fell 189 points to 52,297 |
| Russell 2000 | Fell 2% |
| VIX | Rose to about 18 |
The SPDR S&P 500 ETF Trust (NYSEARCA:SPY) was indicated at $759, up 0.3%.
Why NVIDIA’s Shake-Up Hits Every Index Fund
CNBC reports that Huang stepped down after reported extramarital affairs, including a relationship with a woman U.S. intelligence officials believe is a Chinese spy. Chief financial officer Colette Kress is serving as interim CEO while the board searches for a permanent replacement.
In SPY’s March fact sheet, NVIDIA was the fund’s largest holding at 7.6% of assets, so index investors felt Thursday’s drop directly.
Microsoft (NASDAQ:MSFT) was down 3% premarket as an Outlook outage dragged on. That helps explain why the Invesco QQQ Trust (NASDAQ:QQQ) was up just 0.3%.
Rising Yields Are Hitting Small Caps Hardest
The 10-year Treasury yield finished Thursday at 5.1%, up from 4.98% on Tuesday. Brent crude rose more than 3% to $96 after President Trump posted, “We don’t need a deal with Iran.”
Smaller companies rely more on borrowed money, so they feel higher rates first. The Russell 2000’s Thursday drop was more than four times the S&P 500’s loss. The iShares Russell 2000 ETF (NYSEARCA:IWM) was up just 0.2% premarket.
The VIX is in its normal 15 to 20 range, well below the 28 reading on November 5.
Wholesale Inflation Will Decide How the Week Ends
October’s producer price index comes out Friday morning. Economists polled by Dow Jones expect headline wholesale prices to rise 0.4% on the month and 6.6% from a year earlier.
The Fed raised rates in September, which put the upper bound of the fed funds rate at 4%. A hotter reading could push yields higher and threaten the Nasdaq’s 3.2% weekly gain.
After the report, keep an eye on the 10-year yield. A drop back below 5% would take pressure off small caps and growth stocks. A further rise would put this week’s rally at risk.
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