Nvidia Corp. is set to report its quarterly earnings on Wednesday after the closing bell.
While concerns about the postelection rally and interest-rate uncertainty continue to weigh on investors’ minds, the options market is pricing in risk from Nvidia earnings on the broader stock market, according to BofA Global Research.
Nvidia remains the most dominant stock in the market, driving 20% of S&P 500 return over the past year, and is expected to drive nearly 25% of the large-cap index’s EPS growth in the third quarter, a team of BofA strategists, led by equity-linked analyst Gonzalo Asis, said in a Monday client note.
“With the market taking a breather last week following the election rally, we believe Nvidia earnings can dictate the near-term direction of the market,” they wrote.
“The implied move for the SPX on the day after NVDA earnings has been fluctuating with NVDA’s own earnings implied move … and it suggests more risk from NVDA earnings than from the next NFP, CPI, or FOMC,” Asis and his team said.
Given single stock fragility on the rise and easing post-election euphoria, the BofA strategists said it is “sensible to hedge the potential added impact on the broader market in case NVDA disappoints.”