Market Regime Monitor

• Hotter than expected October inflation set the tone today. Stocks closed lower, but there was no rout.
• Nvidia fell about five and a half percent, its second straight drop, on the fallout from its chief executive's personal scandal.
• Traders now treat a December rate hike as close to certain. The bond market is closed tomorrow for Veterans Day.
• CoreWeave beat estimates and raised its outlook. It also pointed to large customer prepayments to help fund its buildout.

Good evening. This is the Tuesday evening read. Since the post-close briefing, the story has not changed much, but two details have come into sharper focus.

First, the inflation picture. Consumer prices rose faster than expected in October, both the headline number and the core number that leaves out food and energy. The bond market took it hardest. The two-year Treasury yield, which tracks Fed expectations most closely, jumped sharply. The ten-year yield climbed back near five percent. Futures now price a December rate hike as nearly certain, with a small chance that it is a half point move. Bond trading pauses tomorrow for Veterans Day while stocks stay open, so the next real read on rates comes on Thursday.

Second, the shape of the stock market loss. The Dow slipped only modestly and small company stocks fell a bit more. The Nasdaq took the bigger hit, and Nvidia did most of the damage. Its shares fell about five and a half percent after a drop on Monday. Investors are weighing reports that chief executive Jensen Huang had an affair with an executive whom officials reportedly suspect of working for Chinese intelligence. One report says the relationship may have helped move billions of dollars of chips to Chinese firms. None of this has been proven. The board has opened an independent investigation, and a shareholder lawsuit has been filed. Nvidia reports earnings next Tuesday, which will be its first big test since the news broke. This matters beyond one stock, because Nvidia is the anchor of the whole artificial intelligence trade.

CoreWeave's report after the close looks a little better on a second read. Revenue beat estimates and the full year outlook went up. The company said it expects about nine billion dollars of customer prepayments and deposits over the next three months. That speaks directly to the worry about how it will pay for its buildout. It still plans to spend heavily, though, and it still carries a lot of debt. The stock rose a few percent after hours, after losing a large share of its value over the past month. Its bonds will not trade until Thursday, so the credit market's verdict waits until then.

There is no fresh reading on junk bond premiums or on the fear gauge's close beyond what the afternoon report covered. There was also no new private credit news tonight. Credit has stayed calmer than stocks through this rate scare.

The bottom line is that little has changed since this afternoon. Inflation is running hot and the Fed looks set to raise rates again. The Nvidia scandal is now a second weight on technology stocks, separate from rates. CoreWeave gave the data center lending worry some relief, and Thursday's bond trading will show whether that holds.