A look at the day ahead in U.S. and global markets from Mike

Dolan

In an glimpse at how megacap tails wag the dog, a near

half-trillion dollar shakeout in AI-bellwether Nvidia's ( NVDA )

market cap in just a week continued to drag on the entire market

even though most S&P500 stocks ended higher on Monday.

Without any obvious trigger beyond a bout of nervy profit

taking into Friday's half-year end, Nvidia ( NVDA ) has recoiled by

almost 20% since last Thursday's record high - lopping more than

$430 billion off its market value in the process.

But it's only back to where it was a fortnight ago - even

though it remains in the red again before Tuesday's bell.

While the artificial intelligence champion chip behemoth

remains up almost 140% for the year to date, the sheer scale of

stock and the extent of the shakeout pack a punch for index

investors.

The tech-heavy Nasdaq, predictably, lost more than

1% on Monday. The Dow Jones Industrial Average of blue

chips, on the other hand, rallied to a one-month high.

But while some 70% of the S&P500 stocks ended higher and the

equal-weighted S&P was up 0.5%, the overall index

ended 0.3% in the red.

Beyond Wall Street, the impact of Nvidia's ( NVDA ) outsize swings is

just as startling.

Societe Generale strategist Andrew Lapthorne points out that

prior to this week's shakeout, Nvidia ( NVDA ) alone accounted for some

300 basis points of the near 12% year-to-date gain in the MSCI

World index - astonishing as that index contains

almost 1,500 of the world's biggest companies.

But while Nvidia's ( NVDA ) recoil seemed like a lonely hiccup, it

has tallied with a sharp reversal in Bitcoin this week.

Before the generative AI fizz emerged over a year ago, Nvidia ( NVDA )

had long been driven by the crypto boom and the two areas may

still be joined at the hip to some degree.

Although it recovered a tad early on Tuesday, Bitcoin

plunged on Monday too and has staged a peak-to-trough drop of

more than 7% in little over two weeks.

A reversal of money from newly formed exchange-traded funds

at midyear? Again, it's far from clear.

The other alarming reversal of the moment is China's

mainland stocks, which fell yet again Tuesday and have

now almost wiped out all their year's gains.

Partly hit by the Nvidia ( NVDA )-led chip wobble, the CSI300 lost

0.5% and semiconductor shares traded in the onshore market

slumped 4%.

But undermined by its own housing bust and a brewing trade

war with G7 powers, China has other fish frying.

The latest geopolitical sideswipe overnight came on news the

Biden administration is investigating Chinese telecom companies

over concerns they could exploit access to American data through

their U.S. cloud and internet businesses by providing it to

Beijing.

Elsewhere, markets were pretty steady.

U.S. Treasuries and the dollar were little

changed early on Tuesday. U.S. June consumer confidence readings

and an auction of some $69 billion of two-year notes top the

diary later.

With politics dominating the next week's horizon in the

United States and Europe, European markets were off a touch.

French government debt yields and spreads were

subdued, in large part after relatively benign fiscal policy

signals from senior far right officials leading opinion polls

ahead of the weekend's first round of the French parliamentary

election.

Key developments that should provide more direction to U.S.

markets later on Tuesday:

* US June consumer confidence, Richmond Fed June business

survey, Dallas Fed June services survey, Chicago Fed May

business survey, US April house prices; Canada May inflation

* Federal Reserve Board Governor Michelle Bowman and Fed Board

Governor Lisa Cook speak

* US Treasury sells $69 billion of 2-year notes

* US corporate earnings: FedEx, Juniper, Progress Software

(By Mike Dolan, editing by Timothy Heritage

[email protected])