What’s happening
The S&P 500 is close to 6,900 as investors watch Nvidia’s earnings and new inflation data in a market sensitive to policy changes.

Why it matters
AI companies have driven most of the index’s gains. What Nvidia says next will shape how investors feel about technology and other sectors.

What the market is missing
Investors started the year with high stock holdings. Even small changes in these positions can cause bigger short-term price moves.

Key risk to watch
Pay attention to what Nvidia says about future demand for data centres and spending by large tech companies.

Investor lens
Focus on which companies are leading. This week is more about confirming what’s working than spotting new trends.

The market seems quiet, but that’s often when investors are most cautious and thoughtful.

As we approach February 23 to 27, US stocks are just a few points below their record highs. The S&P 500 is near 6,900, and the Nasdaq is close to its own peak. The market is stable, but it doesn’t feel simple.

Beneath the surface, investors have moved from excitement to a more careful approach.

Money has been steadily flowing into bond funds, while stock mutual funds have seen some outflows. Hopes for rate cuts have faded after higher inflation numbers and cautious comments from the Fed. Policy news is also in the spotlight, as President Trump hints at a possible 10-15% global tariff.

Then there is Nvidia, reporting Wednesday after the close.

When the biggest company in the index shares its results, it does more than report numbers; it sets the mood for the whole market.

Markets usually don’t drop because they are weak. They fall when expectations are high, and reality changes even a little.

The S&P 500 is close to a key level. Volatility is up slightly, but hasn’t surged. Inflation is lower than before, but still high enough to keep the Fed cautious. Hopes for a March rate cut are low, and the chances of a June rate cut have dropped from earlier in the year.

This is what ‘higher for longer’ means in real terms. There’s no panic, but investors are less willing to pay high prices for stocks.

Big investors started the year with high stock holdings. When these positions are already large, even small adjustments can move prices more than the news might suggest.

This means the market reacts well to good news but responds quickly and sharply to any disappointment.

NVIDIA is the main focus for investors this week.

In the past year, AI infrastructure has been the main story. NVIDIA became the largest company in the S&P 500 thanks to strong demand for its data centre products and its pricing power.

Now the questions are more subtle:

The impact goes far beyond just Nvidia’s stock. $NVDA ( ▲ 1.02% )

High-beta proxies such as Advanced Micro Devices, Broadcom, Marvell Technology and Super Micro Computer tend to move in sympathy with Nvidia’s data centre commentary. Foundry giant Taiwan Semiconductor Manufacturing Company sits upstream of all of it.

If Nvidia’s outlook confirms strong AI spending, the market could rally quickly. But if management sounds cautious, investors may pull back just as fast.

When a few companies lead the market, their earnings reports can affect the whole market.

There’s more to watch this week than just chip companies.

Salesforce reports alongside Nvidia. Investors will look for evidence that AI tools translate into monetisation, not just product demos. Margin discipline also remains under scrutiny.

Synopsys gives a more technical but important signal. Demand for its chip design tools affects how much companies invest in new technology later on.

For consumer trends, Lowe’s and TJX Companies show how people are spending. Demand for home goods and strong sales at discount retailers reveal more about household finances than surveys do.

Raymond James Financial offers a look at where retail investors are putting their money and how much business is coming in. This is important as money moves between different investments.

Policy risks are back in focus for investors.

Trade rhetoric and potential tariff adjustments could affect multinational supply chains and margins. At the same time, escalating rhetoric toward Iran introduces headline sensitivity.

Energy majors such as Exxon Mobil and Chevron often respond quickly to geopolitical shifts. Defence contractors, including Lockheed Martin and Northrop Grumman, tend to attract flows when uncertainty rises.

These sectors have done well during recent market shifts. They offer a different type of investment than AI, but are still part of how money is being moved around.

The main index looks stable, but money is moving between different types of investments.

Recent fund data shows that value funds are attracting inflows while growth funds are experiencing outflows. Sector allocations have favoured industrials, materials, energy and selective technology rather than broad-based mega-cap buying.

This is not a retreat from equities. It is a rebalancing within them.

In other words, the market is broadening while testing its former leaders.

That can be healthy. It can also be fragile if leadership stumbles before breadth fully develops.

It’s easy to get distracted by short-term moves, tariff news, or small changes in yields.

The more durable drivers are simpler:

Markets don’t usually fall apart because of a single piece of data. They change direction when the main story loses support.

Right now, the narrative is that AI remains strong, inflation is moderating slowly, and growth is intact. If that framework holds, rotation can continue without structural damage. If one leg weakens, volatility can rise quickly, especially with high starting allocations.