Wall Street showed caution ahead of Nvidia Corp.'s earnings report, with stock futures dipping as bond yields rose amid speculation of a Federal Reserve rate hike later in the year. Money markets have fully priced in a Fed hike by December, driven by signs of a strong economy. A key inflation gauge, the core personal consumption expenditures price index, increased by 3.3% in July from a year earlier, matching estimates but remaining above the central bank's target. The US economy expanded at an unrevised 1.5% pace in the second quarter, although underlying details indicated stronger consumer spending and business investment than initially reported.
Investors are keenly anticipating Nvidia's financial results for insights into the artificial intelligence market and the broader market trajectory. Analysts project that Nvidia's revenue nearly doubled from a year ago, which would mark the fastest growth in two years. Jack Ablin of Cresset Capital Management noted that investors will be looking at forward guidance, margins, demand durability, and the company's investment strategy for indications that the structural AI growth story remains robust. Mark Malek at Siebert Financial echoed this sentiment, stating that "Nvidia is operating on all cylinders, and they’re doing absolutely everything correctly at this point. We’re anticipating good news here, but so is everybody."
The economic data, while not immediately shifting expectations for the September Fed meeting, suggests that sustained similar trends could pressure policymakers to take action. Bret Kenwell at eToro highlighted the growing challenge of persistent inflation, suggesting that Fed Chair Kevin Warsh's upcoming Jackson Hole speech might address how policymakers plan to bring inflation back to target. Despite these concerns, Jeff Roach at LPL Financial pointed out that consumers are still benefiting from income growth that is outpacing inflation.
Market performance reflected this cautious sentiment. The S&P 500 was little changed, the Nasdaq 100 rose 0.1%, and the Dow Jones Industrial Average fell 0.2%. The MSCI World Index also remained largely unchanged. In the bond market, the yield on 10-year Treasuries advanced four basis points to 4.66%. Commodities saw West Texas Intermediate crude fall 0.4% to $82.02 a barrel, while spot gold dropped 1.3% to $4,597.71 an ounce.
