Stocks soared last week, nearing record highs as Federal Reserve Chair Jerome Powell hinted at upcoming rate cuts.
The S&P 500, Nasdaq, and Dow Jones all posted gains exceeding 1%, with the S&P 500 now within 1% of a record closing high.
But as the market’s August rebound faces fresh tests, Nvidia’s (NVDA) highly anticipated earnings release on Wednesday looms large.
Powell’s announcement on Friday signaled that the Fed’s policy shift is imminent, though he remained vague on the pace and scale of rate cuts.
The markets swiftly adjusted, pricing in four quarter-point cuts by the end of 2024.
However, the central bank’s strategy remains data-dependent, leaving investors on edge about the possibility of a larger, half-point cut in September.
Goldman Sachs’ team, led by Jan Hatzius, suggests that if the August jobs report disappoints, a 50-basis point cut could be on the table.
The Fed’s cautious approach is keeping market participants guessing, with Capital Economics’ Jonas Goltermann warning that aggressive cuts might indicate a weakening economy—hardly reassuring for equity markets.
As Powell underscored risks to the labor market, all eyes turn to the core PCE inflation data due Friday, which is expected to show a slight uptick.
Despite the uncertainties, Powell expressed growing confidence in achieving the Fed’s 2% inflation target.
Nvidia, however, is set to steal the spotlight this week.
After fueling an AI-driven stock market rally with its May earnings, expectations for the chipmaker are sky-high.
Analysts anticipate a staggering 109% jump in earnings year-over-year, with revenues up nearly 100%.
Investors will scrutinize any updates on potential delays for Nvidia’s next-gen Blackwell chip.
Despite its stock climbing 160% year-to-date, KeyBanc analyst John Vinh remains optimistic, forecasting another strong quarter driven by demand for Nvidia’s Hopper GPUs.
Even with a recent 30% rally, Vinh argues the stock remains attractively valued, given Nvidia’s pivotal role in the AI boom.
The broader tech narrative has been shaped by the volatile swings of Nvidia and its peers—the so-called “Magnificent Seven.”
Yet, according to Goldman Sachs’ Ben Snider, the worst of this turbulence may be behind us.
As these tech giants added $1.4 trillion to their collective market cap in just two weeks, Snider suggests that while valuations aren’t cheap, they’ve stabilized somewhat.
Interestingly, hedge funds have begun trimming exposure to most of these tech titans, reflecting investor anxiety despite the AI-fueled excitement earlier this year.
While Amazon and Apple were exceptions, Snider notes that sentiment around megacap tech remains “cautiously optimistic.”
In this delicate dance between optimism and caution, Nvidia’s upcoming earnings could either reinforce or challenge the market’s bullish momentum.
As always, nothing changes an investor’s mind like a shift in price.
This week will test whether the market’s faith in AI’s future—and Nvidia’s central role in it—can hold up under the weight of earnings expectations, potentially reshaping the business landscape.
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