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Nvidia’s Earnings are a Critical Test for the Broader Market Rally
The S&P 500 faces a crucial test as three key events—Nvidia’s earnings, U.S. inflation data and labour market data could heavily influence market sentiment and determine the index’s near-term direction.
Nvidia, a leading chipmaker and a key player in the artificial intelligence (AI) sector, is set to report its second-quarter earnings on Wednesday. The company’s stock has skyrocketed almost 160% year-to-date, significantly contributing to the S&P 500’s 18% gain since the start of the year.
Nvidia has become one of Wall Street’s most valuable companies, but this success also comes with exceptionally high expectations. Investors are keen to see if Nvidia can maintain its remarkable earnings growth, driven by the booming demand for AI technology.
However, the stakes are high. Nvidia not only needs to beat consensus estimates but must also deliver robust guidance to reassure investors that the AI boom is far from over. Anything less than stellar results could trigger a pull back, potentially sparking volatility in the broader market.
Nvidia is expected to report sales of around $28.84 billion, more than double the revenue from the same quarter last year, and net income is also forecasted to double. The company’s guidance for the third quarter will be especially critical, as concerns grow about the long-term sustainability of AI-driven growth begin to emerge.
PCE Inflation in Focus as September Rate Cut Expectations Grow
This week, the Federal Reserve will closely examine a series of key economic indicators ahead of its September rate decision. Among the most significant are the Commerce Department’s revised second-quarter GDP figures and the Personal Consumption Expenditures (PCE) price index, which is the Fed’s preferred measure of inflation.
While the inflation data will be under scrutiny, recent comments from Fed officials suggest the focus has shifted towards labour market risks, with inflation now seen as sufficiently close to target to support a rate cut as early as next month.
Fed Chair Jerome Powell signalled on Friday that “the time has come” to lower the Fed funds target rate, adding that “the upside risks of inflation have diminished.” These remarks have strongly indicated that a rate cut at the Fed’s meeting on the 18 th of September is almost guaranteed.
The August Labour Market Data is a Key Factor for Fed Policy Decision
The August jobs report, due on the 6 th of September, will play the most crucial role in determining the Federal Reserve’s next steps. A strong report could support a cautious approach to rate cuts, while a weaker report might prompt the Fed to take more aggressive measures.
Fed fund futures are fully pricing in a 25-basis-point rate cut at the September meeting, with a 38% chance of a more substantial 50-basis-point reduction. The market has also priced in 103 basis points of easing for this year, with an additional 122 basis points anticipated in 2025.
If the August employment report is stronger than the July’s, the FOMC is likely to implement an initial series of three consecutive 25-basis-point cuts in September, November, and December. However, if the August report turns out to be weaker than expected, a 50-basis-point cut would become more likely.
Source: TradingView
Technical Analysis
The S&P 500 has rebounded strongly from its early August low with current price action trading close to its record high of 5,639. The rally has lost momentum over the past five trading sessions showing that the bulls are running out of steam.
While at this juncture in time there is no reversal signal evident on the chart and we favour levels towards 6,000 by the end of the year, we are expecting volatility to increase again as we approach the seasonally weakest month of the year – September.
We anticipate volatility to stay elevated until November, followed by a robust rally after the U.S. elections, potentially driving the S&P 500 into new record-high territory. Overall, our view on the market remains positive and we see any short-term pull backs as a buying opportunity.
Conclusion: A Decisive Week for the S&P 500
In summary, this week could be decisive for the S&P 500, with Nvidia’s earnings, U.S. GDP and inflation data, which could significantly influence the direction of the market. Nvidia’s performance will be key to see if the AI-driven rally is sustainable, while the inflation report and the jobs data next week will provide critical insights into the Federal Reserve’s likely course of action. Together, these events could set the tone for the market in the coming weeks, either reinforcing the S&P 500’s gains or introducing resurgence in volatility.
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If you are not classified as an institutional investor, you will be categorised as a private/retail investor. At this time, we cannot send communications directly to private/retail investors. You are welcome to view the contents of this website.
If you are an ‘Institutional investor’, you affirm either that you are a Per Se Professional Client, or that you wish to be treated as an Eligible Counterparty Client, both as defined under the Markets in Financial Instruments Directive, or an equivalent in a jurisdiction outside the European Economic Area.
Risk Warnings
The value of an investment in ETPs may go down as well as up and past performance is not a reliable indicator of future performance. Trading in ETPs may not be suitable for all types of investor as they carry a high degree of risk. You may lose all of your initial investment. Only speculate with money you can afford to lose. Changes in exchange rates may also cause your investment to go up or down in value. Tax laws may be subject to change. Please ensure that you fully understand the risks involved. If in any doubt, please seek independent financial advice. Investors should refer to the section entitled “Risk Factors” in the relevant prospectus for further details of these and other risks associated with an investment in the securities offered by the Issuer.
This website is provided for your general information only and does not constitute investment advice or an offer to sell or the solicitation of an offer to buy any investment.
Nothing on this website is advice on the merits of any product or investment, nothing constitutes investment, legal, tax or any other advice nor is it to be relied on in making an investment decision. Prospective investors should obtain independent investment advice and inform themselves as to applicable legal requirements, exchange control regulations and taxes in their jurisdiction.
This website complies with the regulatory requirements of the United Kingdom. There may be laws in your country of nationality or residence or in the country from which you access this website which restrict the extent to which the website may be made available to you.
United States Visitors
The information provided on this site is not directed to any United States person or any person in the United States, any state thereof, or any of its territories or possessions.
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Access to this site is restricted to Non-U.S. Persons outside the United States within the meaning of Regulation S under the U.S. Securities Act of 1933, as amended (the “Securities Act”). Each person accessing this site, by so doing, acknowledges that: (1) it is not a U.S. person (within the meaning of Regulation S under the Securities Act) and is located outside the U.S. (within the meaning of Regulation S under the Securities Act); and (2) any securities described herein (A) have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction and (B) may not be offered, sold, pledged or otherwise transferred except to persons outside the U.S. in accordance with Regulation S under the Securities Act pursuant to the terms of such securities. None of the funds on this website are registered under the United States Investment Advisers Act of 1940, as amended (the “Advisers Act”).
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