Market Analysis

What's moving markets are expectations for a rate decrease, Nvida results, and minimal change in futures

Amos Simanungkalit · 26 Aug12.8K Views

Wall Street Trades in Tight Ranges as Investors Eye Nvidia Earnings and Inflation Data

Futures Steady with Markets Near Record Highs
U.S. stock futures remained relatively unchanged on Monday as markets hovered close to record levels following the Federal Reserve's clear signal of an impending rate cut next month. As of 03:48 ET (07:48 GMT), Dow futures and S&P 500 futures were both flat, while Nasdaq 100 futures edged up by 35 points, or 0.1%.

Markets are coming off a strong week, with the S&P 500 closing on Friday just shy of its all-time high reached in mid-July. The three major indexes rallied after Fed Chair Jerome Powell indicated that "the time has come" to lower the Fed funds target rate, noting that "the upside risks of inflation have diminished." These comments have all but confirmed a rate cut at the Fed's September 18 meeting, marking the first reduction in over four years.

U.S. Economic Data in Focus
This week, the data-dependent Federal Reserve will be assessing a range of economic indicators before making its September rate decision. Key data include the Commerce Department's revised second-quarter GDP and the comprehensive Personal Consumption Expenditures (PCE) report, which contains the Fed's preferred inflation measure, the PCE price index.
Friday’s PCE data will be closely monitored, although recent statements from Fed officials suggest a shift in focus towards labor market risks, with inflation deemed close enough to target to justify rate cuts starting next month. The economic calendar also features a report on durable goods orders later Monday and the weekly initial jobless claims report on Thursday.

Nvidia Earnings Loom Large
The rally in U.S. markets faces a potential challenge when Nvidia, a key player in AI, reports its earnings after the market closes on Wednesday. Nvidia's stock has surged roughly 150% year-to-date, contributing to nearly a quarter of the S&P 500’s 17% gain this year. However, the extraordinary rise, driven by AI enthusiasm, has drawn comparisons to the dot-com bubble of over two decades ago.

The upcoming earnings report, along with Nvidia's guidance on future AI investments, could be pivotal for market sentiment as investors approach what is traditionally a volatile period of the year. This report concludes an earnings season where investors have been less forgiving of tech giants whose earnings didn’t justify their high valuations or significant AI expenditures.

Oil Prices Climb Amid Middle East Tensions and Fed Rate Cut Expectations
Oil prices edged higher on Monday due to concerns that escalating conflict in the Middle East could disrupt regional oil supplies. Additionally, the prospect of imminent U.S. rate cuts has bolstered the global economic outlook and fuel demand. By 03:48 ET (07:48 GMT), Brent crude futures had risen by 74 cents, or 0.9%, to $78.89 a barrel, while U.S. crude futures increased by 75 cents, or 1.0%, to $75.62 a barrel.

Both oil benchmarks gained over 2% on Friday as expectations for September rate cuts by the Fed solidified. However, oil prices still ended last week lower due to a bleak outlook for major economies affecting fuel demand. Oil traders remain cautious about OPEC and its allies’ plans to increase output later this year.

NASA Chooses SpaceX Over Boeing for ISS Astronaut Return
NASA announced on Saturday that it’s too risky to bring back two astronauts stranded on the International Space Station (ISS) using Boeing’s faulty new capsule. Instead, they will return home aboard a SpaceX craft in early 2025.

Astronauts Butch Wilmore and Sunita Williams have been stuck on the ISS since June after Boeing’s Starliner capsule seemingly malfunctioned during a test flight. The mission, originally planned to last a minimum of nine days, was indefinitely delayed as the agency worked to identify the issue with the Starliner.

NASA’s decision to proceed with SpaceX is another blow to Boeing (NYSE: BA), which is already under intense scrutiny over the safety standards of its commercial aircraft. SpaceX, which has a contract with NASA to supply cargo to the ISS, has successfully completed nine missions to and from the ISS as of April 2024.