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U.S. stock index futures showed slight gains on Monday morning, as the markets appeared to take a breather following a robust performance last week. Investors are cautiously optimistic, bolstered by the expectation of a potential rate cut from the Federal Reserve in September. However, the upcoming week promises to be eventful, with key earnings and economic data set to influence market sentiment.
Caution Prevails Ahead of Crucial Week
As the trading week begins, market participants are adopting a cautious stance ahead of several key events. One of the most anticipated reports is from NVIDIA Corporation (NASDAQ: NVDA), a market favorite, which is scheduled to release its earnings after the closing bell on Wednesday. Additionally, the Personal Consumption Expenditures (PCE) price index data—widely regarded as the Federal Reserve’s preferred measure of inflation—is expected later in the week, adding another layer of complexity to the market outlook.
By 05:35 ET (09:36 GMT), S&P 500 Futures had edged up by 0.1% to 5,661.75 points, while Nasdaq 100 Futures rose by 0.2% to 19,835.75 points. The Dow Jones Futures were relatively unchanged, sitting at 41,289.0 points.
Nvidia Earnings in Focus as AI Rally Faces Scrutiny
All eyes are on Nvidia’s upcoming earnings report, which will cover the company’s performance for the three months leading up to July. The primary focus is on whether Nvidia can sustain its impressive earnings growth, largely fueled by the booming demand for artificial intelligence (AI) technology.
Nvidia’s results are expected to provide crucial insights into the current state of AI demand, especially in light of recent mixed earnings from other technology giants. Companies like Alphabet Inc. (NASDAQ: GOOGL) and Microsoft Corporation (NASDAQ: MSFT) saw their stock prices dip following their second-quarter earnings, raising questions about the sustainability of the AI-driven market rally that has characterized much of the past year.
As the producer of the most advanced AI chips on the market, Nvidia has more than doubled in value over the past year, becoming one of Wall Street’s most valuable companies. However, this growth will be put to the test on Wednesday. Despite mixed signals from other chipmakers like TSMC (NYSE: TSM) and ASML (NASDAQ: ASML), which reported their earnings in July, Nvidia’s results will be closely watched as a barometer for ongoing AI demand.
PCE Inflation Data and Rate Cut Expectations
Another key focus for the week is the PCE price index data, due on Friday. As the Federal Reserve’s preferred inflation gauge, this reading is expected to offer critical insights into the future path of interest rates.
Recent comments from Federal Reserve Chair Jerome Powell have solidified expectations for an interest rate cut in September. However, there is still some debate among traders regarding the magnitude of the reduction, with CME FedWatch showing a split between a 25 basis point and a 50 basis point cut. The forthcoming PCE inflation data will likely play a pivotal role in shaping these expectations.
Dow and S&P 500 Near Record Highs
Optimism surrounding potential interest rate cuts has propelled Wall Street indexes close to record highs. On Friday, the S&P 500 surged by 1.2% to 5,634.61 points, while the Dow Jones Industrial Average increased by 1.1% to 41,175.08 points. The NASDAQ Composite also saw a strong performance, jumping 1.5% to 17,877.79 points.
Despite this positive momentum, the Nasdaq remains below the record high it reached earlier this year. The index has faced pressure due to a mix of profit-taking and uncertainty surrounding the AI rally, which has weighed heavily on technology stocks since July.
As the week unfolds, the market’s direction will largely hinge on the outcomes of Nvidia’s earnings and the PCE inflation data, both of which have the potential to significantly influence investor sentiment and market dynamics.
