- Nvidia is set to report its earnings later in the day.
- Equities ended lower on Tuesday, a day after Trump tried to fire Fed Governor Lisa Cook.
- Stocks rallied last week after Powell hinted at a rate cut during the Jackson Hole symposium.
Equities were almost flat on Wednesday as investors eagerly awaited Nvidia’s earnings report. Meanwhile, the stocks ended the previous session down amid worries about the independence of the US central bank.
Nvidia is set to report its earnings later in the day. The stock rose in anticipation as analysts predicted another upbeat report.
S&P 500 Price Chart (Source: Bloomberg)
However, there is some tension in the market about tech stocks after experts warned that they were overvalued. This means it might be a market bubble that could soon burst. Nevertheless, Nvidia has performed extremely well due to forecasts of a surge in demand for AI. The company has become the world’s largest and has helped support most other tech stocks.
“In the same way Apple symbolized the smartphone era, Nvidia now defines the AI era. The stock has become the heartbeat of the market,” said Josh Gilbert, market analyst at eToro.
“Regardless of whether you own Nvidia shares or not, its result will impact your portfolio in some way.”
A downbeat report could significantly weigh on equities by intensifying worries about a likely bubble burst.
Meanwhile, equities ended lower on Tuesday, a day after Trump tried to fire Fed Governor Lisa Cook. The conflict between Trump and the Fed has been a major concern for investors. However, it took a new turn when the president tried to fire an official. The move highlighted his determination to get his way and have interest rates lowered. It raised concerns about a future Fed that is controlled by the government.
Meanwhile, stocks rallied last week after Powell hinted at a rate cut during the Jackson Hole symposium. Market participants are now pricing an 87% chance of the Fed cutting by 25-bps in September.
The focus has also shifted to the upcoming nonfarm payrolls report. The state of the job market will greatly impact the outlook for Fed rate cuts. Further weakness will increase expectations for rate cuts. On the other hand, a solid report would lower the rate cut bets.
“The focus right now is the labor market,” said Brian Klimke, investment director at Cetera Investment Management.
“We have the job market that’s rolling over a little bit and the economy is weakening, so the Fed needs to act sooner than later, and they’re seeing it too.”
