[New York Stock Market] Mixed Close Amid Nvidia Earnings Concerns... Dow Hits All-Time High

NVIDIA Earnings Release on the 28th
July PCE Inflation Data to Be Announced on the 30th

The three major indices of the U.S. New York Stock Exchange closed mixed on the 26th (local time). Dow Jones Industrial Average broke its all-time high as Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), hinted at a rate cut in September. The market is closely watching the earnings of AI giant Nvidia and the July Personal Consumption Expenditures (PCE) price index, both to be released this week.

On that day in the New York stock market, the blue-chip-focused Dow Jones Industrial Average closed at 41,240.52, up 65.44 points (0.16%) from the previous trading day, setting a new all-time high. The large-cap-focused S&P 500 index fell 17.77 points (0.32%) to 5,616.84, and the tech-heavy Nasdaq index dropped 152.03 points (0.85%) to 17,725.76.

Tech stocks declined by individual issues. Nvidia, which is about to announce earnings, fell 2.25%. Other semiconductor stocks Broadcom and Micron dropped 4.05% and 3.83%, respectively. Boeing declined 0.85% following reports that NASA astronauts will use SpaceX spacecraft instead of Boeing’s, after several delays in returning two astronauts from the International Space Station (ISS) to Earth. PDD Holdings, the parent company of the e-commerce platform Temu, plunged 28.51% due to disappointing quarterly results.

Concerns over Nvidia’s earnings weighed on investor sentiment. Nvidia will release its fiscal 2025 second-quarter (May to July) results after market close on the 28th. Both revenue and operating profit are expected to more than double, reaching $28.6 billion and $18.7 billion, respectively. The market’s direction will likely depend on whether Nvidia’s earnings meet expectations.

Ross Mayfield, an investment strategist at Baird, said, "I think there is some anxiety about the upcoming Nvidia earnings in the tech sector," adding, "The market is in a fairly healthy state, but if tech stocks, which make up a large portion of the indices, lag behind, it will be really difficult to make significant progress."

Chris Larkin, head of trading at Morgan Stanley’s E*TRADE, stated, "For the market to reach new highs this week, it must avoid major surprises in earnings," and emphasized, "Especially Nvidia, which has led sentiment in the tech sector, must avoid shocks in its earnings."

On the previous trading day, the New York stock market rose collectively due to the "Powell effect." Chairman Powell signaled a rate cut in September by saying, "The time has come to adjust policy." He noted, "The labor market is unmistakably slowing, and we do not want labor market conditions to cool further," adding, "Our goal is to maintain a strong labor market while avoiding a sharp rise in unemployment." Powell also expressed increased confidence that inflation is sustainably slowing toward 2%. However, he did not specify the size of the rate cut, stating that the pace depends on upcoming data.

Investors are confident in a September rate cut following Powell’s remarks. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds futures market fully prices in a rate cut of at least 0.25 percentage points in September. The probability of a 0.25 percentage point cut is 69.5%, while the chance of a "big cut" of 0.5 percentage points is 30.5%.

Sam Stovall, chief investment strategist at CFRA Research, said, "We expect them to cut 25 basis points in September, November, and December," adding, "They want to signal to the market that they are not behind the curve while confirming they are not entering rate-cut mode too quickly."

The key will be the August employment report released before the Federal Open Market Committee (FOMC) meeting on September 17-18. The unemployment rate surged from 4.1% in June to 4.3% in July, and if it rises further in August, it could strengthen expectations for a big Fed rate cut.

Investors are also focusing on the July PCE price index, to be released on the 30th. The July PCE price index is expected to rise 0.2% month-over-month and 2.5% year-over-year, matching or slightly exceeding the previous month’s figures (0.1% and 2.5%, respectively). Stable inflation trends are expected to support the Fed’s September rate cut outlook.

U.S. Treasury yields showed slight gains. The 2-year Treasury yield, sensitive to monetary policy, rose 2 basis points to 3.93%, while the 10-year Treasury yield, a global benchmark, increased 1 basis point to 3.81%.

International oil prices surged more than 3% due to heightened tensions in the Middle East and production cuts in Libya. West Texas Intermediate (WTI) crude rose $2.59 (3.5%) to close at $77.42 per barrel, and Brent crude, the global benchmark, increased $2.41 (3.05%) to $81.43 per barrel.