[New York Stock Market] Despite Nvidia Decline, US GDP Boost Supports Investor Sentiment... Dow Hits Record High

New York Stock Market Mixed Close... Nvidia Plummets 6.38%
Q2 Economic Growth Rate Revised Up from 2.8% to 3%
Core PCE Inflation Rate Lowered to 2.8%
July PCE Inflation Data to Be Released on 30th

The three major indices of the U.S. New York Stock Exchange closed mixed on the 29th (local time). Concerns over Nvidia's earnings released the previous day acted as a negative factor, but the U.S. Gross Domestic Product (GDP) data showing a 'surprise growth' in the second quarter supported investor sentiment. Nvidia's stock fell more than 6% as it failed to meet the market's already high expectations.

On that day in the New York stock market, the blue-chip-focused Dow Jones Industrial Average closed at a record high of 41,335.05, up 243.63 points (0.59%) from the previous trading day. The large-cap-focused S&P 500 index fell 0.22 points (less than 0.1%) to 5,591.96, and the tech-heavy Nasdaq index dropped 39.6 points (0.23%) to 17,516.43.

By stock, Nvidia fell 6.38%. Other tech stocks rose. Apple, which was reported to be discussing investment in OpenAI, jumped 1.46%, and Microsoft (MS) rose 0.61%. Amazon and Meta, the parent company of Facebook, increased by 0.77% and 0.28%, respectively.

Nvidia announced after the market closed the previous day that in the second quarter of fiscal year 2025 (May to July), it recorded sales of $30.04 billion and net income of $16.6 billion, up 122% and 168% year-on-year, respectively. The third-quarter sales guidance was set at $32.5 billion. Although both earnings and sales guidance exceeded Wall Street expectations, they fell short of the actual internal forecasts of securities firms, leading to a decline in the stock price that day. The latest AI chip, 'Blackwell,' is scheduled for release in the fourth quarter as planned, but only expectations of generating billions of dollars in sales in that quarter were presented, without specific forecasts, which stimulated selling pressure.

John Higgins, chief economist at Capital Economics, said, "The decline in Nvidia's stock price after earnings that exceeded recent consensus supports the argument that Nvidia's price is set at a level for perfection," adding, "But that does not mean Nvidia's party is over or that the AI bubble is bursting."

Despite Nvidia's stock price decline, the economic indicators released that day strengthened expectations for a soft landing, and the market was not significantly shaken. The U.S. Department of Commerce announced that real GDP grew at an annualized rate of 3% in the second quarter, higher by 0.2 percentage points than the preliminary figure (2.8%) released last month, and more than double the first quarter growth rate (1.4%). Personal spending, the engine of U.S. economic growth, increased significantly more than initially estimated, boosting the GDP growth rate. The personal spending growth rate was revised up from 2.3% to 2.9%. Spending on goods and services increased mainly in healthcare, housing, utilities, and leisure sectors.

On the other hand, inflation was revised downward. The core Personal Consumption Expenditures (PCE) price index rose 2.8% annualized in the second quarter, 0.1 percentage points lower than last month's figure (2.9%). The core PCE price index, excluding volatile energy and food prices, is the Fed's most important indicator. The second-quarter PCE price index growth rate was revised down from 2.6% annualized to 2.5%.

The market is awaiting the July PCE price index to be released on the 30th. Last month's PCE prices are estimated to have risen 0.2% month-over-month and 2.5% year-over-year. As a result, the core PCE price inflation rate likely slowed to 2.1% over the past three months, approaching the Fed's target of 2%.

The U.S. labor market also remained robust, further supporting soft landing expectations. The U.S. Department of Labor reported that new unemployment claims for the week of August 18-24 totaled 231,000, down 2,000 from the previous week (233,000), and below the expert forecast of 232,000.

Brett Kenwell, U.S. investment analyst at eToro, said, "Today's data helped reassure investors that the economy is not precariously standing on a cliff," adding, "We are not out of the woods yet, but the U.S. economy is more resilient than many think." He also evaluated, "Today's report will give investors confidence that the Fed can still orchestrate a soft landing."

Investors are confident about a rate cut in September. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds futures market fully reflects a 100% probability that the Fed will cut rates by at least 0.25 percentage points in September. The probability of a 0.25 percentage point rate cut next month is 67.5%, while the chance of a 'big cut' of 0.5 percentage points is 32.5%.

Government bond yields are on the rise. The U.S. 10-year Treasury yield, a global bond yield benchmark, rose 2 basis points (1 bp = 0.01 percentage points) from the previous trading day to 3.86%, and the 2-year Treasury yield, sensitive to monetary policy, increased 2 basis points to 3.89%.

International oil prices rose due to supply disruptions in Libya and concerns over production cuts in Iraq. West Texas Intermediate (WTI) crude oil closed at $79.94 per barrel, up $1.29 (1.6%) from the previous trading day, and Brent crude, the global oil price benchmark, rose $1.39 (1.9%) to $75.91 per barrel.