NVIDIA Earnings to Test U.S. Stocks After Powell's Rate Cut Hints

U.S. stocks are set to face a significant test this week as artificial intelligence chip giant NVIDIA is scheduled to release its earnings report on Wednesday after the market close. Market participants widely believe that NVIDIA's performance and outlook will be crucial in determining the next move for the broader market.

Following Federal Reserve Chairman Jerome Powell's remarks at the Jackson Hole symposium last Friday, which suggested a potential rate cut in September, U.S. stocks initially surged. The S&P 500 index closed up 1.5% on Friday, recording a weekly gain of 0.3%. However, the market failed to maintain this momentum on Monday, with the S&P 500 index closing lower by 0.43%, the Dow Jones Industrial Average down 0.77%, and the Nasdaq Composite Index retreating 0.22%.

Nicholas Colas, co-founder of DataTrek Research, noted that with the Jackson Hole meeting concluded, the next significant catalyst for the market will be NVIDIA's earnings report. Given NVIDIA's substantial weight in the S&P 500 index, its performance could either amplify or overshadow the market's reaction to Powell's comments. NVIDIA's market capitalization has surpassed $4 trillion, with its stock price rising nearly 34% year-to-date, significantly outperforming the S&P 500's 9.5% gain. Key technical levels to watch include the 50-day moving average around $167 and the short-term resistance at $184.

As one of the "Magnificent Seven" tech giants, NVIDIA is the last to report its quarterly earnings. Anthony Saglimbene, chief market strategist at Ameriprise Financial, cautioned that the combined market capitalization of Microsoft, Apple, Amazon, Meta, Alphabet, and NVIDIA now accounts for nearly a third of the S&P 500 index, highlighting the increased concentration risk in the market. Despite a generally positive earnings season, with 80% of the 474 S&P 500 companies that have reported so far exceeding expectations, the market's true test lies in NVIDIA's performance. Bespoke Investment Group emphasized that while the earnings season is largely over, NVIDIA remains the "elephant in the room" for investors.