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CNN
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U.S. stocks closed mixed on Monday as investors awaited a key earnings report and a slew of economic data due to be released later this week.
The Dow closed 65 points, or 0.2 percent, higher on Monday, hitting a new record of 41,241 points. The S&P 500 fell 0.3 percent and the Nasdaq Composite lost 0.9 percent.
Global markets have been on a wild ride this month. Japan’s benchmark Nikkei 225 index plunged and American stocks tumbled in early August as the yen carry trade unraveled and a weak U.S. jobs report sparked recession fears. Mixed earnings reports from the Big Tech giants that have dominated this year also dragged the market lower.
Just a few weeks later, the situation has changed again. All three major US stock indexes have now recouped their losses and are on track to post monthly gains. A series of reports of falling inflation has given investors optimism that the Federal Reserve will finally start cutting interest rates next month after pushing rates to their highest levels in decades.
Fed Chairman Jerome Powell said Friday at an economic summit in Wyoming that “the time has come” to ease monetary policy, effectively locking in a September rate cut. Powell also indicated he believes the Fed could achieve the elusive soft landing, that is, when inflation falls without unemployment soaring.
This scenario “is an economic consensus, a market consensus and apparently a consensus of corporate America,” wrote Katie Nixon, chief investment officer at Northern Trust Wealth Management, in a note Friday.
Investors’ attention now turns to Nvidia (NVDA), which reports earnings on Wednesday afternoon. The chipmaker’s shares fell 2.3 percent on Monday. Still, the stock is up a whopping 155 percent this year as investors continue to bet on the boom in artificial intelligence and the companies that enable the technology.
Nvidia is expected to report second-quarter revenue of $28.7 billion and profit of $15 billion, according to FactSet estimates. The chipmaker that has benefited most from Wall Street’s artificial intelligence hype has been significantly beating analysts’ forecasts in recent quarters. Wall Street favors Nvidia among chipmakers because its processors are unparalleled for AI, including generative AI, the technology that creates algorithms like ChatGPT.
But in recent weeks, investors have become skeptical about whether the billions of dollars that tech giants have pumped into the emerging industry will translate into increased revenues. They have had to grapple with the question of whether AI will actually lead to revolutionary efficiency gains or just prove to be a money-eater.
Wall Street was further rattled after a federal judge ruled on August 6 that Google’s search business violated U.S. antitrust law. The decision, which threatens Google’s dominance in online search, could also have implications for other Big Tech companies struggling with accusations that they have become too large and dominant in their fields.
Some analysts say the fundamentals of major technology companies remain strong despite the staggering amounts they spend on growth: Apple, Google, Microsoft, Meta and Amazon all posted profits of over $94 billion in the last quarter alone.
“I still think AI is in its early stages and would look to buy on any NVDA dip,” wrote Matthew Tuttle, managing director of Tuttle Capital Management, in a note Friday.
Wall Street will also analyze the personal consumption expenditures price index for July on Friday morning. Inflation has been declining in recent months and the Fed has indicated this month that it is prioritizing maintaining maximum employment. Nevertheless, investors will be watching the Fed’s preferred inflation indicator to confirm the downward trend in inflation.
Wall Street will also be looking at the latest S&P CoreLogic Case-Shiller US National Home Price Index, the second estimate for gross domestic product and second-quarter consumer confidence data due out later this week.
As stock prices stabilize after the trading day, levels may change slightly.
