Contrary to expectations, the publication of NVIDIA's quarterly report, which once again surpassed all analyst forecasts, failed to keep the S&P 500 index from declining. This is a clear signal that even flawless corporate results can no longer outweigh the macroeconomic risks looming over the market.
Caution ahead of the release
Ahead of NVIDIA's report, which holds the largest weight in the S&P 500 index among all companies, the market showed restraint. On Wednesday, the index closed at nearly the zero mark—at 7,675.70 points—failing to build on Tuesday's upward momentum, when it rose 0.32% to 7,677.28 points. Investors preferred to take a wait-and-see stance, analyzing fresh inflation data.
The core Personal Consumption Expenditures (PCE) price index for July matched forecasts, showing a 0.2% monthly increase and 3.3% year-over-year growth. However, the overall PCE indicator came in 0.1 percentage points above consensus, reaching 3.7% year-over-year. These figures give the Federal Reserve no reason to ease policy, but they also do not add to panic. Nevertheless, the yield on 30-year Treasury bonds, which hit a nearly 20-year high last week, continues to pressure the technology sector.
Strong report, weak reaction
NVIDIA (NVDA) shares closed the main session down 1.59% at $209.66. However, after the market close, the stock recovered its losses and surged 4.32% to $218.72. The catalyst was a report that came in significantly better than expected: quarterly revenue reached $96.2 billion, up 106% year-over-year, exceeding forecasts of around $92 billion. Earnings per share came in at $2.22 versus the expected $2.09, while gross margin held at 75%.
The AI cloud and enterprise solutions segment brought in $40.3 billion, up 138% year-over-year. The company's CEO, Jensen Huang, stated that "AI has passed the inflection point," and computing now generates real revenue. However, S&P 500 futures reacted cautiously to this.
My assessment of the situation
The market is in a phase where positive news is already priced in. Investors are beginning to question the sustainability of current valuations, especially in light of persistent inflationary pressures. NVIDIA continues to break records, but further stock growth requires increasingly bold forecasts, making the market vulnerable to the slightest disappointments. On Friday, the key event could be the speech by Fed Chair Kevin Warsh in Jackson Hole, which will likely determine the short-term dynamics of the indices.