U.S. stocks declined as PCE inflation exceeded expectations, while Nvidia rose 4% after earnings.

Article by: Tide Research

On Wednesday, U.S. equities traded in a narrow range: the S&P 500 fell 0.04% to 7,674.55, the Nasdaq dropped 0.08% to 26,130.20, and the Dow declined 0.21% to 53,463.88, ending a two-day winning streak. The primary pressure on the broader market came from the PCE inflation data—July PCE rose 3.7% year-over-year, exceeding expectations, while core PCE increased 3.3%, in line with forecasts. Rising expectations of rate hikes pushed up U.S. Treasury yields and the dollar. Gold fell below $4,600, and oil prices continued to weaken. The real focus came after closing: NVIDIA reported second-quarter revenue of $96.2 billion, surpassing estimates, with the current quarter expected to surpass $100 billion for the first time; after-hours trading saw shares rise approximately 4%, lifting Nasdaq futures by about 1%.

The U.S. PCE price index rose 3.7% year-over-year in July, higher than the market expectation of 3.6%. Core PCE increased 3.3% year-over-year, in line with expectations. The overall inflation reading exceeded forecasts for the second consecutive month, further dampening hopes of an imminent Fed rate cut.

After the data release, the 10-year U.S. Treasury yield rose to 4.68%, and the U.S. Dollar Index strengthened simultaneously. Higher interest rates directly pressured high-valuation tech stocks, causing the three major indices to fluctuate narrowly throughout the day and ultimately close slightly lower.

Consumer-side signals are also worth noting. Actual consumer spending in July unexpectedly stalled, contrasting with the higher-than-expected PCE data. With inflation rising but consumption flat, household real purchasing power is being eroded. Walmart’s prior earnings report already revealed pressure on middle- and lower-income consumers, and the latest spending data confirms this trend.

Spot gold fell about 1%, dropping below $4,600 to $4,590.40 per ounce, ending a four-day winning streak. Rising U.S. Treasury yields and a stronger dollar exerted dual pressure on gold.

Oil prices moved in the opposite direction of geopolitical news. Following an agreement between Iran and Oman on revenue sharing from the Strait of Hormuz, Brent crude has fallen more than 9% this week. WTI crude closed down 0.16% at $82.23 per barrel, while Brent crude closed down 0.84% at $87.84 per barrel, marking its largest single-day decline in nearly three weeks.

Negotiations on navigation through the Strait of Hormuz continue to progress, and the geopolitical risk premium continues to decline, which is the primary driver of falling oil prices. Although escalation in the Russia-Ukraine situation should have increased the geopolitical risk premium, signs of easing in Iran-related tensions have carried greater weight in the market. Oil prices have weakened for multiple consecutive days, and the energy sector remains under pressure.

The chip sector was one of the few bright spots in Wednesday’s market. Western Digital rose 4.02%, Arm gained 3.93%, and the broader memory chip segment closed higher.

The Magnificent Seven ended mixed overnight. NVIDIA closed down 1.59% at $209.66, Apple fell 0.38%, Microsoft declined 0.22%, Google dropped 0.15%, Amazon rose 0.28%, Meta gained 0.75%, and Tesla fell 1.02%. Collectively, the Magnificent Seven edged lower, in line with the broader market trend.

NVIDIA’s after-hours earnings report was the real highlight. Second-quarter revenue reached $96.2 billion, doubling year-over-year and surpassing market expectations; this quarter’s revenue is projected to exceed $100 billion for the first time; next fiscal year’s revenue guidance reflects a 70% increase. Amazon’s announcement of an additional 2 million GPUs further validates NVIDIA’s data center revenue growth.

NVIDIA rose approximately 4% after hours, while Nasdaq futures gained about 1% in early trading, with AI-related stocks rising collectively. Market focus centers on three key areas: whether data center revenue continues to exceed expectations, whether Blackwell shipment timelines meet projections, and whether cloud providers’ capital expenditure plans can support future orders.

In addition to chips and AI, the software sector also had its own catalysts that day. Salesforce's Q3 guidance exceeded expectations, and it announced an expanded partnership with Anthropic, driving its stock higher. Meta reached a settlement with 29 U.S. states over a youth addiction case, agreeing to pay up to $18 billion—far below the $1.4 trillion penalty that markets had feared—leading investors to view the outcome as positive.

The independent performance of software stocks is not part of the same main theme as the PCE pressuring the broader market or NVIDIA driving AI momentum, but as a localized strength within the technology sector on that day, it is still worth mentioning in the morning report.

Bitcoin has pulled back from its previous high of $80,000 to $78,300, with the broader crypto market entering a correction phase.

In industrial metals, COMEX copper futures rose 0.40% to $6.62 per pound, with Shanghai copper continuing to hit a new all-time high. Copper’s sustained strength is directly linked to the construction of AI computing infrastructure and global demand for grid investments, representing another resource segment worth monitoring beyond the AI hardware supply chain.

Will NVIDIA’s post-market rally continue after the open? Second-quarter revenue of $96.2 billion exceeded expectations, guidance for this quarter surpassed $100 billion for the first time, and next fiscal year’s revenue growth is projected at 70%—all surpassing market forecasts. A post-market gain of approximately 4% is not extreme, indicating that the market had already priced in some of the upside. The price movement after Thursday’s open is more significant than the post-market move; a 1% rise in Nasdaq futures at the open is merely an initial reaction. What truly determines the direction is whether capital continues to flow in after the open, and how the market absorbs discussions from the earnings call regarding Blackwell’s production ramp-up, gross margin trends, and the sustainability of cloud providers’ capital expenditures.

The key tension in overnight U.S. equities was that inflation data weighed on the broader market, while NVIDIA’s earnings provided independent upward momentum for the AI sector. Over the next two days, whether inflation concerns or AI earnings dominate will determine the market’s direction at the start of September.