Stocks finished essentially flat today, with the Dow down 0.21%, S&P 500 down 0.02%, Nasdaq down 0.08%, and Russell 2000 down 0.14%. Beneath the surface, however, market breadth was somewhat better than the headline indexes suggested, with the equal-weight S&P slightly higher and several cyclical areas outperforming.
Semiconductors, memory and software recovered from earlier weakness, while banks, private equity, credit cards, industrials and transportation stocks also performed relatively well. Healthcare, homebuilders, airlines and cruise lines were among the weaker areas.
Treasury yields moved modestly higher, the dollar strengthened, and gold and silver pulled back. Oil was nearly unchanged after a choppy session.
Nvidia Becomes the Main Event
Much of today’s session felt like a waiting game ahead of Nvidia’s earnings after the close. The broader AI trade has been volatile recently as investors weigh enormous infrastructure spending against questions about financing, competition and whether all that spending will generate sufficient returns.
Those concerns remain, but the underlying demand signals continue to look strong. Semtech reported particularly strong AI data-center growth, while several recent companies across computing, networking and memory have continued to highlight healthy demand.
Nvidia’s initial results reinforced that message. The company guided to roughly 70% revenue growth in fiscal 2028, well above current expectations, and said underlying demand could be closer to 100% if supply were available. The stock rose in after-hours trading.
Inflation Is Cooling, But Not Enough to Settle the Fed Debate
July’s core PCE inflation increased 0.2% for the month, in line with expectations, while the year-over-year rate remained at 3.3%. Personal income and consumer spending both came in somewhat stronger than expected.
That combination captures the Fed’s dilemma fairly well. Inflation has improved, but it remains above the 2% target, while households are still spending and the economy has not clearly weakened enough to force the central bank’s hand.
Treasury yields consequently remained elevated, and investors are increasingly looking toward Fed Chair Kevin Warsh’s Jackson Hole speech on Friday for clues about how the Fed is thinking about the balance between inflation and growth.
AI Disruption Hits Software Again
The AI disruption debate also resurfaced in software. Intuit fell after issuing weaker long-term growth guidance, particularly for its TurboTax consumer business, where lower-end customers are increasingly being targeted by cheaper and AI-enabled alternatives. Zoom also disappointed investors despite beating quarterly expectations, largely because of concerns about slower consumer growth and pressure on margins.
These developments reinforce an increasingly important distinction within technology: AI may expand the overall technology market, but it can simultaneously disrupt incumbent business models. Investors are becoming much more selective about which companies are likely to benefit rather than simply assuming all technology companies will.
Geopolitics Remains a Background Risk
Oil was volatile as investors continued to weigh conflicting developments in the Middle East. There are still efforts to establish a temporary shipping corridor through the Strait of Hormuz, but President Trump said he was in no hurry to restart formal negotiations with Iran.
Meanwhile, reports that Russia could escalate its war in Ukraine added another layer of uncertainty. For now, neither issue appears to be driving broad market risk sentiment, but energy prices remain an important link between geopolitics, inflation and interest rates.
What We’re Watching
The immediate focus is now on the market’s full reaction to Nvidia’s earnings and outlook. Tomorrow also brings jobless claims and additional Treasury supply.
Friday is likely to be the week’s most important macro day, with updated payroll revisions, consumer sentiment and, most importantly, Fed Chair Warsh’s Jackson Hole speech.
Here’s Our Take
Today’s flat index performance masked a market that is still trying to answer two big questions: Can AI fundamentals stay strong enough to justify enormous investment levels, and can inflation continue cooling enough to keep the Fed from tightening further?
Nvidia’s early earnings read is encouraging on the first question. Demand remains exceptionally strong, and supply still appears to be the bigger constraint. But that does not eliminate concerns around financing, memory costs, capital intensity or competition.
On the second question, today’s PCE report was reassuring but not decisive. Inflation is moving in the right direction, yet the economy remains reasonably resilient. That leaves the Fed with little urgency to change course.
For now, the market still has a constructive fundamental backdrop, but the hurdle for AI remains extraordinarily high and interest rates remain an important valuation constraint. Nvidia and Warsh should tell us much more about both sides of that equation over the next two days.
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