Written by: Trend Research

On Wednesday, U.S. stocks fluctuated within a narrow range, with the S&P 500 down 0.04% at 7674.55 points, the Nasdaq down 0.08% at 26130.200 points, and the Dow down 0.21% at 53463.88 points, ending a two-day winning streak. The core pressure on the market was from the PCE inflation data, with July PCE rising 3.7% year-on-year, exceeding expectations, while core PCE increased 3.3%, in line with expectations. The rising interest rate expectations pushed up U.S. Treasury yields and the dollar. Gold fell below $4600, and oil prices continued to weaken. The real focus came after the market closed when Nvidia reported second-quarter revenue of $96.2 billion, exceeding expectations, with the current quarter expected to break $100 billion for the first time, rising about 4% in after-hours trading, boosting Nasdaq futures up about 1%.

PCE Exceeding Expectations Boosts U.S. Treasury Yields, Consumer Spending Stagnation Signals Warning

The U.S. July PCE price index rose 3.7% year-on-year, higher than the market expectation of 3.6%. Core PCE increased 3.3% year-on-year, in line with expectations. Overall inflation readings exceeding expectations for the second consecutive month further reduced hopes for a rate cut by the Federal Reserve in the near term.

After the data was released, the 10-year U.S. Treasury yield rose to 4.68%, and the dollar index strengthened simultaneously. The rise in interest rates directly suppressed the performance of overvalued technology stocks, with the three major indices fluctuating within a narrow range and ultimately closing slightly lower.

Signals from the consumer side are also noteworthy. July’s real consumer spending unexpectedly stagnated, contrasting with the PCE exceeding expectations; increasing inflation and stagnant consumption mean that households’ actual purchasing power is being eroded. Walmart's previous financial report had already revealed the pressure on low- to middle-income consumers, and the latest consumer spending data verified this trend.

Spot gold fell about 1% to below $4600, reporting $4590.40 per ounce, ending a four-day winning streak. The stronger U.S. Treasury yields and dollar created double pressure on gold.

Geopolitical Easing and Russia-Ukraine Escalation Intertwined, Oil Prices Drop Instead of Rise

Oil prices have moved in a direction contrary to geopolitical news. Iran and Oman reached an agreement on revenue distribution in the Strait of Hormuz, causing Brent crude to drop over 9% this week. WTI crude closed down 0.16% at $82.23 per barrel, and Brent crude closed down 0.84% at $87.84 per barrel, marking the largest single-day drop in nearly three weeks.

Negotiations for navigation through the Strait of Hormuz are ongoing, and the continued decline in geopolitical risk premiums is the main reason for the drop in oil prices. The escalation of the Russia-Ukraine situation should have raised the geopolitical premium, but signals of easing from the Iran direction carried greater weight in the market. Oil prices have weakened for several consecutive days, and the energy sector continues to face pressure.

Storage Chips All Rise, Nvidia's After-Hours Earnings Boost AI Sentiment

The chip sector was one of the few bright spots in Wednesday’s market. Western Digital rose 4.02%, and Arm rose 3.93%, with the storage chip sector overall closing higher.

The seven giants showed mixed performance overnight. Nvidia closed down 1.59% at $209.66, Apple down 0.38%, Microsoft down 0.22%, Google down 0.15%, Amazon up 0.28%, Meta up 0.75%, and Tesla down 1.02%. The seven giants overall closed slightly lower, in line with the market direction.

Nvidia’s after-hours earnings report was the real highlight. Second-quarter revenue reached $96.2 billion, doubling year-on-year, exceeding market expectations; this quarter's revenue is expected to break $100 billion for the first time; and the revenue guidance for the next fiscal year indicates a 70% growth. Amazon announced plans to deploy 2 million GPUs, further validating Nvidia's data center revenue.

Nvidia rose about 4% in after-hours trading, Nasdaq futures initially rose about 1%, and AI-related stocks rose collectively. Market focus is on whether data center revenue continues to exceed expectations, if the shipping pace of Blackwell meets expectations, and whether cloud vendors' capital expenditure plans can support subsequent orders.

Salesforce Surges, Software Sector Has Independent Catalysts

Apart from chips and AI, the software sector also had independent catalysts on that day. Salesforce’s third-quarter guidance exceeded expectations, and it announced an expanded cooperation with Anthropic, causing its stock price to surge. Meta reached a settlement with 29 U.S. states over youth addiction cases for up to $18 billion, a figure far lower than the previously feared $1.4 trillion fine; the market viewed this as a positive development.

The independent performance of software stocks does not follow the same main narrative as the PCE suppressing the market and Nvidia boosting AI, but as a locally strong direction within the tech sector on that day, it is still worth mentioning in the morning report.

Bitcoin Retreats, Industrial Metals Continue Strong Trend

Bitcoin fell back after previously reaching $80,000, now reporting $78,300, with the entire crypto asset sector entering adjustment.

For industrial metals, COMEX copper rose 0.40% to $6.62 per pound, with New York copper continuing to hit all-time highs. The continuous strength of copper is directly related to the construction of AI computing infrastructure and the global grid investment demand, making it another resource line worth tracking beyond the AI hardware chain.

Tonight’s Focus

Will Nvidia’s after-hours gains continue at the market open? The second-quarter revenue of $96.2 billion exceeds expectations, guidance for this quarter breaks $100 billion for the first time, and guidance for next fiscal year indicates a 70% increase, all three data points surpassing market expectations. The approximately 4% after-hours increase is not extreme, indicating that the market had some expectations for exceeding forecasts. The market action following Thursday’s open is more important than after-hours gains or losses; the initial rise of Nasdaq futures by about 1% is just the first reaction, and what truly determines the direction will be whether funds continue to buy after the market opens and how the discussions regarding Blackwell's capacity ramp-up, gross margin trends, and sustainability of capital expenditures from cloud vendors are digested in trading.

The core contradiction in overnight U.S. stocks is that inflation data suppressed the market, but Nvidia's earnings provided independent momentum for the AI sector. The next two days will determine the market direction at the beginning of September, based on whether inflation concerns or AI performance takes precedence.