Editor
The blistering rally that swept Wall Street last week sputtered on Monday, with major indices pulling back as traders braced for the most anticipated corporate earnings call of the year: Nvidia earnings on Wednesday.
The Dow Jones Industrial Average dropped 0.5%, retreating from its fresh record high, while the benchmark S&P 500 hugged the flat line, wavering just below parity. Curiously, the tech-heavy Nasdaq Composite bucked the trend, rising 0.3%. That modest gain was almost entirely fueled by the underlying stock itself, as Nvidia shares tacked on 2%. It’s a classic case of wait-and-see; the market wants confirmation before committing fresh capital.
The Rally That Was
To understand the pause, you must look at the surge. Last week, the market took off like a sprinter hearing the starting pistol, propelled by Federal Reserve Chair Jerome Powell’s clearest signals yet that interest rate cuts could be on the docket as soon as September.
The enthusiasm was palpable. The Dow roared past 45,000 to notch its first record of 2025, gaining over 800 points, or 1.8%. The S&P 500 similarly charged ahead, finishing its best week in months. Investors, convinced the central bank was finally preparing to ease policy, piled into equities, creating a rush of buying power that lifted nearly all boats. But records, as every seasoned trader knows, are made to be tested, and a slight pullback was always on the cards.
The Nvidia Earnings Litmus Test
This week, however, all roads lead to Santa Clara. As the current earnings season draws to a close, the market’s attention is now fixated on Nvidia (NVDA), which reports after Wednesday’s close.
The chipmaker—now the most valuable stock in the S&P 500—is widely expected to report earnings of $1.01 per share on $46.13 billion in revenue. However, the real number investors are hunting for is the outlook on future AI demand. Shares have already doubled since the spring, sitting near a record high, reflecting a massive bet on continued technological dominance. The stock’s performance isn’t just about one company; it’s a proxy for the entire AI investment thesis.
“Nvidia is the bellwether for every capital expenditure decision being made in the data center space right now,” observed Laura Chen, Chief Market Strategist at Vanguard Global Investors. “Its supply chain is running flat out, and the expectation is perfection. If they miss—even slightly—it could trigger a rotation out of the entire tech sector faster than you can hit the sell button, hitting related names like Dell (DELL) and Marvell Technology (MRVL), which report later in the week.”
Beyond Tech: The Fed’s Next Move
While tech commands the headlines, the ultimate driver of the current macro-environment remains inflation. The spotlight pivots to Friday’s July PCE inflation report, the Fed’s favored gauge for measuring price changes.
The market got giddy over the idea of interest rate cuts following Powell’s comments, but the Fed will only deliver if the inflation data cooperates. Economists project core PCE to tick up slightly to 2.9% year-over-year, up from June’s 2.8%. That’s still stubbornly close to the Fed’s goal, a reality that dampens the recent rate-cut fervor and explains why investors remain nervous.
The trading week ahead looks less like a celebratory sprint and more like a tightrope walk. “This pause makes sense,” concluded David Miller, a portfolio manager at Sterling Wealth Management. “After that kind of surge, traders are simply de-risking ahead of major events. We are in a holding pattern until we get definitive signals from either Nvidia on corporate growth or the PCE report on monetary policy direction.” The fate of the rally now rests on two distinct, yet equally powerful, data points.
