Dow holds steady at open after inflation tops expectations as Nvidia results loom

• July PCE inflation rose 0.2% monthly and 3.7% annually, both 0.1 percentage point above consensus, keeping inflation above the Fed's 2% target
• Nvidia, the largest S&P 500 company with over $5 trillion market cap, reports fiscal earnings with Wall Street expecting $2.09 per share amid scrutiny of AI infrastructure spending sustainability
• Markets price roughly one-in-three chance of a Fed rate move in September, with December showing strongest probability for action as policymakers assess persistent inflation

Market Summary

Market Performance:

U.S. equity markets opened relatively flat on Wednesday, with the S&P 500 up 0.1%, Nasdaq near unchanged, and Dow Jones gaining 53 points (0.1%) following hotter-than-expected inflation data.

Key Economic Data:

July's Personal Consumption Expenditures (PCE) index rose 0.2% monthly, bringing annual inflation to 3.7%—both exceeding forecasts by 0.1 percentage points. Core PCE increased 0.2% monthly and 3.3% annually, matching expectations. Inflation remains above the Fed's 2% target. Personal income grew 0.4% while spending rose 0.2%. Services prices jumped 0.3%, driven by financial services (up 1.2%) and housing (up 0.3%), while goods prices fell 0.1%.

Federal Reserve Outlook:

The FOMC's next meeting is September 15-16. Markets currently price a one-in-three chance of a rate move in September, with December showing stronger probability for action. Fed Chairman Kevin Warsh's speech Friday at Jackson Hole will be closely watched for policy signals.

Nvidia Earnings:

The chipmaker reports fiscal quarterly results after market close, with Wall Street expecting $2.09 EPS. As the largest S&P 500 company with over $5 trillion market cap, results will significantly impact broader market sentiment. Investors will scrutinize AI infrastructure spending strength and forward guidance.

Market Implications:

Markets face competing forces: persistent inflation may limit Fed dovishness and pressure long-duration tech stocks, while strong Nvidia results could reinforce confidence in AI-driven earnings growth. The outcome creates a critical juncture for equity valuations, particularly in the technology sector.