Stocks barely budged Wednesday as Wall Street took a cautious stance ahead of this week’s key events, namely, Nvidia (NVDA) earnings this evening and Federal Reserve Chair Kevin Warsh’s keynote speech at Jackson Hole on Friday.
Market participants also sifted through a busy economic calendar, which included a hotter-than-expected inflation report.
Ahead of the open, the Bureau of Economic Analysis (BEA) said the Personal Consumption Expenditures Price Index (PCE) — the Fed’s preferred measure of inflation — rose 0.2% from June to July, and was up 3.7% from the year-ago period. Economists expected the monthly and yearly figures to arrive at 0.1% and 3.6%, respectively.
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Core PCE, which excludes volatile food and energy prices, was up 0.2% month over month and 3.3% year over year, matching economists’ forecasts.
“With markets continuing to be sensitive to any data that could increase the odds of rate hikes, today’s mild upside inflation surprise and relative economic strength weren’t necessarily what investors — or the Fed — wanted to see,” says Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management.
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The data did little to shift the needle on expectations for a rate hike at the Fed’s September meeting. According to CME Group FedWatch, futures traders are pricing in a 60% chance the central bank keeps the federal funds rate unchanged next month — roughly the same as yesterday.
But Zentner says “if subsequent data point in the same direction, the Fed may feel more pressure to move off the sidelines.”
Short-term Treasury yields ticked higher after today’s inflation data while equity benchmarks slipped. At the close, the blue-chip Dow Jones Industrial Average was down 0.2% at 53,463, the broader S&P 500 was off 0.02% at 7,675, and the tech-heavy Nasdaq Composite was 0.08% lower at 26,130.
Nike hits a 12-year low after downgrade
Nike (NKE) was the worst Dow Jones stock today — sinking 2.3% and hitting a 12-year intraday low of $38.41 along the way — after Truist Securities analyst Joseph Civello downgraded the athletic apparel and footwear retailer to Hold from Buy. He also lowered his price target to $42 from $47.
The downgrade comes after Dick’s Sporting Goods (DKS, +4.3%) cut its full-year guidance Wednesday on weakness in its Foot Locker chain, sending shares of the consumer discretionary stock down more than 30%. This, says Civello, “signals incremental murkiness around NKE’s turnaround progress.”
Civello also downgraded Dick’s to Hold and slashed his price target to $135 from $270, saying the athletic retail chain “appears increasingly exposed to Nike with limited visibility into the product improvements needed for the brand’s turnaround.” The 2025 acquisition of Foot Locker increased Nike’s sales penetration at DKS to 35%-40% from 25%.
Nvidia drops ahead of earnings
Nvidia was another Dow stock that closed in negative territory today, falling 1.6%, ahead of the artificial intelligence (AI) bellwether’s critical after-the-close earnings report.
Wall Street is expecting another beat-and-raise quarter from the chipmaker, but the real uncertainty rests in the forward guidance and what it means for AI demand, as well as the stock’s reaction and how that impacts the broader market.
You can follow along with all the latest news and commentary on Nvidia earnings on our live blog.
Nvidia earnings and Jackson Hole
Brandon Zureick, chief economist and senior managing director at Johnson Investment Counsel, says the timing of Nvidia’s earnings event is notable considering it comes ahead of Chair Warsh’s first keynote speech at the Jackson Hole Economic Symposium this Friday.
“The current bull market continues to be driven by the artificial intelligence investment theme, and Warsh’s commentary could influence investor sentiment,” Zureick explains.
The Fed chair has been deliberately vague ahead of the event and “higher long-term interest rates represent a potential headwind for the artificial intelligence trade,” says Zureick.
Following today’s sticky PCE data, Wall Street will be looking to Warsh for more clarity on inflation and interest rates.
While Nvidia and Warsh are top of mind this week, Meta Platforms (META, +1.1%) made headlines after the company agreed to an $18 billion settlement with 48 states, the District of Columbia and several U.S. territories to end a landmark case over social media’s impact on children.
Meta will also implement changes at Facebook and Instagram, including setting a two-hour time limit on the apps for users under the age of 18 and launching “night mode” and “school mode.”
Under the terms of the agreement, the social media platform will only pay out 70% of the settlement unless TikTok and Alphabet’s (GOOGL, -1.4%) YouTube agree to pay a financial penalty, and the two platforms, along with Snapchat parent Snap (SNAP, -8.5%), agree to implement new safety measures.