I. Market Overview: Mixed Data, Indices Pull Back Slightly
On Monday, August 25, U.S. equities slipped modestly as investors awaited two major catalysts later this week—NVIDIA’s earnings (Tuesday after close) and the July PCE inflation report (Friday). Economic data released intraday were mixed: July PCE inflation and Q2 GDP revision painted a neutral picture, while Treasury yields rose as heavy government bond auctions pressured supply.
The S&P 500 closed down 0.16% at 5,625.84, the Nasdaq 100 eased 0.07% to 17,996.98, and the Dow Jones slipped 0.11% to 40,824.71. Trading volume was subdued as risk appetite cooled following last week’s strong rally.
II. Key Events: NVIDIA Earnings & PCE Data — The “Two Shoes” to Drop
1. NVIDIA Earnings — Market Barometer for Tech
Expectations: As the largest S&P 500 component (~8% weight), NVIDIA’s Q2 results could move the entire market. Consensus expects EPS of $1.08 (+48% YoY) and revenue of $45.9B (+112% YoY).
Implied Volatility: Options pricing signals a potential ±6% move post-earnings—equivalent to $200B in market cap swing.
Key Watchpoints: Data center and AI chip demand, China-related shipments under U.S. export controls, and clarity on the rumored “15% revenue share” export arrangement.
Flows: Since Powell’s dovish remarks last week, some capital rotated out of tech into financials, energy, and cyclicals. If NVIDIA underdelivers, this rotation may accelerate.
2. PCE Inflation Data — The Fed’s Guiding Star
Expectations (to be released Aug 30): Core PCE +2.9% YoY (vs 2.8% prior), +0.3% MoM; headline PCE +2.5% YoY (flat), +0.2% MoM.
Scenarios:
- In line with estimates → reinforces 25 bps cut in September.
- Below expectations (<2.8% core) → raises odds of 50 bps cut, bullish for equities.
- Above 3% → triggers policy error fears, pressuring risk assets.
III. Market Backdrop: Yields & Risk Sentiment
Treasuries: The 10Y yield neared 4.3% on supply pressure from a $211B Treasury auction this week (starting with $69B in 2Y notes Tuesday). Most see this as temporary rebalancing rather than a trend reversal. If yields sustain above 4.3%, the Fed may cut to offset, likely pulling yields back down.
Volatility: VIX edged up to ~16.5 as traders hedged ahead of NVIDIA earnings and PCE. The move reflects caution, not panic.
IV. Sector & Stock Highlights
1. Technology:
NVIDIA: Rebounded above short-term MAs, trend intact but capital outflows visible.
Crypto-linked stocks: Bitcoin fell for a third day (rotation from BTC into ETH). BLSH -8%, BMNR -7%, Coinbase surrendered over half of last Friday’s gains, still below 30DMA. DFDV dropped sharply after announcing a 4.2M share issuance ($125M raise).
2. Consumer & Cyclical:
Wayfair: -9% after U.S. launched a furniture import tariff probe. Stock had tripled since April, making it vulnerable.
Figma (Autodesk): Pulled back after last week’s bounce; most analysts rate “Neutral” given stretched valuation.
Keurig Dr Pepper (KDP): -S&P laggard after announcing $18B acquisition of JDE Peet’s. Leverage could rise to 5x+, prompting S&P negative outlook.
3. Pharma & Real Estate:
Merck (MRK): Weighed down by Trump’s drug price-cutting policy proposal, including tariff-based cost benchmarking. Sector sentiment weak.
China Property ADRs: Shanghai eased housing restrictions, boosting sector. Penny stock FDD spiked, while KE Holdings (BEKE) rallied on recovery hopes.
4. China ADRs:
Pinduoduo (PDD): Q2 revenue +7% YoY, profit beat. Stock initially +11% premarket but faded to +0.3% as management warned results are unsustainable and pledged reinvestment.
V. Outlook: Market in a Holding Pattern
Short-Term: The “two shoes” are NVIDIA earnings and PCE inflation. Upside if NVIDIA beats and PCE stays on track; downside rotation if either disappoints.
Medium-Term: Seasonality favors weakness into late August, but any correction is likely tactical, not structural. Funds may shift from expensive tech into cyclicals.
Risks: Geopolitics (Ukraine war, U.S.-China tariffs), plus volatility in crypto and small caps.
Conclusion: August 25’s mild pullback reflects investors’ cautious positioning ahead of pivotal catalysts. Strategy: focus on earnings visibility and policy beneficiaries (financials, real estate), avoid chasing crowded trades in high-beta tech and crypto until clarity emerges.
