Nvidia Earnings and ECB Rate Cut Anticipation Stir Markets

Markets are on edge as Nvidia’s earnings report on Wednesday looms, with investors bracing for significant AI-driven growth. The yen neared three-week highs while European tech stocks dropped 1%, and PDD Holdings' weak earnings highlighted reduced Chinese consumer demand, impacting European luxury stocks. Traders are closely watching the Fed’s preferred inflation gauge due Friday, anticipating a potential rate cut in September.

Equities

The S&P 500 ended 0.32% lower at 5,616.84 points on Monday, with technology stocks dragging the index down. Nvidia, a key player in the AI sector, fell 2.25% ahead of its much-anticipated earnings report due on Wednesday. Investors are closely watching Nvidia, as any signs of a less-than-stellar forecast could impact other AI-related companies like Microsoft and Alphabet.

The Nasdaq also declined, finishing 0.85% lower at 17,725.77 points. Among the biggest losers was Tesla, which dropped 3.2% after Canada announced a 100% tariff on imports of Chinese electric vehicles, following similar actions by the US and the EU. PDD Holdings, the owner of Temu, saw its shares tumble nearly 29% after missing revenue expectations in its quarterly report.

The Dow Jones Industrial Average bucked the broader trend, inching up 0.16% to close at 41,240.52 points. The index was supported by strong performances from Caterpillar and American Express, both of which gained around 1%. Boeing, however, slipped 0.85% following news that NASA chose SpaceX over its Starliner to bring astronauts back from space next year.

Energy stocks were a bright spot, with the sector index rising 1.11% as oil prices climbed on concerns about supply disruptions due to the ongoing conflict in the Middle East. Trading volume on US exchanges was lighter than usual, with 9.5 billion shares traded, compared to the 20-session average of 11.9 billion shares.

Forex & Commodities

The US dollar strengthened on Monday, recovering from an eight-month low as geopolitical tensions in the Middle East led investors to seek safe-haven assets. The dollar index, which measures the greenback against a basket of six major currencies, rose 0.2% to 100.84, bouncing back from its lowest level since December. Against the yen, the dollar was stable at 144.51, after earlier dipping to a three-week low of 143.45. The yen gained against other currencies as well, with the euro down 0.1% to 161.45 yen and the Swiss franc slipping 0.7% to 169.97 yen. The yen’s strength was attributed to expectations of a US interest rate cut next month, reinforced by hawkish comments from Federal Reserve Chair Jerome Powell.

Gold prices held steady above the $2,500 per ounce level, supported by expectations of imminent US rate cuts and ongoing concerns over the Middle East conflict. Spot gold was nearly unchanged at $2,515.51 per ounce, while US gold futures edged down 0.2% to $2,551.00. Analysts suggest that gold could continue its upward trend, potentially reaching $2,550 in the mid-to-long term, given its appeal during periods of economic uncertainty and geopolitical risk.

Oil prices surged 3% on Monday, driven by production cuts in Libya, which added to supply concerns amidst the escalating conflict in the Middle East. Brent crude closed at $81.43 per barrel, while US crude settled at $77.42 per barrel. Libya’s eastern-based government announced the closure of all oil fields, halting production and exports, further tightening global supply. Falling crude inventories in the US also supported the rise in oil prices, adding to the bullish sentiment in the market.