The market is no longer watching the data. It’s watching what the Fed does with it.
After several weeks of relatively quiet gains, the market is finally showing signs of fatigue.
Monday told the story: Dow: +0.26%. $S&P 500(.SPX)$ : -0.28%. $NASDAQ(.IXIC)$ -0.76%
And the bigger warning? Technology has now fallen for 7 consecutive sessions. $Technology Select Sector SPDR Fund(XLK)$ So what is really happening?
THE REAL PROBLEM ISN’T THE ECONOMY
For weeks, bad economic news was actually good news for stocks. Weak jobs, less pressure on the Fed. Softer CPI, less inflation pressure. Softer PPI, even less pressure. Stocks, higher. But that relationship is starting to crack.
LONG-TERM TREASURY YIELDS ARE STILL EXTREMELY HIGH.
The 30-year Treasury is around 5.25%. And that changes the equation completely for growth stocks.
Treasury
The higher yields go, the lower the present value of future earnings becomes. And which companies have some of the most distant future earnings? Technology and AI.
THE MARKET IS BEING FORCED TO CHOOSE
On one side: AI + growth + explosive earnings
On the other: Inflation + oil + U.S. debt + higher-for-longer rates
And these two forces are beginning to collide. That is why the Nasdaq can struggle while the Dow holds up relatively well.
WEDNESDAY: NVIDIA FACES THE TEST
Everyone is waiting for $NVIDIA(NVDA)$ earnings. The expectations are enormous:
Nvidia
~$92B expected revenue, ~$2.08 expected EPS, 2026 revenue expectations around $400B.
NVIDIA no longer needs to beat expectations. It needs to crush them.
At roughly a $5 trillion market cap, an excellent quarter could simply be considered… normal. And that's where the real trap lies.
The real question isn't:
“Will NVIDIA beat estimates?”
It's:
“What will the market do AFTER the beat?”
If NVIDIA reports spectacular numbers……but the stock jumps 5% and then reverses sharply…
FRIDAY: WARSH TAKES THE STAGE
Then, just two days later, Kevin Warsh speaks at Jackson Hole. This could be even more important.
The market wants an answer to one question: Will the Fed prioritize employment… or inflation?
Warsh
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This summary is for informational purposes only and does not constitute financial advice. Investors should conduct their own research before making investment decisions.
[Salute]
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