US July PCE inflation tops forecasts, raising rate-hike concerns

Dow, S&P 500, NASDAQ all close with sub-1% losses

[Reuters]
[Reuters]

Wall Street closed slightly lower Wednesday (local time) as investors held back ahead of Nvidia's earnings report, while stronger-than-expected inflation data tempered hopes for interest rate cuts. After the bell, however, Nvidia posted results and an outlook that beat market expectations, sending its shares up about 4 percent in after-hours trading.

The Dow Jones Industrial Average fell 113.52 points, or 0.21 percent, to close at 53,463.88. The S&P 500 slipped 1.58 points, or 0.02 percent, to 7,675.70, and the NASDAQ Composite dropped 21.10 points, or 0.08 percent, to 26,130.20.

Investors largely stayed on the sidelines ahead of Nvidia's after-hours earnings release and the subsequent conference call. With AI-related stocks having rallied sharply in recent months, valuation concerns have grown, and Nvidia's results and forward guidance were seen as a key indicator of whether enthusiasm for AI investment would continue.

Nvidia's share price fell 1.41 percent during the regular session, but the mood shifted after the close. The company reported fiscal second-quarter sales of $96.22 billion and earnings per share of $2.22, both topping market expectations. Data center sales reached $89 billion, up 117 percent from a year earlier, and the company's third-quarter sales outlook of $108 billion also exceeded the market consensus of about $104.2 billion.

During the post-earnings conference call, Nvidia also addressed recent controversy over so-called "circular financing," saying that actual demand from its investee companies remains strong and that investment risks are limited. The company noted that while OpenAI plans to build roughly 12 GW of Nvidia computing capacity by 2030, the portion Nvidia is helping to finance amounts to about 2 GW.

Inflation data released that day came in slightly above expectations. According to the US Commerce Department, the personal consumption expenditures (PCE) price index rose 3.7 percent in July from a year earlier, topping the market forecast of 3.6 percent. On a monthly basis, it rose 0.2 percent.

The core PCE price index, which excludes food and energy, rose 3.3 percent year-on-year and 0.2 percent month-on-month, in line with market forecasts.

The hotter-than-expected inflation reading kept uncertainty alive over the Federal Reserve's interest rate path. Markets are watching closely for signals on the rate outlook from Fed Chair Kevin Warsh's Jackson Hole speech, scheduled for Friday.

US government bond yields rose. Near the close, the 10-year Treasury yield was up 2.6 basis points at 4.663 percent, while the 30-year yield gained 1.1 basis points to 5.185 percent.

The Philadelphia Semiconductor index rose 0.20 percent. Among individual stocks, Meta climbed 1.07 percent after news that the company had agreed to pay about $16.7 billion and strengthen youth protection measures to settle lawsuits filed by US state governments over social media addiction among minors.

Oil prices fell for a third consecutive trading session, providing some relief to equity markets. Analysts said supply disruption concerns eased somewhat as negotiations between Iran and Oman over the Strait of Hormuz showed progress. Brent crude settled down 0.84 percent at $87.84 per barrel, while West Texas Intermediate fell 0.16 percent to $82.23 per barrel.


kacew@heraldcorp.com