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It looks like the market is reacting strongly to Nvidia’s earnings report, with Nasdaq 100 futures taking a significant hit. Even though Nvidia exceeded revenue and earnings expectations, the market seems disappointed with the company’s sales outlook for the upcoming quarter, which didn’t quite meet the high expectations set by its previous performance. The smaller-than-expected beat and the sharp drop in Nvidia’s stock in extended trading indicate that investors were hoping for more, particularly given the hype around AI-related growth.

The broader tech sector is feeling the pressure as well, with CrowdStrike’s lowered full-year outlook contributing to the negative sentiment. On the other hand, Salesforce’s strong results have provided some relief, but it wasn’t enough to offset the overall decline in the tech-heavy Nasdaq.

The decline in the major indices on Wednesday, especially in technology, consumer discretionary, and communication services, reflects the market’s growing concerns about the sustainability of the recent tech rally, particularly as we head into a period of increased economic uncertainty.

As for the broader market, all eyes are on the upcoming economic data, including the second estimate for Q2 GDP and the initial jobless claims. These reports, along with the PCE price index on Friday, will be crucial in shaping expectations for the Federal Reserve’s next moves. The slight rise in the dollar index and stabilization of the 10-year Treasury yield suggest that investors are bracing for potential surprises in the data that could influence Fed policy.

The narrowing of the yield curve inversion continues to signal expectations of an imminent Fed easing cycle, reinforced by recent dovish comments from Fed officials. However, with markets already pricing in substantial rate cuts, the upcoming economic data will be critical in determining whether these expectations are fully justified.

2 months ago

Overall, the market appears to be in a cautious mode, reacting to both corporate earnings and the anticipation of key economic data that could either confirm or challenge the current narrative around Fed policy and the economic outlook.

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