OVERVIEW
This Morning

• Nvidia: Revenue reached $96.2 billion, with data-centre sales of $89 billion. The company expects roughly 70% revenue growth next fiscal year and guided current-quarter sales above Wall Street estimates. Shares are up about 7% premarket.

• Futures: At 6:51 a.m. ET, S&P 500 futures were +0.4% and Nasdaq 100 futures +0.97%. Dow futures were roughly flat.

• Wednesday: The cash session was quiet. The S&P 500 slipped 0.02%, Nasdaq fell 0.08% and the Russell 2000 lost around 0.1%. QQQ closed at 711.37, just below its 50-day average around 713.

• Inflation: July headline PCE was 3.7% YoY, while core PCE was 3.3%, unchanged from June. Both rose 0.2% on the month. Q2 GDP was unchanged at 1.5% annualised.

• Oil: Brent is around $88, well below last week’s highs, as renewed diplomatic efforts raise hopes that flows through Hormuz could improve.

• Tomorrow: Fed Chair Kevin Warsh speaks at Jackson Hole at 10:00 a.m. ET Friday

MARKET ANALYSIS
Nvidia Cleared a Very High Bar

There was plenty of room for Nvidia to disappoint. The stock had already become the focal point for concerns about AI spending, hyperscaler financing and whether demand could keep growing quickly enough to justify the amount of capital flowing into data centres.

The numbers did not support the slowdown argument. Second-quarter revenue came in at $96.22 billion, ahead of expectations, while data-centre revenue more than doubled from a year earlier to $89 billion. Nvidia expects around $108 billion of revenue next quarter and, unusually, gave a longer-term forecast for roughly 70% sales growth in the fiscal year ending January 2028.

That long-range outlook is probably the most important part of the report.

Management is effectively saying that demand remains strong well beyond the current Blackwell cycle. Growth is coming not only from the large hyperscalers, but also AI labs, sovereign buyers, enterprises and newer cloud providers.

There are still constraints. Memory shortages are limiting how quickly Nvidia can increase production, and margins are being watched closely as component costs rise. But those are supply problems in the face of strong demand, not evidence that customers are pulling back.

The market likes the distinction. Nvidia is up around 7% before the bell, while Micron, Marvell, Broadcom, Sandisk and Western Digital are also higher.

There is some encouragement outside semiconductors too. Salesforce is up more than 11% and CrowdStrike around 10% after both companies raised forecasts. ServiceNow and Oracle are also higher.

Given how poorly software had been behaving recently, that is worth noting.

QQQ Is Still the Chart to Watch

Wednesday did very little to the technical picture. QQQ closed at 711.37, up just 0.09%, after trading as high as 713.02 during the session.

Its 50-day average sits around 713. That leaves QQQ right on the edge of reclaiming the trend line it lost last week.

Today’s premarket strength should put it back above that level at the open if futures hold. The important part comes afterwards. A gap above the 50-day that holds through the session would be useful. A strong open that gets sold straight back beneath it would tell us something different.

The next larger area remains roughly 728 to 735, where the August breakout failed, but there is no reason to discuss 661 as an active risk level here- It is far too distant.

For now, 713 is enough and the recent sequence has been a failed breakout, a sharp technology selloff, a break of the 50-day and then several sessions of stabilisation around it. Nvidia now gives QQQ its best chance so far to start repairing that sequence.

The Rest of the Market Is Holding Up

SPY remains in better shape and we saw it closed Wednesday at 766.08, almost unchanged on the day and still comfortably above its 50-day average around 753. The recent high at 779.37 remains overhead.

There is no need for SPY to attack that high today. Holding its current structure while technology catches up would be enough.

The mid-cap picture also improved Wednesday as the MDY gained 0.63% to 698.40, putting it back above the 50-day area around 695.5.

That is an important correction to the draft. MDY is not sitting at 698.47 after a weak session while waiting to prove itself above a distant 679 floor. It has already moved back above its 50-day. The next job is simply to stay there.

IWM closed at 298.93, down 0.10%, and remains narrowly above its own 50-day around 297.

So the four-index picture is reasonably clear and SPY has the most room above its 50-day. MDY has reclaimed its average. IWM continues to hold just above its own. QQQ is the laggard, but Nvidia should give it a chance to join them today.

That is a healthier setup than we had earlier in the week.

Inflation Was Sticky, Not Disastrous

Yesterday’s PCE report was a little uncomfortable, but the draft has the figures mixed up. Headline PCE was 3.7% YoY. Core PCE was 3.3%. Core was unchanged from June, while both measures rose 0.2% month on month.

The detail was somewhat firmer than the headline numbers suggested, which is why Treasury yields and the dollar initially moved higher.

At the same time, consumer spending was soft in real terms and Q2 GDP was left unrevised at 1.5%, down from 2.1% in the first quarter.

That leaves the Fed in roughly the same awkward position it has been in for several weeks. Inflation is not back at target, but growth is not particularly strong either.

The 10-year Treasury yield is around the mid-4.6% area this morning, well below last week’s worst levels.

Oil has also moved in the right direction for equities. Brent traded as low as $86.22 earlier today before recovering toward $88.50. Qatar’s prime minister is travelling to Tehran as efforts continue to restart U.S.-Iran negotiations and improve shipping through the Strait of Hormuz.

Crude is still elevated relative to where it was before the conflict, but it is no longer adding the same pressure it was when Brent was trading near $95.

Warsh Comes Tomorrow

With Nvidia out of the way, the next major event is Kevin Warsh’s Jackson Hole speech and he speaks at 10:00 a.m. ET tomorrow. The timing is confirmed by the Federal Reserve.

Yesterday’s inflation data gives him plenty to address. Markets will be listening for how much weight he puts on core inflation remaining above 3%, whether the Fed still views 2% as a hard target, and what would need to change before another rate hike becomes appropriate.

There is no need to guess at the tone today and once again the market gets a full session to respond to Nvidia first.