U.S. stocks traded close to unchanged levels on Wednesday as investors digested mixed inflation and economic data while waiting for Nvidia’s highly anticipated quarterly earnings report.
Market sentiment was also pressured by reports that Russia may be preparing to intensify military operations in Ukraine after concluding that peace negotiations had stalled.
At 13:23 ET, the S&P 500 slipped 0.1% to 7,672.52, while the Nasdaq Composite fell 0.2% to 26,094.50. The Dow Jones Industrial Average also declined 0.2% to 53,458.13.
PCE Inflation Keeps Fed Policy in Focus
Interest rate expectations remained a major focus after the latest U.S. Personal Consumption Expenditures data.
Core PCE inflation, widely viewed as the Federal Reserve’s preferred measure of underlying price pressures, increased 0.2% month over month in July.
On an annual basis, core PCE remained at 3.3%, matching economists’ expectations but staying well above the Federal Reserve’s 2% inflation target.
Headline PCE also increased 0.2% from the previous month and 3.7% from a year earlier. Both readings showed that inflation remains persistent even as parts of the economy begin to cool.
Consumer Spending Shows Mixed Signals
The latest economic figures presented investors with a mixed picture.
Inflation remains elevated, but there are signs that consumers are becoming more cautious with spending, particularly on physical goods.
Spending on services, including areas such as travel, has remained more resilient.
Recent Walmart results also pointed to softer consumer momentum, with the retailer reporting its weakest U.S. comparable sales growth in six years.
This combination of sticky inflation and moderating consumer activity complicates the Federal Reserve’s policy outlook.
U.S. GDP Growth Holds at 1.5%
The Bureau of Economic Analysis also released its second estimate for second-quarter U.S. economic growth.
Real GDP expanded at an annualized rate of 1.5%, unchanged from the previous estimate and in line with economists’ forecasts.
Meanwhile, new orders for manufactured durable goods increased 1.1% in July, according to the U.S. Census Bureau.
That result was significantly stronger than expectations for a 0.4% increase.
Together, the figures suggest that the U.S. economy remains relatively resilient even as economic growth slows and inflation remains elevated.
Fed Expected to Hold Rates Steady in September
The combination of persistent inflation and continued economic growth may give the Federal Reserve more flexibility to keep interest rates unchanged while waiting for additional economic data.
According to CME FedWatch probabilities cited in the report, markets continued to price in roughly a 60% chance that the Fed will leave rates unchanged in September.
Investors will closely monitor upcoming inflation, employment and consumer data for clues about whether policymakers may eventually need to tighten monetary policy further.
Bond Market Volatility Remains a Concern
The latest inflation report arrives after a volatile period for U.S. Treasury markets.
Long-term government bonds came under significant selling pressure last week as investors reacted to high oil prices, persistent inflation concerns and growing corporate borrowing related to artificial intelligence infrastructure.
Concerns surrounding the expanding U.S. national debt have also contributed to higher borrowing costs.
Recent reports suggested that Washington could use part of its nearly $1 trillion Treasury General Account to support larger long-term bond buybacks.
The possibility of additional Treasury intervention has provided some relief to bond markets.
Jackson Hole Could Provide the Next Fed Signal
Markets are now preparing for Federal Reserve Chair Kevin Warsh’s upcoming keynote speech at the Jackson Hole Economic Policy Symposium.
His remarks on Friday could provide investors with additional guidance on inflation, interest rates and the central bank’s outlook for the U.S. economy.
Any indication that the Fed is becoming more concerned about persistent inflation could have significant consequences for stocks, bonds and the U.S. dollar.
Nvidia Earnings Take Center Stage
Beyond economic data, Nvidia’s quarterly earnings report remains one of the most important market events of the week.
The company’s results are particularly significant because Nvidia has become a central indicator of investor confidence in the artificial intelligence sector.
AI-related stocks rallied strongly during April, May and June, helping major U.S. indices return to record territory despite geopolitical uncertainty.
However, enthusiasm weakened in July as investors began questioning whether the enormous amounts being spent on AI infrastructure will generate sufficient financial returns.
The Philadelphia Semiconductor Index subsequently dropped more than 20% during the month.
Nvidia Faces Extremely High Market Expectations
Investors are expecting another exceptionally strong quarter from Nvidia.
The company is projected to nearly double quarterly revenue to approximately $92 billion, reflecting continued demand for AI-related computing infrastructure.
However, expectations have become so elevated that even strong results could disappoint markets if Nvidia’s guidance fails to exceed forecasts.
Investors will also be watching for comments regarding the transition from Nvidia’s Blackwell processors to its next-generation Vera Rubin architecture.
Management guidance on future customer spending and financing could prove especially important for broader AI-related market sentiment.
Oil Prices Reverse Higher on Russia-Ukraine Concerns
Oil prices moved slightly higher later in Wednesday’s session after initially declining.
Brent crude futures rose around 0.1% to $87.38 per barrel following reports that Russia could intensify its military campaign in Ukraine.
Bloomberg reported that Russian officials were considering increasing conventional ballistic missile attacks on Kyiv and infrastructure targets elsewhere in the country.
The report added another layer of geopolitical uncertainty to energy markets.
Middle East Diplomacy Limits Oil Price Gains
Earlier in the session, crude oil had declined on optimism surrounding diplomatic progress in the Middle East.
Russia’s RIA Novosti reported that the United States and Iran had reached a new ceasefire arrangement that could be announced within days.
The report cited Iranian and Pakistani sources but had not been independently verified by Investing.com at the time.
Meanwhile, Al Jazeera reported that Iran and Oman had reached an agreement on a temporary shipping route through the Strait of Hormuz.
However, Iranian officials reportedly said that the waterway would not fully reopen until Washington fulfilled commitments connected to an earlier ceasefire framework.
Wall Street Awaits Nvidia and the Fed
For now, Wall Street remains caught between persistent inflation, slowing economic growth, geopolitical risks and expectations for strong artificial intelligence demand.
The next major catalysts will likely come from Nvidia’s earnings report and the Federal Reserve’s Jackson Hole message.
Together, these events could determine whether U.S. stocks regain upward momentum or remain under pressure as investors reassess interest rates, AI valuations and the broader economic outlook.
