Nvidia/PCE Hold the Keys the Market's Ability to Keep Rallying

👋Hello and Happy Monday! 🌅 

Here’s what’s on deck this week:

• The S&P 500’s expected range for the week is 6596 to 6337.

• Is this Nvidia’s most important earnings report ever?

• Fed’s favorite inflation gauge drops later this week.

• Data could tip September’s first rate cut decision.

Let’s get going.▶️▶️

🗓️ This week’s market spotlight is basically a two-hander: Nvidia (NVDA) and inflation. Nvidia drops earnings Wednesday, and Wall Street wants to know if the AI darling can keep smashing sales records while juggling China’s $8B export curbs and a new revenue-sharing deal with the Trump administration.

Meanwhile, Friday’s PCE inflation report—the Fed’s favorite—could make or break September rate-cut hopes after Powell’s dovish turn last week. Sprinkle in earnings from Dell, CrowdStrike, Snowflake, and some Canadian banks, plus trade and housing data, and we’ve got ourselves another jam-packed week.

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Once again, the S&P 500 ended last week’s trading with “strong uptrend” characteristics.

Based on the past 20 years of weekly data, the S&P 500 cash index (SPX) has closed within its implied range 79.4% of the time while trading in a strong uptrend. Odds are favorable that this to continue until the trend reverses.

📊Nvidia reports Wednesday, and Wall Street’s watching to see if the AI king can keep smashing sales records despite $8B in China export curbs. The company may update investors on its China strategy, including a revenue-sharing deal with the Trump administration and new product plans.

Also on deck this week: earnings from Marvell, Dell, CrowdStrike, Snowflake, Autodesk, and a few Canadian banks.

👇 Below, is a look at this week’s biggest earnings reports, sorted by market cap.

This week’s biggest earnings reports (NVDA and BABA) may be poised to move beyond their implied ranges following earnings.

At the opposite end of the spectrum, Royal Bank of Canada (RY) and BHP Group (BHP) are the largest stocks showing potential to trade well within their expected ranges following earnings (keep reading below this table for more details).

For active traders looking for actionable insights, the highlighted columns on the table above show the implied (expected) post-earnings move for each company, along with the Average 1-Day Realized Volatility Post Earnings Ratio (1D RV).

📈Implied Move: The market’s best guess at how much a stock will swing after earnings.

📊1D RV: A powerful tool that represents the post-earnings price move divided by the expected price move over the past 12 quarters. In other words, it measures how good (or bad) the market is at pricing each company’s earnings.

💵When you see a ratio >1.0, indicates that, historically, the earnings are mispriced and the stock moves MORE than the market anticipates, favoring straddle buyers.

🪝A ratio <1.0 tells the opposite story, meaning the stock historically moves LESS than the market anticipates, which favors straddle sellers.

Happy hunting.

From the Market’s Perspective, This Just May be Nvidia’s Most Important Earnings Report Ever

Wall Street’s biggest player takes center stage this week: Nvidia. The $3T chip king reports after the bell on Wednesday, and its numbers could decide whether this summer’s rally has legs or fizzles.

A quick look at the past 8 earnings reports shows that Nvidia’s earnings have been followed by some big moves in the days that immediately follow.

With stocks back near records after Powell’s Jackson Hole pivot, Nvidia’s results are less about one company and more about the entire AI trade that’s powered 2024’s bull market.

The stock has nearly doubled since April, making it the single biggest driver of S&P performance — and the tech sector’s fate may hinge on whether it delivers another blockbuster quarter.

Analysts expect $46B in sales, but China headwinds and sky-high expectations mean anything short of a beat could rattle markets far beyond semis. In short: Nvidia isn’t just reporting earnings this week, it’s reporting on the state of the rally.

Over the past 12 quarterly earnings reports, NVDA has never developed a bearish trajectory more than 50% of the time during the windows shown on the table below. While the average short-to-near-term price path tends to be positive following earnings, this table also shows that the best historical performance (62.5%) really isn’t much for bulls to hang their hats on either.

Currently, NVDA trades with a very strong trailing 1-quarter correlation of 0.97. That means that, over the past 3 months, the stock has basically moved in lock-step with the S&P 500.

When we also consider that NVDA is the most heavily weighted stock in both the S&P 500 and Nasdaq 100 ETFs (SPY and QQQ, respectively), and that NVDA has had a history of leading the S&P 500 at market tops, bulls are hoping NVDA can stay above 164.58/share post earnings to prevent another market-leading breakdown.

Although the CBOE Volatility Index’s (VIX) slide to low levels not seen since the middle of December 2024 last week implies that volatility is expected to remain low of over the next 30 days, the speed at which volatility suppression occurred may introduce a reflexive rebound in volatility this coming week.

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Monday

• New home sales (July)

• Key Earnings: PDD Holdings

Tuesday

• Consumer confidence (August)

• Federal Reserve Officials Speaking: Richmond Fed President Tom Barkin

• More Data to Watch: Durable-goods orders (July), S&P Case-Shiller home price index (June)

• Key Earnings: Bank of Montreal, Bank of Nova Scotia, MongoDB , Okta

Wednesday

• Federal Reserve Officials Speaking: Richmond Fed President Tom Barkin

• Key Earnings: Nvidia, Royal Bank of Canada, CrowdStrike, Snowflake, Veeva Systems, Agilent Technologies, HP

Thursday

• Gross domestic product - first revisions (Q2)

• More Data to Watch: Initial jobless claims (Week ending Aug. 23), Pending home sales (July)

• Key Earnings: Toronto Dominion Bank, Dell Technologies, Canadian Imperial Bank of Commerce, Marvell Technology, Autodesk, Li Auto, Affirm Holdings, Dollar General

Friday

• Personal Consumption Expenditures (PCE) (July)

• More Data to Watch: Consumer sentiment - final (August), U.S. trade balance (July), retail inventories (July), wholesale inventories (July)