The S&P 500 edged lower on Wednesday as hotter-than-expected US inflation data increased concerns that the Federal Reserve may keep interest rates higher for longer. The index opened around 0.14% lower at 7,666.88, while investors remained cautious ahead of Nvidia’s quarterly earnings report.
The latest Personal Consumption Expenditures (PCE) inflation data showed headline inflation at 3.7% year-over-year in July, above the 3.6% forecast. Core PCE inflation, which excludes food and energy, remained elevated at 3.3%, keeping price pressures well above the Federal Reserve’s 2% target.
Nvidia Earnings in Focus
Nvidia’s earnings report after the US market close is the next major test for equities. Investors will be watching revenue growth, data-center demand, margins and forward guidance for signs of whether the AI investment boom can continue supporting elevated technology valuations.
A strong Nvidia outlook could provide fresh support for the S&P 500 and broader technology sector. However, disappointing results or cautious guidance could increase volatility, particularly after recent concerns surrounding high expectations for AI-related stocks.
Fed Policy Adds Another Risk
Sticky inflation has also strengthened expectations for another Federal Reserve rate increase later this year. Market pricing for a potential quarter-point hike increased following the latest inflation figures, adding pressure to rate-sensitive equities.
Investors will also turn their attention to Federal Reserve Chair Kevin Warsh’s upcoming remarks at Jackson Hole on Friday for further clues about the path of monetary policy.
Market Outlook
The S&P 500 remains near record levels, but the combination of elevated inflation, interest-rate uncertainty and high expectations surrounding Nvidia creates a potentially volatile environment.
A strong Nvidia earnings report combined with reassuring Fed signals could help the index resume its upward trend. Conversely, persistent inflation or disappointing AI-related guidance could increase selling pressure and trigger a deeper pullback.
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