The US stock market anticipates Nvidia's earnings report today, and Nasdaq responded with a 1% increase on Monday. The Jackson Hole meeting also keeps investors on their toes this week as bond yields anticipate a continuation of the present interest rate.
Nvidia and Tesla in the spotlight
US equities opened with small increases, fueled by excitement about Nvidia Corp.'s results due Thursday.
The market wants to know about the advancement of artificial intelligence, which has piqued investors' curiosity. Moreover, they size Nvidia to determine if it is truly leading the field. Tesla Inc. also extended its gains after snapping its longest losing streak of 2023 with back-to-back declines since mid-July.
The optimism did not last long, as Nvidia Inc. reversed its bullish course and corrected downwards later in the session, dragging down North American indices, especially the Nasdaq, which rose more than 1.5% and ended at significantly lower levels.
Nvidia Inc. Daily Chart, 23.08.2023.
The Jackson Hole meeting is a hot subject this week
Apart from Nvidia Inc.'s performance, market interest rates may be the biggest concern for investors. Treasury rates are rising, with the 2-year note above 5% and the 10-year note at record highs. Jerome Powell is expected to confirm the Federal Reserve's determination to keep interest rates high for as long as necessary at the Jackson Hole meeting this Friday, one reason bond yields have skyrocketed.
Is the Chinese economy influencing US markets?
However, the market believes China, the largest US sovereign debt holder, is selling bonds and raising yields. The Chinese central bank is intervening in the offshore market to stabilize the yuan, which is weakening due to the economy. It requires dollars from its reserves, which it gets by selling treasury bonds.
Thus, the Asian giant's economic decline indirectly raises US market interest rates dramatically.
In this scenario, the stock market remains vulnerable, and the dollar strengthens, notably against the euro, which again struck a low below 1.0840, a crucial support zone.
Sources: Bloomberg, Reuters
Key Takeaways
- Indices increased at the start of the week as a response to the upcoming Nvidia Inc. report.
- Investors are sizing up Nvidia to determine its position in the AI game.
- It is expected that the Jackson Hole meeting will output a continuation of current rates.
- Markets assume that China selling bonds plays a part in the high yields.
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