Fed Policy, Nvidia Earnings, Business Investment, and Q2 GDP Revisions
Photo Credit: Ben Emrick, Unsplash
Weekly Market Recap for August 29nd
This week, markets rose broadly, with small caps and cyclical sectors leading. The S&P 500 and Nasdaq returned ~+2% but underperformed the Russell 2000’s +4%, signaling a continued rotation into smaller companies. Growth outperformed Value, and High Beta led, while Low Volatility and Equal Weight lagged. Sector leadership came from Technology, Energy, and Consumer Discretionary, while defensive sectors like Consumer Staples, Utilities, and Health Care declined. International equities underperformed despite the U.S. dollar weakening. Treasury yields fell, boosting mid- and long-duration bonds. High-yield corporate outperformed investment grades as credit spreads tightened. Gold moved back toward record highs, oil edged higher, and the U.S. dollar weakened. Volatility declined, with the VIX and MOVE indices finishing lower.
S&P 500 Index (Last 12 Months)
S&P 500 Technical Composite (Last 24 Months)
US Risk Demand Market Indicator
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S&P 500 Valuation Matrix
Key Takeaways
#1 - Fed Chair Powel’s Speech at Jackson Hole
Chair Powell's speech at the Fed's annual Jackson Hole conference was the first of two significant events this past week. In his speech, Powell said the balance of risk is shifting to the labor market, with growing downside risks to employment potentially justifying a rate cut. However, he avoided committing to a full easing cycle, leaving the possibility of a pause if tariffs reignite inflation pressures. The market interpreted the speech as a green light for a September rate cut.
Implication: The dovish tone eased concerns about further hikes and lifted risk assets, while also shifting focus to the upcoming jobs and CPI reports in early September.
US Small Cap Stocks Trying to Break Out
Gold Trading Back Toward Record High
#2 - Nvidia’s Quarterly Earnings
Nvidia's quarterly earnings report was the second big event. Nvidia delivered another headline beat with Q2 revenue of $46.7 billion, but the upside surprise was more muted than past quarters, underscoring the high bar set by investors. Management reiterated that demand remains strong, noting Blackwell chips are booked into 2026 as AI infrastructure investment enters a multi-trillion-dollar buildout phase. Sustained AI capex would be a significant tailwind for GDP growth. However, management also highlighted a key overhang: zero revenue was booked from China due to export restrictions, with future sales dependent on uncertain licensing approvals.
Implication: With crowded tech positioning and high investor expectations, even solid results were not enough to extend the stock’s rally.
#3 - July’s Durable Goods Report
July’s durable goods report showed firm underlying business investment. Headline orders fell -2.8% from the prior month, but the decline was due to the volatile aircraft category. Excluding transportation and defense, core capital goods orders, a proxy of future business investment in GDP, rose +1.1%, the highest since January (Figure 3). Orders have accelerated in recent months despite anecdotal and survey evidence that companies have put investment projects on hold. Core shipments, which feed into current-quarter GDP, climbed +0.7%, marking a third straight monthly gain.
Implication: The report signals solid demand and strengthening factory activity, with analysts raising business investment estimates for Q3 GDP.
US Durable Goods Orders Point to Solid Business Investment
US Core Durable Goods Shipments Inflect Higher
#4 - US Q2 GDP Shows Economy Expanding
The second estimate of Q2 GDP showed the economy expanded faster than initially reported. Real GDP growth was revised up to 3.3% from 3.0%, driven by strong consumer spending and business investment. While two-thirds of the gain still came from the tariff-driven collapse in imports, the report revealed firm domestic demand. Final sales to private domestic purchasers, a measure of core underlying demand, were revised up to 1.9% from 1.2%.
Implication: The revisions show a slightly stronger, broad-based expansion, with the consumer, capex, and corporate profits all looking healthier. Despite the upward revision, the data reinforce the trend of a slowing economic expansion.
US GDP Growth Revised Higher
US Final Sales Solid But Cooling
#5 - What to Watch Next Week
The holiday-shortened week will be busy with a full slate of macro data as investors return from summer break. The spotlight will be on Friday’s jobs report, along with the ADP and JOLTS job openings reports released earlier in the week. All three labor market reports will be watched closely after the weak early August jobs report. The ISM Mfg. and Services surveys will be released on Tuesday and Thursday, respectively. On the corporate front, Broadcom reports earnings Thursday, offering another read on AI-driven capital spending.
Important Disclosures
This material is provided for general and educational purposes only and is not investment advice. Your investments should correspond to your financial needs, goals, and risk tolerance. Please consult an investment professional before making any investment or financial decisions or purchasing any financial, securities, or investment-related service or product, including any investment product or service described in these materials.
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