Is Nvidia More Important Than the Fed Right Now?

Nvidia earnings and the Fed are competing for investors’ attention as markets weigh sticky inflation, rising Treasury yields and signs of pressure on the consumer. Jeff Praissman and Scott Bauer discuss whether Nvidia’s results could ultimately matter more for markets than Jackson Hole, inflation data and the Fed’s next move.

Summary – IBKR Podcasts Ep. 420

The following is a summary of a live audio recording and may contain errors in spelling or grammar. Although IBKR has edited for clarity no material changes have been made.

Jeff Praissman

Hi, everyone. This is Jeff Praissman with Interactive Brokers, and it’s my pleasure to welcome back to the IBKR Podcast Studio, Scott Bauer from Prosper Trading Academy. Hey, Scott. How are you? 

Scott Bauer

Jeff, end of the summer coming up here, but I am great. How about you? 

Jeff Praissman

I’m doing well. Yeah, it is crazy with such a late Labor Day. We still got one more week of summer. 

Scott Bauer

I know. 

Jeff Praissman

But love having you come in every other week, discussion on the markets. And for those new to this, we just spend like a quick five minutes, Scott and I, just kind of talking about the week prior and the week ahead. 

So without further ado, let’s kick it off. 

Scott Bauer

All right. 

Jeff Praissman

So Scott, last week the Philly Fed Manufacturing Index jumped to its highest level since 2021. Even as like easing price paid reading suggests that some inflation relief, the combination doesn’t really fit neatly in either the soft landing or the kind of re-acceleration narrative. So which signal should investors actually be weighing more heavily right now, the strengthening factory activity or the cooling price pressures? 

Scott Bauer

That’s a great question, Jeff. We are getting so many divergent reports, economic data reports that are coming out here. Some showing acceleration in manufacturing, which is great for the economy. Reports saying that inflation is still sticky. So I think it’s very, very important to really see what the bond market is doing. So the strengthening factory activity, that’s great. However, I need to see that continuing, right? This was… I don’t want to say it was a one-off. It was a great number from Philly Fed, but I gotta see that continuing before I can really buy into that. 

Jeff Praissman

Yeah. And Scott, that leads me actually like perfectly into my next question. The S&P 500 initially rallied last week that the Treasury would kind of ramp up their long bond buybacks, but then reversed as the 30-year yields climbed again on inflation worries. 

We had Walmart’s worst week since 2022, adding to this unease, and then even other retailers like TJ Maxx, despite my wife’s best efforts, also slid 7%. So how much of last week’s volatility was really about the Fed versus kind of a genuine repricing of consumer inflation risks? 

Scott Bauer

I think it was really about 50/50, to be honest. That initial pop that we saw after the news came out, the initial pop in bonds and rates going down. I think after that was digested in the news, the market said, “Eh, maybe that’s really not gonna work.” And as the yield started to climb again, and then like you said, we got that Walmart report. 

I think there’s some definite pressure on there on the consumer. We’ve talked a while for the consumer trading down, meaning that some of the lower-cost retailers, like a Target, a Walmart, a TJX, that’s the place they’re going to. But then we get what happened last week here. So I think overall we’ve got to be very, very careful on how the consumer feels and what their retail spending is like. 

Jeff Praissman

This week, obviously a lot of the key guys are in Jackson Hole, right? It starts kind of toward the end of this week, and— 

Scott Bauer

I’d love to be there with him. 

Jeff Praissman

I know, me too. Well, maybe more so in the winter though with skiing. But we have Warsh’s keynotes on Friday. Also, as we always talk about, there’s always tons of data, right? So there’s the preliminary annual payrolls benchmark revision the same day, and that’s sort of a data point for people that know that it’s historically reshaped the labor market narrative kind of more than any other single monthly jobs report. So if the revision and the speech kind of send conflicting signals, which one should traders actually trust more heading into September’s FOMC meeting? 

Scott Bauer

I don’t want to be a contrarian, but I think that that revision is what we need to focus on. I think, what is Warsh gonna say? He’s gonna come out and he’s gonna tell us still that right now we’re not doing anything with rates, but if inflation continues to be sticky and manufacturing is picking up, they may have to be hawkish. So I think we really need to look at that revision because that is something that the Fed is really focused on. If that revision is adding payrolls, boy, that’s gonna be tough for the market. If it is relatively unchanged or removing payrolls, maybe that takes a little pressure off. 

Jeff Praissman

We’re toward the end of earnings season, but we got a big one tonight. We got maybe the biggest of the bigs. Nvidia is reporting their earnings after the close today. And obviously, AI, AI, AI, right? So like, I mean, this is something that could really move the entire market, especially considering I think there’s a projected 600 billion spend on AI infrastructure this year. 

So do you think Nvidia’s print’s gonna be the single most important data point this week, even ahead of all the stuff we just talked about with Jackson Hole and PCE? 

Scott Bauer

I think the print itself is a little difficult to say, well, whether this is bullish or bearish for the market. We have to let it play out. We know that when the headlines hit and we see the numbers, things can change real quickly when we get Jensen Huang speaking about the numbers. So I do think, though, when the dust is settled, this is the most important point. This is the leader. Are people still buying into the AI expansion, the CapEx that is being spent? If they start to see Nvidia maybe waning on that a little bit, that could put a little bit of hurt into the marketplace. 

I do think this is more important than PCE, which we just got in Jackson Hole. 

Jeff Praissman

Scott, as always, it’s great having you in the studio. You can find more from Scott at prospertrading.com as well as on our website, interactivebrokers.com. Click on Education, click on Podcasts or Webinars or even Articles. As always, Scott, love having you in here and looking forward to seeing you next, in a couple weeks. 

Scott Bauer

Thanks a lot, Jeff.