Stock futures are little changed after major averages fall to start week: Live updates

U.S. stock futures were largely flat Monday night following a Monday session where major indices slid due to profit-taking. Investors are now keenly focused on two key upcoming catalysts: Nvidia's earnings report on Wednesday and the Federal Reserve's preferred inflation gauge, the Personal Consumption Expenditures (PCE) price index, due Friday. Market sentiment remains underpinned by hopes for potential September interest rate cuts and sustained strength in the megacap tech sector, with analysts viewing any Nvidia weakness as a buying opportunity given AI's dominant long-term trend.

Analysis

The U.S. equity market is in a holding pattern, with futures little changed following a session of profit-taking where the Dow Jones Industrial Average slid 349 points, or 0.8%. Investor attention is now sharply focused on two primary near-term catalysts: Nvidia's earnings on Wednesday and the Federal Reserve's preferred inflation gauge, the Personal Consumption Expenditures (PCE) price index, due Friday. Nvidia's report is positioned as a critical referendum on the strength of the megacap technology sector and the broader AI investment theme, especially after the 'Magnificent Seven' stocks experienced five straight days of losses prior to a recent rally. Concurrently, market sentiment is being supported by hopes for a September interest rate cut, a possibility alluded to by Fed Chair Jerome Powell. This makes the upcoming PCE data a crucial input that could either validate or undermine these expectations. An analyst from Truist Wealth articulated a long-term bullish view, stating that AI remains the dominant market theme and that any post-earnings weakness in Nvidia should be considered a buying opportunity, as the fundamental momentum in the technology sector is perceived as unchanged.

Key Decisions for Investors

• Investors with a long-term bullish thesis on artificial intelligence may consider using any potential post-earnings volatility in Nvidia as a strategic opportunity to build or add to positions.
• Monitor Friday's Personal Consumption Expenditures (PCE) price index closely, as a reading that deviates significantly from expectations could alter the probability of a September rate cut and introduce broad market volatility.
• Given the market's current state of consolidation ahead of key data, it may be prudent to assess both Nvidia's results and the inflation report before making significant portfolio adjustments or rotating into more rate-sensitive assets like small caps.