Palantir, Alibaba Among Market Cap Stock Movers on Monday

Investing.com-- U.S. stock indices fell at the start of Monday’s session after Wall Street rallied sharply on dovish comments from Federal Reserve Chair Jerome Powell, which heralded interest rate cuts in the near-term. 

Focus this week is squarely on earnings from artificial intelligence major NVIDIA Corporation (NASDAQ:NVDA), for more cues on the fast-growing industry. 

Wall Street rallied on Friday, reversing a bulk of recent losses as investors ratcheted up bets that the Fed will cut interest rates in September. 

In early Monday trading, the S&P 500 index declined 0.24%, while the NASDAQ Composite fell 0.4% and the Dow Jones Industrial Average dropped 0.2%. 

Powell signals potential rate cut, Wall St rallies 

Powell, speaking at the Jackson Hole Symposium on Friday, said the central bank could possibly cut rates in September amid increasing risks to the labor market.

But the Fed Chair warned that the decision was not set in stone, especially as risks from inflation remained. Fed policymakers have repeatedly cited uncertainty over the inflationary impact of President Donald Trump’s trade tariffs. 

Still, Powell’s comments were relatively dovish when compared to recent signaling from the Fed, and saw markets ramp up bets on a September rate cut. Wall Street indexes also rose sharply following his comments, reversing most of last week’s losses.

The S&P 500 rose 1.5% to 6,466.91 points on Friday. The NASDAQ Composite rose 1.9% to 21,496, while the Dow Jones Industrial Average rose 1.9% to a record-high 45,631.74 points. The US Small Cap 2000 surged 3.9% on Friday after Powell’s speech.

"Small Caps run the risk of seeing only a short-lived outperformance trade once again, particularly if the economic concerns that appeared open the door for a September cut ultimately come to fruition," RBC strategist Lori Calvasina wrote in a note.

Markets are now pricing in a ~89% chance of a 25bp rate cut in September, followed by a 49% chance of another 25bp cut in December.

Nvidia awaited for more cues on AI 

Focus this week is squarely on second-quarter earnings from AI major NVIDIA Corporation (NASDAQ:NVDA), which are due on Wednesday. 

The company is widely regarded as a bellwether for AI demand, and is expected to mostly log another strong quarter.

But focus will be on the company’s China sales, which are likely to have fallen further amid brief U.S. export curbs and increased Chinese scrutiny towards AI chips. Nvidia was seen halting production of its China-specific H20 chip last week.

Nvidia’s earnings also come following an extended rout in tech shares, as investors questioned just how profitable the AI industry will remain in the coming quarters. 

Outside Nvidia, Dell Technologies Inc (NYSE:DELL), Dick’s Sporting Goods Inc (NYSE:DKS), Best Buy Co Inc (NYSE:BBY), Dollar General Corporation (NYSE:DG), and Abercrombie & Fitch Company (NYSE:ANF) are also set to report earnings this week.

Second-quarter gross domestic product data is also on tap this week, coming after preliminary data released in late-July showed strong growth.

Investing.com -- The Dow Jones Industrial Average closed at a record high on Friday after Federal Reserve Chair Jerome Powell suggested the central bank could start cutting rates as soon as next month.

The blue-chip index jumped 846.24 points, or 1.89%, to 45,631.74. The S&P 500 added 1.52% to 6,466.91, just shy of its own peak, while the NASDAQ Composite rose 1.88% to 21,496.53.

Tech heavyweights, including Nvidia (NASDAQ:NVDA), Meta Platforms (NASDAQ:META), Alphabet (NASDAQ:GOOGL), Tesla (NASDAQ:TSLA), and Amazon (NASDAQ:AMZN) led the advance following Powell’s remarks at the Fed’s annual Jackson Hole meeting.

In his address, Powell said “the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,” adding that “the balance of risks appear to be shifting” as the economy absorbs “sweeping changes” in tax, trade and immigration policies.

Traders raised bets on a September quarter-point rate cut, with the probability climbing to about 83% from 75% earlier in the week, CME’s FedWatch tool showed.

For the week, the Dow gained 1.5%, the S&P 500 was up 0.3%, and the Nasdaq slipped 0.6%.

Apart from the much-anticipated Nvidia earnings, investors this week will also scrutinize a series of U.S. economic reports that could shape expectations for Fed policy.

The July personal consumption expenditures (PCE) inflation reading will be the main focus, with markets widely expecting the Fed to begin lowering rates next month.

A firmer core PCE print would increase the likelihood that policymakers will also need weak August payroll data, due in early September, to support a rate cut.

Additional indicators will offer a broader view of the economy’s health. Durable goods orders for July and the Conference Board’s August consumer confidence survey arrive Tuesday, while the government’s second estimate of second-quarter GDP and the latest weekly jobless claims are due Thursday.

HSBC economists expect second-quarter GDP growth to be revised to an annualized 3.2% from the initial 3.0% estimate. In a recent note, they said that consumer sentiment will “remain subdued” in August, while July durable goods orders are likely to show a contraction.

Tech stocks slide raises stakes for Nvidia earnings

The bulk of investors’ attention this week will be on Nvidia’s imminent earnings report.

The tech sector S&P 500 Information Technology fell 1.6% last week after a strong run, weighing on major indexes. Losses eased Friday as a broad market rally followed remarks from Fed Chair Jerome Powell that signaled upcoming rate cuts.

A pullback in U.S. tech stocks has increased the focus on Nvidia’s results, seen as a key gauge for the AI-driven rally.

The chipmaker’s shares have surged more than 30% this year and over 1,400% since late 2022, making it the most prominent beneficiary of investor enthusiasm for artificial intelligence.

Its results arrive as the second-quarter earnings season winds down, with S&P 500 profits tracking a 12.9% gain from a year earlier—well above the 5.8% rise expected at the start of July, according to LSEG IBES.

Nvidia is projected to report a 48% jump in per-share earnings on revenue of $45.9 billion for its fiscal second quarter, LSEG data show.

Beyond Nvidia, software firms like MongoDB (NASDAQ:MDB) and Snowflake (NYSE:SNOW) are also due to report this week, as well as HP (NYSE:HPQ), CrowdStrike (NASDAQ:CRWD), and Chinese tech behemoth Alibaba Group (NYSE:BABA).

What analysts are saying about U.S. stocks

Cannacord Genuity: "As the poster-stock for AI tailwinds, NVDA results this Wednesday could be a major test of investor appetite for the AI / large tech trade and another potential catalyst for small caps."

UBS: "The S&P 500 looks expensive on a forward P/E of more than 22x; 18.9x for S&P 500 ex Tech+. Valuation concerns matter more when EPS downgrades are underway, but continued stabilisation and widening breadth of improvement should be an offset near term. We think that modern market structures like buybacks and reliable flows from global pension savings schemes contribute to the ’momentum’. If hard data/jobs begin to weaken faster negative earnings revisions could lead to increased volatility and more sellers, but there are strong arguments that this market structure continues to offset valuation downside in the U.S."

RBC Capital Markets: "Without substantial further upward revisions to earnings forecasts, we believe this poses a challenge to further gains in the broader U.S. market and the big cap growth/Tech trades in particular. There is still some room, but not a lot of room, in other parts of the U.S. equity market (Small Cap, S&P 500 equal weighted) to travel before returning to their own respective valuation peaks, a condition which may end up helping us know when other parts of the market have put in a short-term top as well."

Wolfe Research: "Optimism over the central bank restarting its cutting cycle sometime in the next several months will likely lead stocks higher over the near term and we continue to see the current environment as later cycle. Along this vein, we continue to favor Tech and Communication Services along with other secular growth stocks as the AI spending narrative continues to be the dominant theme in the markets."

Investing.com -- RBC Capital Markets pushed back against the idea that artificial intelligence will render traditional software obsolete, arguing that the narrative around the “death of software” is overstated.

While software stocks have been under pressure in recent weeks, RBC said the weakness reflects misplaced concerns.

The IGV software index is up 6% year-to-date, but that performance has been carried by Microsoft (NASDAQ:MSFT), Oracle (NYSE:ORCL), and Palantir (NASDAQ:PLTR); excluding those names, the index would be down 14%, RBC notes.

The broker said the market is split between two camps: one claiming “all software will be replaced by agents and multi-agentic systems” and another believing incumbents’ “valuable data and distribution” will allow them to endure and eventually monetize AI.

Instead, RBC analysts led by Rishi Jaluria take a middle view, arguing that “AI will benefit some, but not all incumbents, while also creating net-new scaled companies and accelerating AI-focused M&A.”

The report questioned whether incumbents’ much-discussed data advantage is as strong as often claimed, citing ownership ambiguity, data commoditization and the shifting importance of real-time data over historical datasets.

At the same time, RBC pointed to risks of disintermediation, where AI-native vendors augment existing platforms before competing more directly, potentially reducing engagement and growth for large incumbents.

Lower barriers to entry from tools like “vibe coding” may intensify competition, but analysts said this could expand overall software budgets by fostering more innovation.

M&A is likely to be a key strategy for traditional vendors, similar to how cloud adoption spurred acquisitions in the past. However, monetization of AI may take longer than investors expect, with broad adoption across enterprises potentially not materializing until 2028 or beyond.

“In the interim, we may start to see indirect monetization of AI, whether that shows up in greater consumption, higher engagement, improved win rates, or better gross retention rates,” analysts said.

RBC identified Microsoft, Intuit (NASDAQ:INTU), HubSpot (NYSE:HUBS), MongoDB (NASDAQ:MDB) and Pegasystems (NASDAQ:PEGA) as best positioned to “cross the chasm” in a post-AI world, while it was more cautious on Salesforce (NYSE:CRM) and ZoomInfo (NASDAQ:GTM).

“While investor fears are likely overblown, we also believe investors should focus on picking the right stocks within software and being careful about terminal value risk creep,” the analysts wrote.

RBC also said stocks such as Dynatrace (NYSE:DT), HubSpot, MongoDB, ServiceNow (NYSE:NOW) and Snowflake (NYSE:SNOW) have seen pullbacks that may be overdone.