Stocks Steady After Nvidia as Rates Focus Returns: Markets Wrap

(Bloomberg) — Global equities steadied on Thursday, attempting to recover from Nvidia Corp.’s disappointing sales forecast, as traders turned their focus to the likelihood of interest-rate cuts.

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Nvidia shares dropped more than 5% in US premarket trading, after its underwhelming guidance hinted at a cooling in the artificial-intelligence frenzy. However, futures on the Nasdaq 100 and the S&P 500 indexes were little changed, erasing earlier losses. The pan-European Stoxx 600 index rose 0.5%, and chip-linked shares such as ASML Holding NV and ASM International NV rose.

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“One should not forget that all semi companies are not exposed to the AI trend as Nvidia, and some have large exposure to handset, auto or industrials,” said Gaël Combes, head of equities at Banque Syz & Co.

The Nvidia setback also follows a rally that’s lifted the shares more than 150% this year.

With the earnings season officially at an end, the focus should turn back to the macro landscape. Money markets are wagering on 100 basis points worth of rate cuts by year-end but uncertainty remains whether the Federal Reserve will ease policy by a quarter-point next month or deliver a larger 50 basis-point cut. Atlanta Fed President Raphael Bostic said it “may be time to cut,” but he’s still looking for additional data to support lowering rates next month.

The Fed’s preferred inflation gauge may firm up bets on how much and how quickly the central bank will ease policy, with the annual and month-on-month core PCE readings due Friday.

“What investors are looking for now is further confirmation that if economic momentum is weakening, the Federal Reserve are going to ride to the rescue, and provide a series and of substantial cuts,” said Brian O’Reilly, head of market strategy at Mediolanum International Funds.

Treasury 10-year yields slipped about two basis points. In Europe, bond yields slid across the board after data showed Spanish inflation slowing to a one-year low — a retreat that’s likely to be mirrored across the euro area — offering ammunition to those betting on policy easing from the European Central Bank in September.

The dollar was steady and is headed for its biggest monthly decline this year, undermined by the rate-cut expectations.

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