Nvidia's earnings report hits Jackson Hole! The market faced multiple tests this week, and AI beliefs, the inflation mystery and financial “raids” resonate

The Zhitong Finance App learned that after a week of turbulence surrounding retail performance differentiation, rising bond yields, and unexpected intervention by the Ministry of Finance, investors will face another five trading days of intense events this week. Trump plans to announce economic countermeasures against Iran; AI giant Nvidia (NVDA.US) will release earnings reports to put an end to the tech giant's quarterly reporting period; key inflation data will also be released to guide the Fed's next interest rate decision. Additionally, economists and central bank officials will gather at the Jackson Hole Global Central Bank Annual Meeting.

On Friday, the S&P 500 index rose 0.4%, but the cumulative decline was 1.4% throughout the week; the Dow rose 1% on Friday, a weekly decline of 0.9%; the NASDAQ rose 0.4% on Friday and fell 2% throughout the week.

This week, retailers at all price levels will continue to be listed intensively, providing more clues about US consumer resilience. Dick Sporting Goods (DKS.US) announced results on Tuesday, and Five Below (FIVE.US), Urban Outfitters (URBN.US), and Bath & Body Works (BBWI.US) debuted on Wednesday. Ulta Beauty (ULTA.US) revealed financial results on Thursday — Last week, many major retailers saw the beauty sector as a growth engine. Meanwhile, Dollar General (DG.US) and Dollar Tree (DLTR.US) will reveal the intensity of “downgrading consumption” and chasing discounts among middle- and high-income groups. However, the biggest focus of the market is Wednesday's Nvidia earnings report, which will be a major test of the rebound in the AI market.

The economic data plane is just as busy. The Chicago Federal Reserve released the National Activity Index on Monday; the Consumer Confidence Index of the Consultative Conference was released on Tuesday; on Wednesday, the PCE Price Index, the Federal Reserve's most popular inflation indicator, will hit hard, providing a key reference for the September interest rate meeting path. On Friday, the University of Michigan Consumer Inflation Expectations and Economic Sentiment Survey will conclude this data week.

Nvidia: AI transactions and its own narrative face a double test

As the last company among the “Big Seven in Tech” to release earnings reports, Nvidia's results on Wednesday will be a key window for testing the AI market, which was once sluggish but recently rekindled.

Looking through this round of quarterly reports from tech giants, the results were mixed. Microsoft (MSFT.US) and Amazon (AMZN.US) have mitigated market concerns that AI investments will be difficult to deliver returns to a certain extent, but Meta (META.US) and Google (GOOGL.US) have once again raised concerns about the continued rise in capital expenditure. However, most of these huge expenses went to Nvidia — a company that is firmly seizing the golden seat of the AI industry chain.

Nvidia's current challenges stem precisely from its own success: extremely high market expectations, and valuations that seem to have fully priced all the optimistic narratives of AI expansion. After successive testimonies of large orders and strong demand, any quarterly report that is less than “perfect” may be considered a loss. However, if Nvidia can position itself as the financial pillar of the entire AI ecosystem, it is expected to start the next round of upward trend in stock prices.

HSBC analyst Frank Lee pointed out in a Friday report that Nvidia's next phase of upward momentum may come from its new role as the world's largest open source AI contributor — which will expand its customer base from a few top tech giants to “millions of independent developers and sovereign countries.”

Bitcoin ushered in a resuscitation

At the dawn, which may herald “winter to spring,” cryptocurrency bulls are beginning to look forward to a recovery.

Bitcoin (BTC-USD) rebounded sharply last week, breaking away from months of sluggishness and returning to the $70,000 mark — the first time since the end of May. Multiple factors have boosted the recovery: Trump is once again pushing the legislative process to respond to the crypto industry's long-standing appeal; while the US Treasury's unexpected increase in long-term treasury bond purchases has also boosted the rise in crypto asset prices. Concerns about the size of government debt getting out of control have further strengthened Bitcoin's safe-haven logic — data released by the Treasury Department last week shows that the total amount of US Treasury bonds has exceeded 40 trillion US dollars.

However, like previous positive pulses, the biggest question in the market is still: Can this round of gains continue? Bernstein strategist Gautam Chhugani said in the latest report, “Bitcoin has always responded positively to the expansion of liquidity.” Although the final impact of the Ministry of Finance's expanded repurchase program on interest rates is unclear, this policy signal itself is already beneficial to digital assets.

The Federal Reserve faces a double whammy between inflationary pressure and an “aggressive” Treasury

Balancing the dual mission is no longer easy; now the Federal Reserve still has to deal with unexpected intervention from the Treasury Department. The impact of the sudden expansion of the bond repurchase program last week will continue to ferment and create a subtle tension with the Federal Reserve's interest rate decisions. Federal Reserve Chairman Kevin Warsh (Kevin Warsh) previously hinted that he would welcome higher yields as a way to raise borrowing costs and tighten financial conditions without the Fed directly raising interest rates. However, the goal of the repurchase operation is precisely to reduce yield and push the economy towards expansion.

“The Federal Reserve and the Treasury are basically working in the opposite direction,” Wil Stith, senior bond portfolio manager at Wilmington Trust, told Yahoo Finance. “I think this will force the Federal Reserve, which has a larger 'policy toolbox', to adjust the federal funds rate target more drastically.” As far as central bank officials are concerned, the consolation is that the bond market has hardly reacted violently to the Ministry of Finance's operations.

On the other side, inflation appears to be more sticky. This is where policymakers are focusing this week — PCE inflation data is about to be released. Goldman Sachs Research chief economist Jan Hatzius held the mainstream view in the latest report, believing that price pressure has improved over the past few months, and that temporary drivers of inflation such as tariffs and energy may gradually subside. However, if the data is stronger than expected, it may reignite the market's call for interest rate hikes in September. In addition, investors will also get more clues about the Federal Reserve's policy ideas at the Jackson Hole Annual Meeting.