This week, stocks have retreated slightly from the record highs reached by some indices at the end of August. All eyes are now on the upcoming NFP report and the Federal Reserve’s decision. Nvidia shares experienced a record drop in market capitalization, and this trend may continue until there's clarity on whether and by how much the Fed will cut interest rates.
Below, we review these and other key news highlights of the week.
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The market shouldn't cheer a larger rate cut in September
A 50 basis point rate cut "would send the wrong signal to the market — suggesting that the Fed is more concerned about a potential recession than controlling inflation. This could trigger a further selloff in stocks," said David Sekera, Morningstar's chief US market strategist.
Additionally, markets are becoming increasingly skeptical about the likelihood of a rate cut at the Fed’s September meeting. With inflation still above target and economic uncertainty lingering, many investors doubt whether the central bank is ready to make such a decisive move.
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Nvidia's stock plunge erases $279 billion in market value
Nvidia’s stock plunged, wiping out $279 billion in market value – marking the largest one-day drop for any US company.
Concerns are growing over the sustainability of the AI boom and broader economic uncertainties. As a major player in the S&P 500 and Nasdaq 100, Nvidia contributed 23% to the S&P 500’s 19.5% annual return through August. Sharp movements in Nvidia’s stock could disrupt these indices unless other sectors take the lead. Although Nvidia recently exceeded earnings expectations, the margins of those beats are narrowing, raising alarm among analysts.
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Oil rises as OPEC+ mulls supply delay
Brent crude edged above $73 a barrel, rebounding slightly after hitting its lowest level since last year on Wednesday. Oil markets are also reacting to a sharp 7.4-million-barrel drop in US crude inventories, according to sources.
Key OPEC+ members are likely to delay a planned production increase of 180,000 barrels a day in October, amid falling prices driven by weak economic data from the US and China. Additionally, Libya is cautiously moving toward resolving the standoff that has crippled much of its oil production.
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Euro could extend recovery once it clears 1.1100K
EUR/USD is trading just below 1.1100 in positive territory. Upcoming US employment data could spark the next major move in the pair.
From a technical perspective, sellers appear to be holding back for now. The pair remains in a tight range below 1.1100, but later today, US employment figures could impact the US Dollar (USD) and drive further action in EUR/USD.
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This concludes our weekly recap. Have a great weekend and see you next week! 👋
