It has been a big week here on Wall Street — a hot inflation print, blow-out earnings from Nvidia, and now all eyes on Jackson Hole where Fed Chair Kevin Warsh gives his first keynote speech tomorrow. Yields are elevated and the Treasury is already stepping into the bond market. Here to break it all down is Eric Criscuolo, NYSE Market Strategist. Eric, thanks for joining us again.
Always a pleasure, Johnny.
Nvidia just blew past expectations. The stock jumped. Are we seeing a great quarter, sell the stock situation — or is this a sign the AI trade is finally proving itself?
We have certainly gone through phases with Nvidia where astronomical growth numbers were just priced into the stock, expectations became harder to beat, and the stock stopped reacting strongly to great prints. Last night was a stellar print. The CEO was as optimistic as ever about AI demand. But what really got my attention was the guidance for 2028 revenue — 70% growth. That was well ahead of what the street was expecting. And I think that woke everybody up. The bar maybe has to be reset again. The stock is reacting relatively strong in the premarket. A lot of the other AI names are reacting strongly as well. So it looks like the street is going to have to reset expectations higher again — maybe another burst of that AI trade going forward. The one thing though is we are moving into September, which is historically a bad month for equities. We will see if that seasonality pushes down on renewed AI optimism or if the AI trade can blow through it.
PCE came in hotter than expected. What is really behind this?
As always it is a lot of things together. Energy prices have certainly impacted general inflation. But when you look at the core numbers that strip out energy — and energy was actually lower during this particular PCE period — so there was not a lot from energy in this print specifically. What it looks like is that inflation is kind of contained. It is not moving higher. It is not moving substantially lower. It is staying at this elevated level. No fear of it breaking out right now — but the Fed has consistently said it is still too high, still way above their target. Three dissenters voted for a rate hike at the last meeting. They are going to have to do something about inflation, whether through policy or by just letting it naturally tick lower.
Jackson Hole is tomorrow and everyone is watching Warsh. What are you actually listening for?
Maybe one of the only times where a Fed official gets more focused attention than Nvidia earnings. Warsh is pretty much brand new to his role. His first two press conferences produced a lot of vagueness and uncertainty. He came out saying he wants to look at Fed operations across the board — the data they collect, how they analyse things, their policy tools, the balance sheet. The whole operation is coming under a microscope. The street expects changes. What Jackson Hole is really focused on is: do we get more clarity on what data he wants to look at, how he wants to analyse inflation, and what changes he wants to make? There is also the question of the Treasury's recent interventions in the bond market — whether the Fed and Treasury work together more or keep things separated as a show of Fed independence. That has to be answered.
What does the persistence of elevated long-term yields tell you after the Treasury already stepped in?
The long end is reacting to several things. Policy uncertainty — not just from the Fed but from Washington in general. There is also an enormous federal deficit that has to be financed with more and more debt. That is a huge concern for long-dated Treasuries. The 30-year yield was over 5.3% before it came down a little. The long end is reacting to a lot of policy uncertainty, a lot of concern about debt going forward. The Fed can only do so much and generally focuses on the short end. Yields have been very high compared to the past several years, and that is just a lot of uncertainty, concern about budgets and deficits, and global macro in general — wars, price shocks, supply chain shocks. All of that is compounding and focusing on what the price of money is. Which is what a yield is.
To wrap up the week — what are you eyeing going into next week?
I am looking to see if the AI trade gets rekindled. Do Nvidia and the chip sector start to move higher again? How do the hyperscalers react — they are a huge part of the S&P overall. But also — does breadth change? Does everything get concentrated back in tech again or does it continue to broaden out? That is a key question. And also seeing how markets react in September. It is historically a bad month for stocks. We will see if that trend continues or if this AI-driven momentum can go the other way.
Awesome. Eric, thanks so much. Always great to have you give us insight on the craziness going on here on the street.
Always love talking craziness here. Thank you.
