Stocks idle all day, then Nvidia lands

The major indexes finished Wednesday almost exactly where they began. The S&P 500 closed down 0.02% at 7,681.95, the Dow Jones Industrial Average fell 0.16% to 53,632.24, and the Nasdaq 100 edged up 0.05% to 29,224.52. The real event came after the 4pm close, when Nvidia reported $96.2 billion of revenue for its second quarter against roughly $92 billion expected, guided the current quarter to between $105.8 billion and $110.1 billion when Wall Street had penciled in about $101.5 billion, and watched its shares drop more than 2% in after hours trading anyway.

Two things shaped the day, and the first one arrived before the opening bell. The government released the PCE price index, which is the inflation measure the Federal Reserve actually watches when it sets interest rates. Prices rose 0.2% in July and 3.7% over the past year, both slightly hotter than economists had forecast. The core reading, which removes food and energy because those two swing wildly month to month, held at 3.3%. That is well above the Fed's 2% target and it did not budge, so the case for cutting interest rates soon got no stronger. The 10 year Treasury yield, which is the interest rate the US government pays to borrow for a decade and the number most other long term borrowing costs are priced off, sat at about 4.67%.

One thing pushed the other way. Oil fell about 2.6% to roughly $80 a barrel on reports that Iran and Oman are negotiating over reopening the Strait of Hormuz, the narrow sea passage that a large share of the world's traded oil has to pass through. Cheaper energy today means slower price increases later, which is why falling oil tends to stop bond yields from climbing further.

But the honest explanation for a flat day is that almost nobody wanted to commit money before Nvidia reported. Nvidia sells the chips that every large artificial intelligence system runs on, which means its sales figures are the clearest available evidence of whether the enormous amounts Microsoft, Amazon and Google are spending on AI are actually turning into revenue for anyone. When one company's report can reprice an entire theme, traders tend to stand still until they see it. Nvidia itself slipped 1.6% during the session, while Microsoft rose 0.9%, Meta rose 1.1% and Micron rose 0.6%.

Then the numbers landed and the stock fell regardless. That looks strange until you remember that a share price already contains everyone's guess about the future. Nvidia shares had climbed on the assumption of a blowout quarter, so delivering a blowout quarter told investors nothing they had not already paid for, and the small group hoping for even more than that sold.