Week of Aug 24: AI Meets a More Hawkish Fed

U.S. equities finished higher for the week, but Friday exposed the central tension: strong AI-related earnings met a Federal Reserve that sounded less comfortable with inflation. The S&P 500 gained 0.5%, the Nasdaq rose 0.9%, and the Dow added 0.5% for its first winning week in three. 1

Nvidia’s earnings lifted the headline technology trade, but the move was selective. Nvidia rose more than 1% for the week, while the VanEck Semiconductor ETF fell more than 3%; Marvell and Applied Materials lagged, while Synopsys and Cadence gained. Salesforce, Workday, and Gap also rallied on company-specific results or changes, while Dick’s Sporting Goods fell sharply after weak results and guidance. 12

July PCE inflation rose 0.2% month over month and 3.7% year over year. Core PCE rose 0.2% on the month and 3.3% over the year. Personal income rose 0.4%, while real personal consumption was essentially flat. 3

At Jackson Hole, Fed Chair Kevin Warsh said recent PCE and CPI readings had not shown a meaningful improvement in underlying inflation. CME Fed funds futures put the probability of a quarter-point September hike at 57.5% Friday, up from 35.4% Thursday. 1

The July JOLTS report is scheduled for Tuesday, September 1, at 10:00 a.m. Eastern. The ISM Manufacturing PMI report is also scheduled for Tuesday, and the U.S. employment report is the key Friday event. 45

The practical watchpoint is the intersection of labor cooling, inflation persistence, and the breadth of the AI rally. This episode explains the setup; it does not make a trading recommendation.