Last Week on Wall Street - Week of August 24th

Last Week on Wall Street

Nvidia Carried the Week, Warsh Took the Last Word

A record forecast out of Santa Clara on Wednesday night, a first Jackson Hole speech out of Wyoming on Friday morning, and a tape that still finished green while quietly re-pricing the odds of a rate hike.

All three major indexes finished higher, snapping a two-week losing streak, and the Nasdaq did most of the lifting. That understates how lopsided the week was. Monday and Tuesday went almost nowhere, with the market parked in front of two events it had circled weeks in advance. Everything that mattered happened between Wednesday afternoon and Friday lunchtime.

The first of those events was Nvidia, which reported after Wednesday's close and did not simply clear the quarter. It handed the market a forecast reaching further into the future than the company has ever been willing to guide, and Thursday belonged to the chip complex as a result. The AI capex trade, which had spent the back half of August looking wobbly, came back to life in a single session. Then Friday morning Kevin Warsh stood up at Jackson Hole and spent his first speech as chairman talking about prices, not growth. The front end of the Treasury curve sold off immediately, September hike odds crossed over from unlikely to likely, and equities handed back a slice of Thursday's gain.

For diversified portfolios, the interesting part is that these two things are supposed to cancel each other out and did not. A stronger-for-longer AI capex cycle and a central bank leaning toward tighter policy pull equity multiples in opposite directions, yet the week closed with the S&P higher, the ten-year almost exactly where it started at 4.72%, and the curve flatter than it was on Monday. That combination rewards owning both sides of the balanced portfolio rather than picking which one is right; the flattening happened at the short end, which is where cash and the very front of the bond ladder live, and that is a quieter change than the headlines suggest.

The New Fed Chair Went to Wyoming and Put a Hike Back on the Table

The key takeaway, Kevin Warsh used his first Jackson Hole address as chairman to say it plainly: with inflation still above target, the Fed's job right now is prices. Traders who walked into Friday morning putting one-in-three odds on a September hike walked out of it putting better than even.

Warsh has spent his short tenure being deliberately hard to read, and the July press conference left the bond market genuinely unsure whether this Fed would raise rates if it had to. Friday settled it. He called the 2% objective a firm and fixed target, said the committee must be confident underlying inflation is moving there at sufficient speed, and added that otherwise there is work to do. The numbers behind the warning: the Fed's preferred gauge ran at 3.7% over the twelve months through July, CPI at 3.4%, and by the central bank's own accounting inflation has now sat above target for more than five years. His framing was that "the Fed's predominant focus right now should be on prices."

Rate futures moved from roughly a one-in-three chance of a September increase to better than a coin flip within the hour. The two-year yield jumped about 8 basis points in the minutes after the speech while the long end moved far less, the textbook flattening: tighter policy priced in now, slower growth priced in later. Warsh also argued for a quieter central bank, less given to forward guidance, which is its own kind of signal. A Fed that says less between meetings hands more weight to every data print, and there are a jobs report and a CPI print standing between here and September.

SOURCE: NPR: Warsh warns inflation is too high, sparking rate-hike bets →

Nvidia Guided a Whole Year Out, and Left the Street a Hundred Billion Behind

The key takeaway, beating the quarter was never in doubt. What nobody expected was the company guiding an entire fiscal year ahead for the first time, calling for roughly 70% revenue growth in fiscal 2028 and putting the number more than $100 billion above where the Street had it.

Nvidia reported July-quarter revenue of $96.2 billion, up 106% from a year ago and past the roughly $92 billion analysts had modeled, with the data center segment alone at $89 billion, up 117%. Guidance for the current quarter came in at $108 billion. All of that was, by the standards of the last three years, the expected part. Then the company put a figure on fiscal 2028: about 70% growth, implying revenue near $690 billion against a consensus closer to $570 billion. Companies with this much demand visibility almost never guide past the next ninety days, and Jensen Huang's read on why was blunt: next year is going to be extraordinary.

The more interesting moment came when CFO Colette Kress took on the criticism that has trailed the AI trade all year, that Nvidia's investments in its own customers make the revenue partly circular. She named the charge, said the company sees it differently, and pointed out that frontier AI labs will make up roughly a quarter of next year's business and that what limits growth is available compute rather than demand for it. Whether that settles the argument is another matter; it is the first time the company has argued the point on the record rather than around it. The chip complex did most of the index's work for the rest of the week.

SOURCE: CNBC: Nvidia earnings takeaways →

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