Dow hits new record on rate cut rally: What’s next for Wall Street ?

US stocks closed Monday with mixed results as investors braced for a key earnings report and upcoming economic data later in the week.

The Dow Jones Industrial Average rose 65 points, or 0.2%, reaching a new record high of 41,241. In contrast, the S&P 500 dropped 0.3%, and the Nasdaq Composite fell 0.9%.

Global markets have experienced significant volatility this month. Japan’s Nikkei 225 index suffered a sharp decline, and US stocks plunged in early August due to a faltering yen carry trade and a weak US jobs report that fueled recession fears. Mixed earnings from major tech companies also contributed to the market downturn.

However, the situation has since reversed. All three major US stock indexes have rebounded, with expectations of monthly gains. Cooling inflation reports have bolstered optimism that the Federal Reserve may cut interest rates in September, following their recent peak levels. Fed Chair Jerome Powell’s comments at an economic summit in Wyoming on Friday suggested that the time for a rate cut has arrived, with hopes for a “soft landing” for the economy.

Katie Nixon, chief investment officer at Northern Trust Wealth Management, noted in a Friday report that this optimistic outlook reflects a broad economic and market consensus.

Looking ahead, investors are focused on Nvidia (NVDA), which reports earnings on Wednesday. Shares of the chipmaker fell 2.3% on Monday but remain up 155% for the year, driven by the AI boom. Nvidia is expected to report second-quarter revenue of $28.7 billion and profit of $15 billion. The company has consistently exceeded analyst expectations, thanks to its leading role in AI technology.

Despite Nvidia’s strong performance, investor confidence in tech stocks has waned recently. A federal judge’s August 6 ruling against Google’s (GOOGL) search business for antitrust violations has added to concerns about the dominance of major tech companies. This decision could have broader implications for the tech sector.

A recent sell-off in tech stocks has raised questions about the sector’s health, though some analysts argue that the fundamentals remain solid. Big Tech companies like Apple, Google, Microsoft, Meta, and Amazon reported over $94 billion in profits last quarter alone.

Matthew Tuttle, CEO of Tuttle Capital Management, advised investors to view any Nvidia dip as a buying opportunity, believing that AI is still in its early stages.

In addition to Nvidia’s earnings, Wall Street will closely monitor the July Personal Consumption Expenditures (PCE) price index due Friday, along with the S&P CoreLogic Case-Shiller US National Home Price Index, the second estimate for second-quarter GDP, and consumer confidence data later in the week. These reports will provide further insights into inflation trends and economic health.