Nvidia and cyclicals set the tone before Thursday’s open

Introduction#

According to Monexa AI, U.S. equities extended gains into Wednesday’s close with the S&P 500 finishing at 6,481.40 (+0.24%) and the Dow Jones Industrial Average at 45,565.23 (+0.32%). Breadth favored cyclicals and profitable software, while volatility declined with the VIX at 14.51 (-2.29%). After the bell, the narrative remained dominated by AI and macro governance. Nvidia’s latest results and guidance—widely watched given the company’s outsized index weight and its role in the AI buildout—were dissected across financial media overnight, alongside fresh debate over Federal Reserve independence following reports of attempts to remove Fed Governor Lisa Cook. Together, these threads are likely to shape early sentiment ahead of Thursday’s open.

Overnight headlines underscore that the stakes around monetary governance and AI leadership remain elevated. Former Cleveland Fed President Loretta Mester warned that political interference aimed at the Fed represents a broader challenge to central bank independence, as reported by CNBC. The European Central Bank’s Olli Rehn echoed the systemic nature of those risks in remarks flagged by Reuters. On the corporate side, Nvidia’s revenue and forward guide were parsed extensively by outlets including Investopedia and Bloomberg, with several reports highlighting softer China prospects in the near term.

Market Overview#

Yesterday’s Close Recap#

The tape reflected cautiously risk-on tone, with cyclical groups and enterprise software pacing the advance while defensives were mixed. Index-level participation remained solid, and the S&P 500 notched a new intraday year high before easing into the close.

According to Monexa AI, the S&P 500 closed above its 50-day average of 6,296.18 and 200-day average of 5,954.50, reinforcing an uptrend into month-end. The index also tagged a fresh year high intraday at 6,487.06 before settling. The NASDAQ Composite ended at 21,590.14 (+0.21%), within striking distance of its year-to-date peak at 21,803.75. Volatility continued to compress: the VIX fell to 14.51, closer to its year low of 12.70, while the Russell 2000 Volatility Index (^RVX) ticked up to 22.33 (+0.40%), suggesting small-cap risk premia remain higher than for large caps.

At the sector level, leadership tilted toward Energy, Basic Materials, Real Estate, and Technology, with notable follow-through in profitable mid-to-large-cap software. Monexa AI’s intraday heatmap flagged outperformance in names such as DDOG (+4.29%), WDAY (+3.06%), NOW (+2.70%), and CRM (+2.63%), while NVDA finished essentially flat (-0.09%), and PLTR lagged (-2.58%). In cyclicals, autos and travel rallied, with KMX (+4.02%), WYNN (+3.46%), MGM (+3.27%), and ABNB (+2.33%) aiding breadth.

Overnight Developments#

Overnight, macro governance grabbed headlines. The controversy surrounding attempted moves against Fed Governor Lisa Cook reignited debate over central bank independence, an issue multiple outlets—including The New York Times and Bloomberg—argue could carry implications for inflation expectations and financial stability if prolonged. ECB policymaker Olli Rehn warned of global spillovers if Fed independence is compromised, per Reuters.

Across the Atlantic, sentiment in Europe remains fragile. Citi analysts argued that French equities have yet to fully discount heightened political and fiscal risks already reflected in bond spreads, according to CNBC. Separately, eurozone confidence indicators deteriorated as tariff frictions and sluggish domestic growth weighed on the outlook, as summarized by Reuters.

On the corporate tape, Nvidia’s results and commentary continued to set the tone for AI-exposed equities. Reporting aggregated by Monexa AI and covered by Investopedia and Bloomberg highlighted strong top-line delivery and an above-consensus outlook, alongside uncertainty in China where several reports cited expectations for minimal contributions from constrained SKUs in the current quarter. Media roundups such as Barron’s noted that China-related headwinds could benefit domestic competitors within China’s ecosystem.

Macro Analysis#

Economic Indicators to Watch#

The near-term calendar remains anchored by inflation and spending gauges that inform the path of policy normalization. Market focus is trained on the July Personal Consumption Expenditures (PCE) data and fresh auto sales figures as August turns to September, in line with recent previews referenced by Monexa AI’s news rollup and highlighted by outlets like Bloomberg. With equity indices near highs and volatility low, any upside surprise on inflation or downside blip in spending could recalibrate rate-cut timing expectations into the fall.

From a market-structure perspective, according to Monexa AI, implied volatility eased into the close (VIX 14.51, -2.29%), a level consistent with benign macro prints but vulnerable to repricing on policy surprises. The Russell 2000 volatility gauge (^RVX) holding above 22 underscores the still-elevated risk budget for small caps relative to mega caps, making upcoming growth and inflation data especially consequential for cyclically sensitive and domestically oriented companies.

Global/Geopolitical Factors#

Geopolitical and policy developments continue to filter into valuations. Eurozone sentiment has softened as new U.S. tariff measures and domestic growth pressures bite, according to Reuters. Citi’s view that French stocks have not fully reflected the risk premium already embedded in bond markets adds to caution around European cyclicals, as recapped by CNBC. Meanwhile, public challenges to Fed independence—reported across The New York Times and debated on CNBC—have raised concerns about potential knock-on effects for inflation expectations, the term premium, and the cost of capital. As ECB’s Olli Rehn warned, sustained pressure on the Fed’s autonomy could carry global market implications, per Reuters.

Labor dynamics and technology adoption remain in focus as well. A Stanford-linked study cited by CNBC found that AI exposure correlates with a 13% relative decline in employment among younger workers in affected occupations since 2022. While the macro read-through is complex, the finding reinforces investors’ need to distinguish between AI beneficiaries in capital markets and potential demand fragility elsewhere in the economy.

Sector Analysis#

Sector Performance Table#

According to Monexa AI’s sector performance at Wednesday’s close, results were as follows:

Monexa AI’s intraday heatmap analysis points to a slightly different set of magnitudes—for example, Energy at roughly +0.84% and Technology closer to +0.68%—owing to methodology and timing of snapshots versus official close. We prioritize the end-of-day sector table above for the definitive close, and use the heatmap to describe directionality and stock-level drivers.

Sector leadership cohered around cyclicals and software. Energy outperformed with refiners and upstreams rallying—VLO (+2.60%), MPC (+2.52%), PSX (+2.10%), FANG (+2.15%), and XOM (+1.13%)—consistent with a commodity-led risk-on bid. Basic Materials firmed behind a sharp move in ALB (+7.54%) and steady gains in NUE (+1.61%) and CTVA (+1.47%), even as FCX slipped (-1.08%), underscoring metal-specific dispersion.

Technology’s gains were broad within software while large-cap semis were mixed into the Nvidia event. Enterprise platforms led as DDOG, WDAY, NOW, and CRM rallied, offsetting idiosyncratic weakness in PLTR (-2.58%). Renewables lagged within Energy as FSLR fell (-2.79%), highlighting an internal rotation toward fossil-linked profitability.

Communication Services was flat to slightly negative, where moves in WBD (+2.97%) were offset by softness in META (-0.89%) and select media names; PSKY fell (-6.50%), the sector’s largest outlier. Real Estate advanced with broad-based strength in data center and logistics REITs—EQIX (+1.12%) and PLD (+1.19%)—and lodging exposure via HST (+2.60%), while tower operator SBAC declined (-4.89%).

Healthcare was mixed as managed care firm UNH rose (+1.15%) and biopharma saw dispersion—MRNA (+1.50%) versus MRK (-1.08%). Utilities were slightly higher with ES (+1.08%), D (+0.87%), and SRE (+0.59%), offset by weakness in NEE (-1.27%). Consumer Defensive outperformed with EL (+3.11%), KDP (+2.66%), TGT (+1.92%), and COST (+0.87%), while SJM slumped (-4.44%). Industrials were a touch higher overall, where HII (+1.71%), CARR (+1.67%), and DE (+1.09%) offset declines in ROK (-1.82%) and NSC (-1.56%).

Company-Specific Insights#

Earnings and Key Movers#

Nvidia remains the fulcrum for AI sentiment. According to Monexa AI’s news compilation and coverage by Investopedia and Bloomberg, the company reported quarterly revenue of approximately $46.7 billion with guidance near $54 billion for the current quarter, both above expectations. Despite the strength, several outlets highlighted an anticipated near-zero contribution from China for the H20 lineup this quarter amid export controls and local competition, a theme mentioned across Barron’s and other roundups. The stock closed the regular session essentially unchanged at $181.60 (-0.09%), underscoring how “priced to perfection” narratives can limit upside even on beats.

Profitable software outliers re-rated higher on clean execution. MDB surged +37.96% after delivering fiscal Q2 revenue of $591.4 million versus $553.9 million expected and EPS of $1.00 against $0.67 consensus, while raising full-year guidance, according to Monexa AI’s earnings summary. Identity platform OKTA advanced after a beat-and-raise quarter with revenue at $728 million and cRPO growth of +13.5%, as tracked by Monexa AI, while cloud banking provider NCNO rallied +13.94% on stronger subscription growth and operating leverage.

In Consumer Discretionary, ANF posted record Q2 revenue and lifted full-year sales growth to +5%–+7%, even as tariff-related cost pressures were noted; the shares drifted -1.43% into the close, reflecting the heightened bar for retail after a strong YTD run. Premium-brands exposure remains resilient: RL held firm after Jefferies reiterated a Buy and the company highlighted +13% growth in global DTC comparable sales, per Monexa AI’s rollup. This plays directly into the ongoing premiumization trend cited by CNBC, with retailers targeting higher-income consumers despite uneven broader demand.

In Telecom and Satellites, SATS jumped +15.51% as Monexa AI reported a sale of 50 MHz of spectrum to T for roughly $23 billion, prompting multiple analyst upgrades. AT&T also highlighted upcoming investor conference appearances, per a company release noted by Monexa AI. In Energy, consolidation and scale stories stayed in focus as CRGY gained +3.10% after Raymond James lifted its price target to $17 on the Vital Energy acquisition, positioning the firm among top liquids-weighted E&Ps.

Travel and leisure continued to reflect healthy demand for premium experiences. NCLH drew favorable coverage with a target of $38 from Tigress Financial versus a $24.88 close, and the shares rose +0.48%. The broader theme of capacity, pricing, and fuel spread management remains central into the holiday booking window, with Energy price action a key sensitivity.

Financials were broadly steady. Money-center banks such as JPM (+0.24%) and diversified behemoth BRK-B (+0.71%) edged higher, while trading and market infrastructure names lagged—IBKR (-2.39%) and CBOE (-1.98%). North of the border, Reuters reported that Canada’s CIBC posted stronger Q3 profit on capital markets strength, adding a constructive data point for North American bank activity.

Extended Analysis#

The market continues to balance three forces that matter for positioning into September: the durability of AI capex, the rotation into commodity and travel-linked cyclicals, and the policy backdrop.

First, AI infrastructure spend shows few signs of letting up. According to Monexa AI’s coverage, Nvidia’s quarterly revenue of $46.7 billion and an above-consensus $54 billion guide underscore that hyperscalers and enterprises remain in buildout mode. Yet the dispersion under the hood—software platforms like MDB, DDOG, NOW, and CRM re-rating higher on profitable growth while select analytics names such as PLTR lag—argues for selectivity. Investors should focus on durable monetization and operating leverage, not just top-line AI adjacency.

Second, the rotation into cyclicals appears durable so long as commodity pricing and global demand signals remain supportive. Energy leadership was broad, with refiners VLO, MPC, and PSX all gaining more than +2.00% alongside upstream FANG and integrated XOM. Materials saw a standout in ALB (+7.54%), which, paired with steel and agrochemicals, suggests a constructive cyclical tone even as copper proxy FCX lagged. The risk, highlighted in European headlines from Reuters and CNBC, is that policy frictions and softening growth expectations in Europe could crimp global cyclicals if conditions deteriorate.

Third, the policy and governance environment remains a swing factor. Reports discussed by The New York Times, CNBC, and Reuters about direct challenges to Fed independence are not just Washington intrigue; they feed directly into the term structure of interest rates. A perception of politicized policy could raise the term premium, lift long-end yields, and by extension, pressure long-duration assets—even if near-term rate cuts remain on the table. For now, the VIX at 14.51 indicates investors are largely discounting those tail risks, but the modest uptick in the small-cap volatility gauge (^RVX at 22.33) hints at a less sanguine undercurrent for more economically sensitive equities.

On the consumer front, the premiumization theme is still in play. Monexa AI’s news feed pointed to airlines expanding premium seating and retailers like WMT adding higher-end brands, as discussed on CNBC. That aligns with resilient results from RL and solid warehouse club demand at COST. But debt stress indicators are rising across income cohorts per new survey work highlighted on CNBC, and select retailers such as WSM (-2.91%) underperformed, reminding investors that consumer strength is uneven and highly sensitive to financing costs and fuel prices.

Finally, investors should recognize internal dispersion within sectors. Real Estate’s advance was offset by the notable slide in SBAC (-4.89%), while Utilities eked out gains even as NEE slipped (-1.27%). These fault lines argue for barbelled positioning—exposure to secular AI winners and commodity cyclicals on one side, balanced by selective defensives with improving balance sheets on the other—rather than broad beta.

Conclusion#

Morning Recap and Outlook#

The setup into Thursday’s open is defined by three data-backed pillars. First, indices are trending higher with the S&P 500 closing above its 50- and 200-day moving averages and notching a fresh intraday high, per Monexa AI. Second, sector leadership continues to rotate toward Energy, Materials, and selective Real Estate, while the most consistent alpha remains in profitable software franchises. Third, the macro narrative is being shaped by inflation data into month-end and an unusual focus on central bank independence—issues that could reprice volatility if headline risk escalates.

For investors, today’s open will likely be influenced by how markets digest Nvidia’s upbeat guide alongside China-specific constraints, as reported by Investopedia and Bloomberg. Watch AI-adjacent software and data-center infrastructure names for follow-through, while monitoring refiners and upstream E&Ps to gauge whether the commodity bid extends. Keep an eye on consumer bellwethers such as WMT and premium brands like RL for evidence that the premiumization trend is still outpacing broader consumer fatigue.

Key tactical markers are clear. A sustained VIX below 15 with ^RVX pinned above 22 implies supportive liquidity for large-cap tech and defensives but a more challenging backdrop for smaller, higher-beta, rate-sensitive equities. If eurozone growth concerns intensify or Washington policy headlines deepen, expect duration-sensitive assets to wobble even if earnings delivery remains strong. Conversely, confirmation of cooling inflation without a hit to nominal growth would underpin both multiple stability for AI leaders and cash flow visibility for cyclicals.

The bottom line for the morning session: positioning remains tilted to a cautiously risk-on stance, with selective exposure to AI infrastructure beneficiaries and commodity cyclicals supported by the latest close. But the concentration of market leadership and the policy overlay argue for maintaining risk controls, active factor management, and a short leash on idiosyncratic exposures that have underperformed despite favorable sector tides.