July PCE Inflation Stays Above 3%; Stocks Mixed

The Dow Jones Industrial Average fell 0.21%, and the S&P 500 dropped 0.02%. The tech-heavy Nasdaq Composite slipped 0.008%, roughly flat.

The move is seen as reflecting market enthusiasm ahead of new iPhone launches scheduled for September 9, including Apple's first foldable phone. Expectations for the new products appear to have lifted investor sentiment.

Meta is reportedly agreeing to measures such as limiting children's social media time and blocking overnight access. The news is seen as positive for the market, resolving uncertainty and signaling stronger corporate social responsibility efforts.

The U.S. July personal consumption expenditures (PCE) inflation data has been released. Headline PCE rose 3.7% year over year, slightly above the market forecast of 3.6%. Core PCE, which excludes volatile energy and food prices, rose 3.3% year over year and 0.2% month over month, in line with each market forecast.

Morgan Stanley argued that July's figures alone make a September rate hike unlikely, but stressed that continued stability in subsequent data is needed. Capital Economics maintained a hawkish view, saying that with inflation still above 3%, well above the Fed's 2% target, a rate hike is effectively certain and only the timing is in question.

She noted that if such evidence is not confirmed, tight policy would have to continue, implying further rate hikes may be needed. Her remarks suggest the Fed will maintain a hawkish stance until it gets clear signs of slowing inflation.

By this logic, current inflation figures do not justify another hike, suggesting the Fed's policy direction could shift depending on future inflation data.

This suggests consumers are cutting back on non-essential purchases amid high interest rates and inflation, signaling a shift in the balance of total consumer spending.

Photos and videos released show full-scale shipments underway for building Nvidia's AI infrastructure. Nvidia executives said AI infrastructure buildout is proceeding at full speed and that they plan to expand market share by strengthening ties with key customers.

The remark underscores that AI has moved beyond research into a core driver creating real economic value across industries, with Nvidia at the center of the shift.

The chief financial officer attributed the increase to memory procurement. This suggests Nvidia is expanding long-term contracts to secure memory needed for AI chip production, which could add upward pressure on memory prices.

Nvidia guided third-quarter gross margin to 74%, below market consensus, yet its shares turned up 4–5% in after-hours trading. The main reason for the rebound was a sharp upgrade to its fiscal 2028 revenue growth outlook. It projected 70%, well above the previous market estimate of 45%, and analysts say expectations for long-term growth potential restored investor confidence.

Free cash flow decline was cited as a negative for Nvidia. Free cash flow fell sharply from $48.6 billion in the first quarter to $21.3 billion this quarter. There are also concerns that Blackwell inventory is building up ahead of shipments of the next-generation Vera Rubin products. This may be interpreted as a temporary inventory issue that can arise during a transition to new products.

The move signals a new deal and close cooperation, suggesting Nvidia will further expand its influence in cloud computing. News of the stronger partnership contributed to Nvidia's after-hours gain.

Nvidia's valuation appeal is being reassessed. Its 2027 forward price-to-earnings ratio is about 17.4x, lower than competitors. At the same time, Nvidia is posting an outstanding 52% average annual earnings-per-share growth rate, showing growth that is unmatched among big tech companies. The combination of a low valuation and high growth suggests Nvidia remains an attractive investment, with analysts seeing ample room for further stock gains.