Bruised Stocks Face Week Full of Tests, From Nvidia to Powell

Equity traders reeling from the market’s worst stretch since February face some pivotal events in the days ahead, and a closely watched speech by Federal Reserve Chair Jerome Powell may not even be the biggest test of all.

Ahead of Powell’s address Friday at a Fed symposium in Wyoming, traders are going to look to a crucial earnings report Wednesday from Nvidia Corp. to set the tone. A blowout forecast for surging revenue in May from the chipmaker, now the fourth-largest component of the S&P 500 Index, helped ignite the artificial intelligence rally that’s powered the benchmark’s roughly 14% advance this year.

Powell then caps off the week. A Fed chair’s speech at the conference has typically buoyed stocks since the turn of the millennium, with the S&P 500 gaining 0.4% on average in the following week, data compiled by Bloomberg Intelligence show. But last year’s appearance is still fresh in traders’ minds: Stocks slumped 3.2% in the week following Powell’s remarks, according to BI, after he warned of keeping policy restrictive to battle inflation.

The risk this time is he leans into the prospect of additional tightening this year, which may crimp expectations for growth at a time when worries are mounting over China. It’s a scenario that would also jeopardize Wall Street profit forecasts, especially for high-flying tech shares.

“Investors are betting on a narrative that inflation is under control and the Fed can declare victory, but it has yet to become a reality — and that’s the biggest risk to the stock market,” said Stephanie Lang, chief investment officer at Homrich Berg. At the same time, “it’s going to be tough for this rally to continue unless Nvidia can translate the power of AI into earnings growth.”

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