US stocks opened the trading session in negative territory on Tuesday, with all three major indices dipping after the latest inflation report indicated that price pressures remain elevated. The Dow Jones Industrial Average slipped 0.01%, the S&P 500 fell 0.12%, and the Nasdaq Composite dropped 0.15%.
Among individual movers, Boston Scientific fell 5.27%, Charles Schwab declined 4.74%, Moderna slid 3.77%, Kraft Heinz dropped 3.52%, and Intuit lost 3.51%. In the "Magnificent Seven" group, Meta Platforms stood out with a 3.21% gain, while Apple edged up 0.32% and Microsoft rose a modest 0.04%. On the losing side, Amazon dipped 0.06%, Nvidia slipped 0.21%, Alphabet fell 0.49%, and Tesla declined 1.67%.
Meta's 3% rally highlights the day's notable corporate news, following the company's settlement with attorneys general from multiple states to resolve a lawsuit alleging its social media platforms harmed teenage users.
The July Personal Consumption Expenditures (PCE) price index, a monthly report tracking changes in goods and services prices and the Federal Reserve's preferred inflation gauge, showed a 0.2% month-over-month increase and a 3.7% year-over-year rise. Both figures came in 0.1 percentage points above the expectations of economists surveyed by Dow Jones. However, the core PCE reading, which excludes food and energy costs, matched market forecasts with a 0.2% monthly gain and a 3.3% annual increase.
Market sensitivity to inflation data remains heightened, according to Ellen Zentner, chief market strategist at Morgan Stanley Wealth Management. She noted that "the market is highly sensitive to any data point that could increase the odds of a rate hike. Today's inflation came in slightly above expectations while the economy remains relatively strong, which is not necessarily the scenario investors or the Fed would prefer. The data is not yet sufficient to tip the scales at the September Federal Open Market Committee meeting, but if subsequent reports continue along this trajectory, the Fed may face mounting pressure to shift from its wait-and-see stance and take policy action."
Bond markets have become a focal point for investors. Treasury yields initially held steady following the data release, but last week they reached multi-year highs, with the 30-year yield touching levels not seen in nearly two decades. On Tuesday, yields generally retreated, with the 10-year Treasury yield falling nearly 8 basis points in a single session.
Nvidia's earnings report and the Jackson Hole symposium loom large. Nvidia is set to release its second-quarter results after the market closes on Wednesday. According to consensus estimates from FactSet, the market expects earnings per share of $2.09 on revenue of $92.28 billion. The chip giant, now valued at over $5 trillion and the largest component of the S&P 500, could serve as a bellwether for the broader market. Despite unusually quiet options markets ahead of the report, Nvidia's importance to the US equity market has not diminished. The Philadelphia Semiconductor Index has remained below its late-June record high over the past two months, with Nvidia among its most heavily weighted components. If Nvidia's results reinforce confidence in AI capital spending and chip demand, the entire semiconductor sector could receive a boost. Conversely, if the earnings or guidance fail to meet already elevated expectations, the AI trade could face continued pressure.
Investors are also closely watching Federal Reserve Chair Kevin Warsh, who is scheduled to speak on Friday at the annual Jackson Hole symposium in Wyoming. Some analysts believe Warsh may adopt a cautious tone and refrain from signaling clear intentions before the September policy decision. Kurt Lewis, head of central bank policy at Piper Sandler, wrote in a client note: "Looking at the communication style from the June and July press conferences, we do not expect him to offer a deep dive into the current economic outlook and its policy implications for the remainder of 2026. We anticipate his remarks will largely focus on broad macro themes, with emphasis on the supply side and how various working groups will address these issues."