The Stock Market Needs to Think About the Unthinkable: an Nvidia Disappointment

Nvidia’s second-quarter earnings could prove to be even more important to sustaining the U.S. stock rally than Federal Reserve Chairman Jerome Powell’s pivot toward lowering interest rates last week. Lower interest rates tend to be immediately supportive for stocks as a lower risk-free yield on Treasury debt increases the discounted present value of future cash flows. If the cuts stoke inflation pressures, the value of future cash flows is also eroded.