The Fed's direction is unclear. If inflation is the top target, more clarity should come next week at Jackson Hole, with attention on Kevin Warsh as a possible Fed chair pick.
What's driving inflation risk
Oil is the main thing to watch. A price spike caught traders off guard but did not move the broader market. The price of oil is the number one inflation point that hits the consumer directly.
The 10-year Treasury yield keeps climbing above 4.7%. This slow rise has not hurt stocks. A faster move toward 5% could cause shocks.
Trading is in a summer slowdown - one recent session was among the slowest of the year, with few earnings out besides retailers. Seasonal factors add risk: August and September are the two worst months, and traders are nervous about a seasonal downturn heading into the midterm elections.
Nvidia (NVDA) as the key signal
The biggest risk to the bullish momentum is something unexpected from Nvidia (NVDA) when it reports next week. The market story has been earnings growth, and two reports stood out: Amazon (AMZN) and Meta (META). Both beat on revenue, and heavy spending continues. The difference was how they explained the spending. Amazon (AMZN) went point by point and gave a strong guide. Meta (META) did not.
Nvidia (NVDA) will beat and raise, and its guide should be very strong. The real question is the level of spending and how long that momentum can last. The stock has momentum now, sitting back above key moving averages, with its target at the 240 level near its all-time high. Nvidia (NVDA) is the one telltale sign for the market. What Jensen Huang says next week matters most.
Under the surface there is rotation. The market has done extremely well but looks a little tired. Combined with weak seasonality and worry that the straight-line gains cannot continue, stocks may stumble.
Retail earnings
Early results from Home Depot (HD) and Lowe's (LOW) were fairly good given a tough environment for consumer discretionary and home-repair stocks.
The focus is on Target (TGT), reporting Wednesday, and Walmart (WMT), reporting Thursday morning. The retail trade has been uneven, and the challenged consumer keeps showing up in these reports through where dollars are being spent.
Walmart (WMT) is watched for a macro read on the consumer. Technically it sits in no man's land, in a downtrend, not a stock worth trading into earnings. Longer term, a dip back to 105-110 could be a good buying spot.
Target (TGT) is the standout, up about 56% year to date (roughly 54.5%), and just three and a half percent off its recent highs. The turnaround run by Michael Fiddelke has been spectacular. Whether that momentum continues is the open question. This is likely a stock to fade and wait for a better entry. On a pullback to the 50-day moving average it would be a good entry point, needing to hold above 155-160 resistance to keep climbing, which may be a challenge long term. Target (TGT) has been the turnaround story for 2026, leaving other retailers behind and getting too little attention.
