US STOCKS-S&P 500, Nasdaq set for lower open after inflation data; Nvidia results awaited

The S&P 500 and the Nasdaq were set for a lower open on Wednesday as hotter-than-expected inflation added to bets on a September interest rate hike, while markets awaited AI bellwether Nvidia's quarterly earnings.

A Commerce Department ‌report showed the Personal Consumption Expenditures index rose 3.7% on an annual basis in July, slightly above expectations of 3.6%according to economists polled by Reuters. Core PCE rose 3.3% in the same period, in line with estimates. Expectations of a rate hike in September moved up slightly to about 40% from nearly 36% before the data, per LSEG ‌data.

"We're clearly still in a period where inflation is sticky and it's temporarily putting upward pressure on interest rates - an important factor in keeping this bull ‌market for stocks going," said Jeff Buchbinder, chief equity strategist at LPL Financial. Separately, data showed the U.S. economy grew 1.5% in the second quarter, in line with estimates.

The data has sharpened focus on Federal Reserve Chair Kevin Warsh's speech at the Jackson Hole symposium on Friday, as U.S. equities approach the historically weaker month of September. At 08:48 a.m. ET, Dow E-minis were up 19 points, or 0.03%, ⁠S&P 500 ​E-minis were down 10 points, or 0.13%. Nasdaq ⁠100 E-minis were down 108.75 points, or 0.37%.

Investors will closely watch Nvidia's quarterly update, viewed as a crucial test for the AI-driven rally at a time when the slightest hint of slowing ⁠growth is being punished. Anything less than a stellar report from the chip heavyweight could rekindle doubts about the sustainability of the AI boom and set the tone for tech stocks ​for the rest of the week. Shares of Nvidia, set to report results after markets, were down 0.1% in premarket trading.

"This market is a tug ⁠of war between earnings and interest rates and, up to this point, earnings have been winning that battle. As long as the fundamentals remain strong, (the) market is going to hold up okay," said Buchbinder. Bumper results ⁠could ​also deepen the divide between software stocks that have taken a beating this year, and semiconductors, which have capitalized heavily on the AI euphoria.

Shares of Intuit dropped 10.5% after the TurboTax maker forecast annual revenue below Wall Street expectations. Other software stocks also came under pressure, with Adobe , ServiceNow and Atlassian falling between ⁠2% and 3%.

Abercrombie & Fitch jumped 12.6% after the retailer raised its full-year sales forecast. Meanwhile, a report said that Tehran and Oman have reached agreements on their share ⁠of the Strait of Hormuz and ⁠its revenues, citing Iran's Revolutionary Guards spokesperson.

Worries over higher-for-longer oil prices, rising government debt and inflation expectations had pushed Treasury yields to multi-year highs last week, although they retreated after the Treasury Department announced support measures. Higher yields hammered tech stocks earlier in ‌the week, but they recovered ‌in the previous session, helping close Wall Street higher.