Stock Markets on the Brink as FOMC Minutes, NVDA Earnings Loom

Stocks may suffer as they rejoin the global “inflation trade”. Will April’s FOMC meeting minutes and Nvidia (NVDA) earnings add up to the trigger?

• US stocks are carving out lower lows as trading volumes rise to early-April breakout highs
• Crude oil, natural gas, bonds, gold, and the US dollar remain locked in the “inflation trade”
• Minutes from April’s FOMC meeting, Nvidia (NVDA) earnings may trigger a broader selloff

Wall Street is looking soggy heading into the most consequential 24 hours of the week.

The bellwether S&P 500 stock index is carving out narrowly lower lows this week after Friday’s nosedive. That came amid worries about rising interest rates as the Treasury bond market came unglued, hinting that Wall Street may be drifting back toward the “Iran war trade”, which it has managed to ignore for weeks.

Now, the series of higher highs defining the uptrend in US stock indexes has been breached in earnest for the first time since late March.

Crude oil has resumed its climb after a brief pullback. Natural gas is also pushing higher, hitting a two-month high. Hopes for a speedy reopening of the Strait of Hormuz are seemingly giving way fears of a lasting bottleneck.

Treasury bond yields continue to soar as prices melt, breaking to levels last seen in early 2025 before a tariff-driven growth scare that stoked Fed rate cut speculation. Gold is sliding lower again and seems poised to erase the rebound from the late-March low. The US dollar is at the highest in five weeks against an average of its major peers.

The earnings-season buffer is wearing out

The recent decoupling between stocks and other markets seems to trace back to the arrival of big-name earnings announcements in the early part of the corporate reporting season. The benchmark indexes of US shares wandered off higher as massive capex announcements from “hyperscalers” racing to build AI infrastructure overtook the spotlight. Meanwhile, bonds, gold, oil, and the US dollar stayed pinned to the war trade and its inflation implications.

Last week’s Cerebras IPO may have served as a kind of crescendo in that earnings-season narrative. After it passed, traders suddenly seemed interested in April’s hotter-than-expected US inflation data. Five- and ten-year Treasury breakeven inflation rates continue to climb alongside crude oil in the meantime, signaling the bond market expects price pressures to persist.

FOMC minutes may reveal the limits of new Fed Chair Warsh’s power

Minutes from April’s meeting of the Federal Open Market Committee (FOMC) – the last to be chaired by Jerome Powell – may highlight the limits of the power to be wielded by his successor, Kevin Warsh.

The Fed chair is not a dictator and cannot set policy without a plurality of committee votes, making the tone among other policymakers the critical variable defining what Warsh can actually deliver.

The April meeting featured a striking pattern of dissent. Perennially dovish Stephen Miran issued the obligatory call for a rate cut, though he has now rotated off the committee to make room for Warsh. More telling were the dissents from Beth Hammack, Neel Kashkari, and Lorie Logan, who objected not to the rate decision but because they wanted the policy statement stripped of its easing bias.

Powell gave voice to their concerns at the press conference following the meeting. He flagged rising near-term inflation expectations while noting that the labor market’s softness reflects structural shifts — baby-boomer retirement and changes in immigration policy — that monetary policy cannot remedy. The implied message: the Fed will focus on fighting inflation for the time being.

Markets have moved accordingly. Fed funds futures now price about a 60% chance of a 25 basis point (bps) hike by year-end, with 15bps already baked in. If the minutes confirm the hawks are ascendant on the committee, then there is little that Mr. Warsh could do to unilaterally to deliver for President Trump the rate cuts he’s so loudly demanded.

Nvidia earnings could be the trigger for stocks to capitulate

After the FOMC minutes, an earnings report from Nvidia (NVDA) follows in quick succession. The chipmaker sits at the center of the AI capex narrative, were semiconductor names have moved up more than 50% year-to-date while the rest of the market mostly churns.

For the past four quarters, the markets’ reaction to the company’s announcements has deteriorated despite earnings per share (EPS) results that bested analysts’ forecasts. The bar for an upside surprise looks to be devilishly high, while even strong results might be seen as a disappointment if they fall short of the markets’ starry-eyed mythmaking.

Taken together, a hawkish set of FOMC minutes coupled with Nvidia results that fail to satisfy rabid AI speculation may leave stocks without much else to hold on to. That might force through a dramatic end to the divergence between Wall Street and other major markets since late March, with stocks pulled violently lower.

lya Spivak, tastylive Head of Global Macro, has over 15 years of experience in trading strategy. He specializes in identifying thematic moves in currencies, commodities, interest rates and equities. He hosts Macro Money and co-hosts Overtime, Monday-Thursday. @Ilyaspivak

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