Stocks closed higher yesterday with all of the indexes in the green. The S&P 500 made a new all-time high and close in the process. Although, it was the small-cap Russell 2000 that led the gainers yesterday with 0.64%, and making a new YTD high.

After the close the market got what it was waiting for, which was earnings from NVIDIA. After the bell, they posted a positive EPS surprise of 5.00%, and a positive sales surprise of 1.30%. That translated into a quarterly EPS growth rate of 54.4% vs. this time last year, and a sales growth of 55.6%. They were off -0.09% in the regular session before earnings, and were down roughly -3% in after-hours trade following earnings.

This marks the 10th positive EPS surprise out of 11 quarters. (Only miss was the previous quarter, and that was only -3.75% vs. the consensus, but it still resulted in a quarterly EPS growth rate of 32% and a sales growth of 69%.) Prior to that, they positively surprised for 9 quarters in a row. Since February of 2023, they're up 829%.

In spite of the modest decline after-hours, they proved, once again, that the AI trade is alive and well, and the demand for chips, datacenters and other AI related products does not seem to be slowing. It was also interesting to note that while they had the green light to sell their H20 chips to China, last quarter's robust growth did not include any of that.

The soaring demand for AI related products is unprecedented, and is likely to help fuel this historic rally far into the future.

Today we'll get the second estimate for Q2 GDP (consensus is calling for 3.1% vs. the prior estimate of 3.0%), Weekly Jobless Claims, Corporate Profits, the Pending Home Sales Index, and the Kansas City Fed Manufacturing Index.

We'll also hear from Fed policymaker Christopher Waller. He was one of two Fed Governors (the other was Michelle Bowman) that dissented from the majority at last month's FOMC meeting by voting to cut rates at that meeting vs. keeping rates steady. That was the first time more than 1 board member dissented from the consensus in over 30 years.

They cited that risks to the labor market had increased vs. inflation.

We now know that they were ahead of the curve because just last week, Fed Chair Jerome Powell finally acknowledged the same. And that the "base case" remains that the recent price increases (which are showing up in moderate rises in inflation) will be a "one-time" shift due to tariffs, rather than ongoing increases. As such, he suggested it could be warranted to cut rates at the next meeting on September 16-17.

But, of course, it's not a done deal yet. And the Fed maintains it will be data dependent. So, all eyes will be on Friday's (8/29), Personal Consumption Expenditures (PCE) index (which is the Fed's preferred inflation gauge), and then next Friday's (9/5), Employment Situation report.

But the market has not wasted any time in beginning to price that rate cut in. In fact, the CME's FedWatch tool puts the likelihood of a September rate cut at 88.7%.

In the meantime, the market is sitting at or near all-time highs. And we'll see if the market can extend those gains even further as we head into the end of the week.

See you tomorrow,