(Bloomberg) — Ahead of highly anticipated results from Nvidia Corp., the last of the Magnificent Seven, renewed volatility gripped stock prices.

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Losses led the tech sector in another low-volume session that saw the S&P 500 headed – at times – for its biggest drop since the Aug. 5 collapse. The index pulled away from those levels, however, and Nvidia trimmed its decline to about 1.5%. Investors are waiting to see if the company can meet sky-high expectations around artificial intelligence. And traders will be keen to see how CEO Jensen Huang sees demand evolving through 2025.

*OPENAI IN TALKS FOR OVER $100 BILLION FINANCING ROUND: WSJ

Due to its undisputed leadership in AI, Nvidia’s market cap has risen to over $3 trillion. Given its large influence on broader indexes, the reaction to the results could pull the entire market up or down. Options trading implies a move of nearly 10% in either direction the day after the results are released.

Nvidia’s long-awaited earnings announcement – considered the world’s most important indicator of AI prospects – should confirm that demand remains strong, according to LPL Financial’s Quincy Krosby. But for markets, meeting expectations may not be enough to support the stock price, she said.

“There is the issue of lagging chip sales due to the advanced Blackwell design that needs to be addressed,” Krosby noted. “And there is the question of whether companies can monetize their AI capabilities after allocating billions to build out their AI infrastructure.”

The S&P 500 fell 0.5 percent. The Nasdaq 100 slipped 0.9 percent. Wall Street’s favorite volatility indicator – the VIX – rose to around 18. Super Micro Computer Inc. plunged 20 percent after the company announced it would delay the release of its annual financial reports.

The yield on 10-year US Treasury notes rose two basis points to 3.84%. Bitcoin fell below $60,000.

While hype almost never matches reality, investors may be right about Nvidia being the “most important stock” on the market, according to strategists at Bespoke Investment Group.

In its history as a public company, the stock has averaged a one-day move of 8.1 percent in response to results, they noted. Besides Meta Platforms Inc., Tesla Inc. and Alphabet Inc. were the only other stocks to see an average reaction of more than 5 percent following their results.

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Matt Maley of Miller Tabak says that while it’s been a “pretty uneventful week” so far, there’s a good chance we’ll see some significant movement in one direction or the other following Nvidia’s reports.

“Activity should at least increase,” Maley said.

After the rapid recovery over the past three weeks, future gains in global technology stocks are likely to be slower. Potential headwinds from US macroeconomic data and further news on semiconductor export controls are likely to contribute to rising volatility, according to Solita Marcelli of UBS Global Wealth Management.

“However, we remain structurally optimistic about the broader AI theme and see opportunities for investors to manage their exposure to the technology that we believe will drive growth in the years to come,” she noted.

The correlation between the S&P 500 and Nvidia has declined as the stock’s influence on the index’s earnings growth wanes, say Bloomberg Intelligence strategists led by Gina Martin Adams.

“AI topics still attract significant attention, but their dominance is likely to decline as other sectors and topics attract attention and fundamental shares,” they wrote.

According to BI, S&P 500 companies outside the Magnificent Seven group more than doubled growth expectations, now at 9.2 percent compared to the forecast 4 percent. Three of the eleven sectors – including industrials, real estate and staples – recorded growth instead of decline. The energy sector was the only one that fell short of expectations.

Company highlights:

• Kohl’s Corp. raised its full-year earnings forecast as the retailer cuts spending and reduces inventory amid consumer reluctance to spend.

• Abercrombie & Fitch Co. beat analysts’ revenue expectations for the sixth consecutive quarter, but it wasn’t enough to impress investors who have grown accustomed to the comeback of ’90s fashion.

• Foot Locker Inc.’s sales exceeded analysts’ expectations as turnaround efforts and the revival of its relationship with key partner Nike Inc. begin to pay off. Investors, however, are unimpressed with the progress.

• Nordstrom Inc. offered a rosier forecast for current year sales after better-than-expected results from its discount chain.

• United Airlines Holdings Inc. flight attendants have voted to give union leaders the authority to call a strike if U.S. labor arbitrators ultimately allow one.

• Warren Buffett sold another $982 million worth of Bank of America Corp. shares as his conglomerate continues to reduce its investments in the second-largest U.S. bank.

• Lenders to B. Riley Financial Inc. have given the troubled company more time to file a delinquent financial report while it looks for ways to reduce its more than $2 billion debt load.

Important events this week:

• Consumer confidence in the Eurozone, Thursday

• US GDP, initial jobless claims, Thursday

• Fed President Raphael Bostic speaks on Thursday

• Unemployment in Japan, CPI Tokyo, industrial production, retail sales, Friday

• CPI and unemployment in the Eurozone, Friday

• Personal income, spending, PCE in the US; consumer sentiment, Friday

Some of the key market movements:

Shares

• The S&P 500 fell 0.5% at 3:31 p.m. New York time

• The Nasdaq 100 fell 0.9 percent

• The Dow Jones Industrial Average fell 0.4 percent

• The MSCI World Index fell by 0.4 percent

Currencies

• The Bloomberg Dollar Spot Index rose 0.3%

• The euro fell 0.6% to 1.1117 USD

• The British pound fell 0.6% to $1.3188.

• The Japanese yen fell 0.5% to 144.71 per dollar

Cryptocurrencies

• Bitcoin fell 4.2% to $59,257.85

• Ether fell 2.5% to $2,517.03

Bonds

• The yield on 10-year government bonds rose two basis points to 3.84%.

• The yield on German 10-year bonds fell by three basis points to 2.26 percent

• The yield on British 10-year bonds remained almost unchanged at 4.00%

Raw materials

• West Texas Intermediate crude oil fell 1% to $74.77 a barrel

• The spot price of gold fell 0.6 percent to $2,508.69 an ounce.

This story was created with the assistance of Bloomberg Automation.

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