Two major events are likely to drive financial markets this week: Nvidia’s second-quarter earnings report and the Fed’s annual Jackson Hole Economic Symposium.

Before diving into each of those, let’s take a step back and look at the bigger picture.

Perhaps the biggest development in markets over the last week has been the surge in long-term bond yields. The 30-year Treasury yield rose to 19-year highs of 5.26%, while the 10-year sits at 4.73%, near its upper bound for the last five years.

Concerns around both inflation and growing government debt have led to the bond rout.

As a result of the bond-market movements, stocks have struggled. Here’s what major indexes have done since their August 13:

• S&P 500: -1.57%
• Nasdaq 100: -2.68%
• Dow Jones Industrial Average: -1.3%

Treasury Secretary Scott Bessent has said the Treasury would step in to buy back more bonds than it had originally planned starting in September, but the announcement has so far not moved the needle.

The move in Treasury yields has reignited the conversation around a potential AI bubble.

Can Nvidia earnings or Jackson Hole save the day? Let’s take a look at each.

Nvidia earnings

If either one of these events is likely to lift the spirits of investors, it’s Nvidia’s Q2 earnings report.

Analysts widely expect the chipmaker to beat on earnings, and recent earnings for Nvidia’s partners in the AI buildout have smashed expectations. Namely, Nebius and CoreWeave, two data center firms, reported blowout demand and huge order backlogs. Both stocks surged on the news, which also gave the broader market a boost.

Monetization of AI products from hyperscalers like Microsoft and Amazon has also been a positive development for the AI trade in recent weeks.

So, if Nvidia says that it sees no slowdown in spending from its customers, it could spark fresh optimism for investors.

“Nvidia earnings will put the AI investment story back at the center of the equity market,” said Daniela Hathorne, a Senior Market Analyst at Capital.com, in an August 21 email.

She added that “investors will be looking for evidence that demand for chips and AI infrastructure remains strong enough to justify both the spending and valuations attached to the sector.”

Jackson Hole

This will be a tricky one for investors to navigate, as most events around the Federal Reserve have become over the last few months. The central bank’s chairman Kevin Warsh has stopped giving forward guidance on monetary policy, making his speaking engagements volatile market events.

On top of that, Jackson Hole has a history of providing paradigm-shifting moments. In 2022, for example, former Fed chief Jerome Powell gave a brief and hawkish speech, which sparked a sell-off of more than 3% in the S&P 500.

Warsh has so far talked tough on inflation, dousing hopes of rate cuts. But several economic data points recently — like the July jobs report and retail sales, and Walmart’s worrying outlook — has taken investor expectations for imminent hikes off the table for now.

Still, inflation remains sticky at 3.4% year-over-year, so it’s unclear if Warsh will stick with his hawkish messaging.

It’s also unclear what type of messaging exactly investors would cheer on. Given their inflation concerns driving bond yields higher, less hawkish talk from Warsh could worsen inflationary fears. But with certain economic data points showing weakness lately, a slightly more dovish tone could be a welcome thing for investors.