Dow Jones Surges To All-Time High In Mixed Week For Stocks

(MENAFN- ValueWalk) The Dow Jones Industrial Average closed last week at an all-time high in what was a mixed week for stocks. What's on tap this week?

The Dow Jones Industrial Average finished last week at an all-time high, closing Friday at 41,563 after rising 0.9% for the week.

The Dow Jones led the way in what was a mixed week for stocks. The large cap S&P 500 was also up for the week, climbing a modest 0.2%. It was the third straight week of gains for the S&P 500 .

However, the nasdaq Composite fell 0.9% on the week to 17,713, while the small cap Russell 2000 flatlined dropping a single point to 2,218.

Here's a look at what drove the markets last week and a peek at what's in store for this week following the Labor Day holiday in the U.S.

There were two primary catalysts that drove the markets last week - NVIDIA's second quarter earnings and the July Personal Consumption Expenditures (PCE) report on inflation.

NVIDIA had another blowout quarter, as earnings rose 168% and revenue hit a record $30 billion and rose 122% year over year. Yet, NVIDIA stock fell about 7% post earnings and was down nearly 6% for the week.

NVIDIA was also off to a bumpy start this week, to 6% on Tuesday.

Given the impressive Q2 results, which easily topped estimates, it is not immediately clear why NVIDIA was down. One reason may be that its Q3 outlook, which called for a record $32.5 billion in revenue, was not quite as astounding as investors hoped. It represents only an 80% revenue gain, year over year.

Another reason may have been the gross margin fell from 78.1% in Q1 to 75.4% in Q2 and is expected to be in that range for the rest of the year. These are ridiculously high margins either way, and the company guided for slightly lower margins earlier this year due to inventory provisions for lower-yielding Blackwell chips.

Earnings are really not the problem for NVIDIA; its ridiculously high valuation is. It is trading at 55 times earnings, which is actually down from 68 in early August, but it is still elevated, even for a stock with the massive earnings power of NVIDIA. The market is most likely correcting that high valuation.

The performance of NVIDIA stock had an impact on both the Nasdaq and the Dow. The Nasdaq fell in large part because of the NVIDIA swoon, which brought down other tech stocks with it. NVIDIA, however, is not in the Dow Jones index, so it didn't have the same negative effect. That's a big reason why the Dow had the best week and finished in record territory.

The other major catalyst last week came Friday, when the PCE report came out. This primary gauge of inflation is perhaps the most influential metric the Federal Reserve uses to determine the path of interest rates. The July PCE did not disappoint, as inflation rates stabilized at 2.5% while core inflation dropped slightly to 2.6%.

All of the major indexes gained on the news, as it largely confirms that the Fed will most likely lower interest rates at its next meeting on September 10 and 11.

This is a short week for the US markets after the Labor Day holiday on Monday. The two big events to watch are the earnings of another mega cap chipmaker, Broadcom (NASDAQ:AVGO) on Thursday after the market closes, and the August unemployment report on Friday.

Analysts are expecting a 43% revenue increase and a 14% jump in earnings, year-over-year, for Broadcom. Regarding the unemployment rate, economists anticipate it to drop to 4.2%, from 4.3% in July.

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