Risk Appetite Nosedives Ahead of Nvidia, NFP Reports

KCM Trade | Market Commentary | Tim Waterer | Risk Appetite Nosedives Ahead of Nvidia, NFP Reports

Risk appetite has sharply deteriorated this week, even ahead of two key events that could spark further volatility—Nvidia’s earnings and the delayed payrolls report. Growing unease over stretched AI valuations, coupled with declining expectations for another Fed rate cut this year, has pushed equities lower as traders move to reduce exposure. Over the past five days, the S&P 500 has fallen 3.5%, while the Nasdaq has dropped more than 4%.

With the tech sector showing clear signs of instability, the spotlight once again falls on Nvidia to reassure investors that AI momentum is still intact. The market favourite has consistently outperformed expectations—beating earnings estimates for twelve consecutive quarters—so traders are waiting to see whether the trend continues. Current forecasts point to quarterly revenue of roughly $55 billion and earnings per share (EPS) of around $1.25.

However, even if Nvidia meets these expectations, it may not be enough to soothe the market amid heightened scrutiny over tech-sector spending. In reality, it’s the company’s forward guidance that will determine whether the latest pullback in tech stocks has bottomed out or if further downside lies ahead. Nvidia’s earnings release could either deepen the current sell-off or help stabilize sentiment across the sector. The company will report its results after the U.S. market closes on Wednesday.

The U.S. Dollar continues to strengthen against the yen, establishing a 3% USD/JPY rise in the past month. This move has been driven by uncertainty over the timing of the next Fed rate cut and expectations of fiscal stimulus in Japan. Yet, further upside may be limited as markets weigh the possibility of a Bank of Japan rate hike next month and growing concerns that the yen’s weakness is becoming excessive. While intervention does not appear imminent, additional depreciation could increase the likelihood of action. After all, although a weaker currency can benefit Japan’s export sector, it also fuels imported inflation—something the BOJ is keen to avoid with CPI already running sustainably above its 2% target.

Gold’s recent momentum has been tempered by a stronger U.S. Dollar and uncertainty over the timing of the next Fed rate cut. After briefly touching the $4,200 level last week, the precious metal has pulled back, though renewed risk aversion in markets has helped limit the decline by keeping gold attractive as a safety asset. Spot gold is currently trading near $4,069, just above support at $4,020; a break below this level could push prices back under $4,000. More solid support lies at $3,974 and then $3,890. However, resistance at $4111 would need to be overcome to open a potential run back towards $4200.

In the near term, gold may continue to trade choppily as markets digest a backlog of U.S. economic data ahead of next month’s key Fed rate decision. Longer term, the outlook remains promising, provided predictions for a dovish Fed stance in 2026 stay intact.

Alongside Nvidia’s highly anticipated earnings release, the other headline event this week is the long-delayed September Non-Farm Payrolls (NFP) report. With the U.S. government reopening after a 43-day shutdown, agencies are finally clearing a backlog of economic data. Before the shutdown, labour market momentum had already been weakening, with a three-month average of just 40,000 new jobs across June, July, and August. Forecasts now point to an increase of roughly 55,000 jobs for September when the NFP figures are published on Thursday.

A downside surprise could shift market sentiment back toward expecting a Fed rate cut next month. Yet, a stronger-than-expected NFP print may weaken those hopes. In other words, the combined impact of Nvidia’s earnings and the NFP report will determine whether equities can break out of their current slump.

By Tim Waterer, Chief Market Analyst of KCM Trade & Forbes Advisor Australia Advisory Board Member