Wall Street’s main indexes edged lower on Wednesday after a U.S. inflation reading came in hotter than expected, while many investors stuck to the sidelines ahead of AI bellwether Nvidia’s earnings later in the day.

A Commerce Department report showed annual U.S. inflation increased 3.7% in the 12 months through July, a touch above expectations. Separate data showed the economy grew 1.5% in the second quarter.

The latest print added another wrinkle to the Federal Reserve’s policy outlook, raising the stakes for upcoming economic data. Investors will focus sharply on Fed Chair Kevin Warsh’s Jackson Hole speech on Friday.

“It wasn’t enough to shift the balance for September’s meeting, but if subsequent data point in the same direction, the Fed may feel more pressure to move off the sidelines,” said Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management.

The central bank’s next scheduled meeting is in September, putting the policy decision in focus during what is historically a weak month for equities. Odds of an interest rate hike at that meeting stand at 38.1%, according to the CME FedWatch tool.

“There is no crisis, it is more about expectations or guidance we are going to get from the Fed and what the Treasury is trying to do. That blends to some uncertainty and basically increases the risk premium,” said Greg Tuorto, head of U.S. small and midcap cap investing at Goldman Sachs Asset Management.

“But on the other side, on the positive side, the underlying economic environment is really good. Earnings for the companies that we own and some of the larger cap companies are standout,” he said.

At 2:00 p.m. the Dow Jones Industrial Average fell 122.15 points, or 0.23%, to 53,455.25, the S&P 500 lost 3.30 points, or 0.04%, to 7,673.98 and the Nasdaq Composite lost 42.59 points, or 0.16%, to 26,108.71.

Eyes on Nvidia for Verdict on AI

Investors will watch Nvidia’s quarterly update as anything less than a stellar report from the chip giant could rekindle doubts about the sustainability of the AI boom.

Nvidia was down 1.2% ahead of its closely watched report.

On the S&P 500, healthcare stocks were the biggest laggards with a 0.8% decline.

Moderna fell 8%, after strong gains on Tuesday although the stock remained well above the levels before the company, alongside Merck, disclosed a late-stage cancer vaccine trial data last week.

Meta rose 1.5% and was leading gains among megacaps after it agreed to pay up to $18 billion and make major changes to Facebook and Instagram to resolve U.S. states’ claims of harm to children. Apple was up 1%.

Shares of Intuit fell 4% after the TurboTax maker forecast annual revenue below Wall Street expectations.

J.M. Smucker gained almost 4% after the Folgers coffee maker forecast a smaller-than-expected decline in annual sales.

Meanwhile, a report, citing Iran’s Revolutionary Guards spokesperson, said Tehran and Oman have reached agreements on their share of the Strait of Hormuz and its revenue.

Worries over stubbornly high oil prices, rising government debt and inflation expectations had pushed Treasury yields to multi-year highs last week, although they retreated after the Treasury Department announced support measures.

Declining issues outnumbered advancers by a 1.2-to-1 ratio on the NYSE. There were 109 new highs and 51 new lows on the NYSE. On the Nasdaq, 1,874 stocks rose and 2,755 fell as declining issues outnumbered advancers by a 1.47-to-1 ratio. The S&P 500 posted 10 new 52-week highs and 3 new lows while the Nasdaq Composite recorded 58 new highs and 66 new lows.

(Reporting by Purvi Agarwal and Niket Nishant in Bengaluru; Editing by Shilpi Majumdar and David Gregorio)