Equity traders reeling from the market’s worst stretch since February face some pivotal events in the days ahead, and a closely watched speech by Federal Reserve Chair Jerome Powell may not even be the biggest test of all.

Ahead of Powell’s address Friday at a Fed symposium in Wyoming, traders are going to look to a crucial earnings report Wednesday from Nvidia Corp. to set the tone. A blowout forecast for surging revenue in May from the chipmaker, now the fourth-largest component of the S&P 500 Index, helped ignite the artificial-intelligence rally that’s powered the benchmark’s roughly 14% advance this year.

Powell then caps off the week. A Fed chair’s speech at the conference has typically buoyed stocks since the turn of the millennium, with the S&P 500 gaining 0.4% on average in the following week, data compiled by Bloomberg Intelligence show. But last year’s appearance is still fresh in traders’ minds: Stocks slumped 3.2% in the week following Powell’s remarks, according to BI, after he warned of keeping policy restrictive to battle inflation.

The risk this time is he leans into the prospect of additional tightening this year, which may crimp expectations for growth at a time when worries are mounting over China. It’s a scenario that would also jeopardize Wall Street profit forecasts, especially for high-flying tech shares.

“Investors are betting on a narrative that inflation is under control and the Fed can declare victory, but it has yet to become a reality — and that’s the biggest risk to the stock market,” said Stephanie Lang, chief investment officer at Homrich Berg. At the same time, “it’s going to be tough for this rally to continue unless Nvidia can translate the power of AI into earnings growth.”

Over the long haul, however, the path of the Fed is paramount, with three policy-setting meetings left in 2023. In the interest-rate market, traders are leaning toward a pause next month and have priced in less than half of a quarter-point hike for the following decision in November.

A report on consumer prices this month showed that inflation was tame in July. But robust retail sales data also showed that US consumers remain resilient, which could push the Fed to pursue more aggressive policy should inflationary pressures prove sticky.

As the selloff in US stocks gained momentum last week, with the S&P 500 posting its first three-week slide since February, so did the appetite for options contracts betting on more losses.

More than 25 million put options traded on US exchanges on Thursday, the most since the banking tumult in March — while the demand for calls remained about average, according to data compiled by Bloomberg. The measure rose even further Friday when contracts tied to stocks and indexes expired.

“The elevated put volume was a function of markets selling off into a new, lower-than-we’ve seen recently spot range,” Rocky Fishman, founder of derivatives analytical firm Asym 500, said by email. “The proximity to the monthly expiration helped push it above the previous highs.”

The S&P 500 has dropped 4.8% in August, on pace for the worst month this year, and the Cboe VIX Index — a measure of expected swings in the benchmark — is near the highest since May. While the weakness in stocks is hardly fostering panic, derivatives traders are definitely taking notice.

Call buying to open a position — seen as a gauge of bullish wagers — has dropped to the lowest level this year relative to puts to open a position, Options Clearing Corp. data analyzed by Citigroup Inc. show. A similar trend can be seen in a broader measure that also includes put and call selling as a barometer for upside and downside bets.

The positioning puts the Fed symposium under an even brighter spotlight. The setup going into the meeting is “complex,” says Dennis Debusschere, president of 22V Research LLC, with rising Treasury yields pressuring long-duration equities and the fight against inflation far from over.

“Do not expect Powell to deliver the hammer as he did in 2022,” he said in a note to clients. “We don’t think Powell will change his tone away from data dependency, which won’t be perceived to be as hawkish when yields are rising and risk assets underperforming.”