Stocks Set to Open Lower as Fed Rate-Cut Optimism Fades, Nvidia Earnings and U.S. PCE Inflation Data Awaited

September S&P 500 E-Mini futures (ESU25) are down -0.24%, and September Nasdaq 100 E-Mini futures (NQU25) are down -0.32% this morning, pointing to a slightly lower open on Wall Street after last Friday’s rally as some of the optimism around expectations for Federal Reserve interest rate cuts faded.

Investor focus this week is on an earnings report from semiconductor stalwart Nvidia, comments from Fed officials, and the release of the Fed’s preferred inflation gauge.

In Friday’s trading session, Wall Street’s major equity averages closed sharply higher, with the Dow notching a new all-time high. The Magnificent Seven stocks rallied, with Tesla (TSLA) climbing over +6% and Alphabet (GOOGL) gaining more than +3%. Also, chip stocks advanced, with ON Semiconductor (ON) surging over +6% and GlobalFoundries (GFS) rising more than +5%. In addition, Zoom Communications (ZM) jumped over +12% after the videoconferencing platform posted upbeat Q2 results and raised its full-year guidance. On the bearish side, Intuit (INTU) slid more than -5% and was the top percentage loser on the S&P 500 and Nasdaq 100 after the company issued disappointing full-year guidance.

Speaking Friday at the Fed’s annual conference in Jackson Hole, Wyoming, Chair Jerome Powell cautiously signaled the possibility of a September interest rate cut, citing rising risks to the labor market even as concerns over inflation persist. “The stability of the unemployment rate and other labor market measures allows us to proceed carefully as we consider changes to our policy stance. Nonetheless, with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,” Powell said.

“Powell has thrown the door wide open to a September cut with his Jackson Hole speech that sends a clear, strong signal the Fed is on track to reduce rates by 25 basis points at that meeting,” said Krishna Guha at Evercore.

Meanwhile, U.S. rate futures have priced in an 87.3% probability of a 25 basis point rate cut and a 12.7% chance of no rate change at the conclusion of the Fed’s September meeting.

On the trade front, U.S. President Donald Trump announced on Friday a “major” tariff probe targeting imported furniture. In a Truth Social post, President Trump stated, “Furniture coming from other Countries into the United States will be Tariffed at a Rate yet to be determined.”

This week, market participants will focus on earnings reports from several major companies, with semiconductor giant Nvidia’s (NVDA) report on Wednesday attracting the most attention. Nvidia’s earnings reports have been market-moving since May 2023, when the company delivered the revenue growth forecast that reverberated globally. Analysts expect another record in sales, driven by the continued robust demand for the company’s GPU chips used in generative AI applications. Prominent companies like CrowdStrike Holdings (CRWD), Snowflake (SNOW), Dell Technologies (DELL), Marvell Technology (MRVL), HP Inc. (HPQ), and Autodesk (ADSK) are also set to release their quarterly results this week.

Market watchers will also keep a close eye on a slew of U.S. economic data releases this week to assess whether tariffs are driving inflation higher and to gauge the extent to which the economy is slowing. The July reading of the U.S. core personal consumption expenditures price index, the Fed’s preferred inflation gauge, will be the main highlight. If the core PCE price index comes in strong, then the Fed may need another weak jobs report for August to justify lowering interest rates, according to Pepperstone head of research Chris Weston. Other data will provide insight into the state of the U.S. economy, including U.S. GDP (second estimate), the Conference Board’s Consumer Confidence Index, Durable Goods Orders, Core Durable Goods Orders, Initial Jobless Claims, Personal Income, and Personal Spending.

In addition, investors will follow comments from Fed officials to gauge their appetite for a rate cut in September. Fed Governor Christopher Waller, Dallas Fed President Lorie Logan, New York Fed President John Williams, and Richmond Fed President Tom Barkin are scheduled to speak this week.

Today, investors will focus on U.S. New Home Sales data, which is set to be released in a couple of hours. Economists, on average, forecast that July new home sales will stand at 635K, compared to 627K in June.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.273%, up +0.31%.

The Euro Stoxx 50 Index is down -0.56% this morning, erasing Friday’s gains that were driven by dovish remarks from Fed Chair Jerome Powell. Renewable energy stocks underperformed on Monday, with Orsted A/S (ORSTE.C.DX) tumbling more than -17% after the Trump administration halted construction on a nearly completed offshore wind farm. Investors found little reassurance in a survey that showed German business morale improved in August to its highest level in 15 months. Meanwhile, European Central Bank President Christine Lagarde, speaking in Jackson Hole on Saturday, said the European labor market has remained surprisingly resilient despite an inflation shock and aggressive interest rate increases in recent years. Investors are awaiting preliminary August inflation figures from Germany, France, Italy, and Spain later this week, along with an account of the European Central Bank’s July policy meeting that will likely underscore the increasingly difficult path to another rate cut. In other corporate news, JDE Peet’s (JDEP.NA) soared over +15% after Keurig Dr Pepper agreed to acquire the Dutch coffee maker for 15.7 billion euros ($18.4 billion).

Germany’s Ifo Business Climate Index was released today.

The German August Ifo Business Climate Index came in at 89.0, stronger than expectations of 88.7.

Asian stock markets today settled in the green. China’s Shanghai Composite Index (SHCOMP) closed up +1.51%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.41%.

China’s Shanghai Composite Index closed sharply higher today, hitting a fresh 10-year high, led by gains in rare earth and property stocks. Rare earth stocks jumped on Monday after China, on Friday, issued interim rules for overseeing and managing its rare earths mining, smelting, and separation activities. Property stocks also rallied as measures to encourage home buying in Shanghai bolstered stimulus hopes. The gains came after Shanghai authorities lifted restrictions on the number of units buyers can purchase in suburban areas of the city. Non-residents who have paid pensions for three years are now allowed to purchase new homes in urban areas, rather than being limited to buying only existing residences there. Analysts noted that while the measures are unlikely to significantly boost sluggish sales, they indicate growing policy momentum. Meanwhile, the Securities Daily reported that further measures could be introduced as early as September, with authorities preparing to accelerate urban renovation projects and support the struggling property market. In other news, HSBC raised its year-end targets to 4,000 for the Shanghai Composite Index and 4,600 for the CSI 300, citing abundant liquidity. “We see the rally continuing on abundant domestic liquidity from deposit migration, fund issuance, and insurance fund buying,” analysts at HSBC Qianhai said in a note. In corporate news, Pop Mart gained over +1% in Hong Kong after Hang Seng Indexes announced on Friday that the stock would be added to the Hang Seng Index, effective September 8th. This week, investors will turn their focus to China’s industrial profits data for July for fresh insights into the health of the world’s second-largest economy. Attention will then shift to official PMI readings due on the final day of August.

Japan’s Nikkei 225 Stock Index closed higher today, tracking Friday’s rally on Wall Street. Metal and machinery stocks led the gains on Monday. Technology stocks also advanced. Data from the Cabinet Office released on Monday showed that Japan’s June leading economic indicators index, which gauges the economic outlook for a few months ahead based on data such as job offers and consumer sentiment, was revised downward. Investors also digested hawkish comments from Bank of Japan Governor Kazuo Ueda. Speaking at the Fed’s Jackson Hole conference on Saturday, Ueda said wage increases are spreading beyond large firms and are likely to continue accelerating amid a tightening labor market, signaling his optimism that conditions for another interest rate hike were coming together. Meanwhile, the Asahi newspaper reported on Monday that Japan’s government is considering introducing a new tax to fund repairs of aging public infrastructure, replacing a decades-old gasoline surcharge set to be abolished by the end of the year. Investor focus this week is on a series of Japan’s economic data releases. Inflation figures, including producer prices for services and the Tokyo CPI, will indicate whether price growth could push the BOJ toward raising rates later this year. A separate set of data, including industrial production, retail sales, and the unemployment rate, will offer fresh signals on Japan’s economic resilience amid tariff pressures. Signs of strength could heighten expectations that the BOJ will hike rates as early as October. In corporate news, TOTO jumped over +8% after the luxury toilet maker announced on Friday it would build a $224 million plant in the U.S. state of Georgia, marking a shift away from production in Asia. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed down -3.42% to 24.25.

The Japanese June Leading Index came in at 105.6, weaker than expectations of 106.1.

Pre-Market U.S. Stock Movers

Wayfair (W), Williams-Sonoma (WSM), and RH (RH) fell more than -5% in pre-market trading after President Trump announced on Friday that the U.S. would launch an investigation into tariffs on furniture imports.

Cryptocurrency-exposed stocks are moving lower in pre-market trading after the price of Bitcoin dropped over the weekend. Strategy (MSTR) is down more than -3%. Also, MARA Holdings (MARA) is down over -4%, and Coinbase (COIN) is down more than -2%.

Keurig Dr Pepper (KDP) slid more than -4% in pre-market trading after the company agreed to buy Dutch coffee firm JDE Peet’s for about $18 billion.

Okta (OKTA) rose over +2% in pre-market trading after Truist upgraded the stock to Buy from Hold with a price target of $125.

Intel (INTC) gained more than +1% in pre-market trading after the U.S. government agreed to take a 9.9% stake in the chipmaker.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Monday - August 25th

Heico (HEI), Semtech (SMTC), NAPCO (NSSC), StealthGas (GASS).