Fed Rate Cut Enthusiasm Fades After U.S Stock Rally

U.S. equities eased lower Monday as last week’s excitement over potential Federal Reserve rate cuts faded, with investor attention pivoting toward trade tensions and corporate profit outlooks.

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The S&P 500 slipped 0.2% by 9:35 a.m. in New York, following Friday’s 1.5% surge the index’s first gain in six sessions which brought it close to record highs. The Nasdaq 100 shed 0.3% ahead of highly anticipated earnings from AI powerhouse Nvidia Corp. scheduled for Wednesday.

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A group tracking the “Magnificent Seven” tech giants, including Apple, Alphabet, and Meta Platforms, fell 0.4%. Meanwhile, Intel rose 1.8% after the U.S. government announced plans to acquire a 10% stake in the semiconductor company.

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Among individual names, Keurig Dr Pepper dropped 8.2% after agreeing to acquire JDE Peet’s NV for $18.4 billion, a strategic play to revive its coffee segment ahead of a planned operational split.

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Furniture stocks took a hit after President Donald Trump revealed a “major Tariff Investigation on Furniture coming into the United States.” Shares of Arhaus and RH fell 3.9% and 9.1% respectively, while Wayfair tumbled 8.2%. In contrast, Ethan Allen managed a modest 0.4% gain.

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Investor sentiment was lifted late last week after Fed Chair Jerome Powell signaled that rate cuts are on the horizon during his Jackson Hole address. Now, the spotlight turns to artificial intelligence the primary catalyst behind recent market strength.

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“Tech remains the big wildcard,” said Adam Crisafulli, founder of Vital Knowledge. “Friday’s rally was broad-based after Powell’s remarks, but the recent rotation out of tech into cyclical and value stocks is still fresh in traders’ minds… Nvidia will need to deliver strong numbers to reignite momentum in the sector.”

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With AI expectations running high, Nvidia’s results could set the tone for whether the recent rebound is sustainable or just another short-lived tech-driven surge. The chipmaker’s dominance in AI hardware makes its performance a critical barometer for market confidence.

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Later this week, Dell Technologies and Marvell Technology will also report earnings, further shaping the narrative for the tech sector.

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So far, more than 90% of S&P 500 companies have posted second-quarter results. According to Bloomberg Intelligence, earnings are on track for an eighth consecutive quarter of growth, with profits projected to rise nearly 11%, far surpassing early-season estimates of about 3%. This robust earnings trend provides a solid foundation for equity markets, even as macro uncertainties persist.

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Elsewhere, Verint Systems slipped 1.2% after private equity firm Thoma Bravo agreed to acquire the call-center software maker for $1.23 billion in cash as part of its continued push into enterprise software. PDD Holdings, the parent company of popular e-commerce platform Temu, dipped 1.9% despite posting better-than-expected earnings and revenue per American depositary receipt.

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Shares of American Eagle Outfitters fell 3.9% after Bank of America Global Research downgraded the retailer to underperform, citing concerns about tariff-related cost pressures.

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Looking ahead, investors will closely monitor the Fed’s preferred inflation gauge the core personal consumption expenditures (PCE) price index due Friday. Economists forecast a 2.9% year-over-year increase for July, still above the Fed’s 2% target but signaling progress toward price stability.

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