The U.S Stock Market Falls as Investors Focus on Retail Earnings and Await Powell's Remarks

U.S. equities opened lower on Tuesday as Wall Street digested Home Depot Inc.’s latest results, which marked the start of a series of major retail earnings reports. At the same time, market participants are turning their attention to the Federal Reserve’s annual Jackson Hole symposium later this week for signals on the future path of interest rates.

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The S&P 500 slipped 0.1% at the open, dragged down by declines in energy and communication services stocks. Meanwhile, Palo Alto Networks Inc. emerged as the session’s top gainer after the cybersecurity firm issued an annual sales forecast that exceeded analysts’ expectations.

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The Nasdaq 100, heavily weighted toward technology, edged down 0.2%, while the Dow Jones Industrial Average bucked the trend, rising 0.2% and moving toward a record close.

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This week’s retail earnings lineup is expected to shed light on the resilience of U.S. consumer spending, a key driver of the economy. Home Depot reported a return to sales growth in its second quarter, setting a positive tone for the sector. Other major retailers, including Lowe’s Cos., Target Corp., and Walmart Inc., are all set to report in the coming days.

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On the macroeconomic front, Treasury Secretary Scott Bessent attributed the recent uptick in services inflation largely to higher investment service costs. His comments came just days ahead of the Federal Reserve’s Jackson Hole conference, where Chair Jerome Powell is scheduled to deliver a highly anticipated speech on Friday. Investors are eager for any guidance that could confirm expectations of an interest rate cut as soon as September.

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“Powell’s remarks at Jackson Hole could be a turning point for markets,” said Stephen Schwartz, founding partner at Pioneer Financial. “We believe he will strongly signal that rate cuts are likely at the upcoming September meeting.”

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Equities have enjoyed solid support from a surprisingly strong earnings season. Companies have reported an average 8.2% upside surprise on results, according to Barclays, prompting institutional investors such as mutual funds to boost their equity exposure.

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“Institutional buyers are stepping back in after retail dominated for much of the past year,” wrote Venu Krishna, head of U.S. equity strategy at Barclays Capital, in a recent note. He highlighted that U.S. mutual fund equity allocations have climbed back above their long-term median “for the first time in over a year.”

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Looking ahead, markets will focus on several key data points and policy updates this week. Minutes from the Federal Open Market Committee’s latest meeting are due Wednesday, providing more insight into policymakers’ thinking. Additionally, initial jobless claims, scheduled for release Thursday, will be closely watched for signs of labor market health.

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