Powell signals possible Fed rate cut in September
Federal Reserve Chair Jerome Powell opened the door to a September interest rate cut, asserting that “downside risks to employment are rising.”
U.S. stocks closed lower on Aug. 25 as investors took a breather from record highs last week to wait for chip giant Nvidia’s earnings for the next move.
Nvidia’s earnings are due on Aug. 27, after the market closes. Nvidia is expected to post a 48% rise in earnings per share on revenue of $45.9 billion for its second fiscal quarter, according to data firm LSEG. However, investors will be watching for the company’s outlook to see how tariffs, China and artificial intelligence investments are panning out.
“Saying this is the most important stock in the world is an understatement,” said Jay Woods, chief global strategist at Freedom Capital Markets. “The stock’s average move after an earnings release is plus or minus 7.4%, so just an average move will make an impact on the entire market.” Nvidia has a heavy weighting in major stock indexes, especially the Nasdaq and S&P 500.
“As Nvidia goes, so go most of the semiconductor stocks and AI plays,” he said. “They are the dominant player in the space and positive forward guidance combined with continued strong demand will likely lift the sector. Any surprising slowdown and the negative impact could be dramatic.”
At the end of the week, investors will also see the Federal Reserve’s preferred inflation gauge, the July personal consumption expenditure price index. Core PCE, minus volatile food and energy prices, are expected to rise 2.9% on a year-over-year basis, compared to a 2.8% increase in June, according to economists polled by FactSet.
“It is still premature to dismiss tariff impacts on consumer prices at this stage, even if PCE is well behaved,” wrote RBC’s Chief Economist Frances Donald and U.S. Economist Carrie Freestone. “There will be a lag between tariff-driven producer prices and consumer prices, and we don’t expect consumer prices to show more serious evidence of tariffs until late” in the third quarter.
The blue-chip Dow slid 0.77%, or 349.27 points, to 45,282.47; the broad S&P 500 fell 0.43%, or 27.59 points, to 6,439.32 and the tech-heavy Nasdaq slipped 0.22%, or 47.243 points, to 21,449.292. The benchmark 10-year Treasury yield rose to 4.281%.
Despite an expected uptick in inflation, Federal Reserve Chairman Jerome Powell suggested last week he might be ready to support a rate cut soon. Stocks rallied on those comments, with the Dow closing at a record high.
Lower rates drop the cost of borrowing, which should spur business investments and consumer spending to lift the economy.
Corporate news
- Keurig Dr Pepper will buy European coffee company JDE Peet’s for roughly $18 billion. Keurig shares tumbled 11.48%.
- Rocket Labs is expanding its semiconductor manufacturing capabilities and plans to open the launch complex for the Neutron rocket this week. Shares jumped 6.4%.
- Shares of furniture stores such as Arhaus and RH slumped after Trump said tariffs on furniture imports may come within the next 50 days. Arhaus shares fell 3.3% and RH stock shed 5.33%.
- Vital Energy agreed to be acquired by Crescent energy for $3.1 billion. The deal is expected to close by year-end. Vital stock rallied 14.65%.
- Comcast’s NBC and Disney’s ABC should have their licenses revoked, Trump said in a social media post. Shares of both companies were fractionally lower.
- Intel slipped 1.01% to last week’s gains after the U.S. government confirmed a 10% stake in the chipmaker.
- Verint Systems reportedly will be acquired by private equity firm Thoma Bravo for about $2 billion, including debt. Verint was down 1.32%.
Cryptocurrency
Michael Saylor, Microstrategy co-founder, hinted on social media the company will buy more Bitcoin.
Separately, Trish Turner said in a LinkedIn post she resigned as head of the IRS’ digital assets division, just three months into the role.
Ether rose to a new record over the weekend.
Bitcoin was last down 2.83% at $110,367.30 and Ether down 8.01% at $4,415.98.
(This story was updated with new information.)
Medora Lee is a money, markets and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.
