Investors, traders and speculators stepped back after a furious rally triggered by Federal Reserve Chair Jerome Powell’s dovish speech at the Jackson Hole Economic Symposium.
With the direction of interest rates seemingly settled, attention has turned to the biggest stock ever by market capitalization and the most important company on the planet amid a still-expanding artificial intelligence revolution.
“The baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,” was all Powell had to say Friday for market participants to price in easier money.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more – straight to your e-mail.
Profit and prosper with the best of expert advice – straight to your e-mail.
Today, the blue-chip Dow Jones Industrial Average closed down 0.8% at 45,282, the broad-based S&P 500 was off 0.4% to 6,439, and the tech-heavy Nasdaq Composite lost 0.2% at 21,445.
“The huge rally on the Powell policy shift on Friday is seeing some profit-taking,” observes Louis Navellier of Navellier & Associates. “In the short term, however, lower interest rates are undeniably stimulative. The big question is, will the longer-term interest rates follow the Fed’s cuts in overnight fed funds?”
The yield on the 2-year U.S. Treasury note was up to 3.730% on Monday from 3.688% on Friday, while the 10-year yield climbed to 4.283% from 4.258%.
Thirty-day federal funds futures prices show an 84.3% probability of a 25-basis-point rate cut at the next Fed meeting in September.
“Overall,” Navellier concludes, “the trend remains positive. The AI narrative remains strong, despite increasing comments about an ‘AI Bubble’ being heard.”
How you can follow Nvidia earnings
No single event on the economic calendar measures up to the revelation of fiscal 2026 second-quarter results for Nvidia (NVDA, +1.0%), which is happening after the closing bell on Wednesday.
Indeed, you can follow events leading up to and after the announcement – including CEO Jensen Huang’s press conference – on our live Nvidia earnings blog.
And all of the incoming data together is just a prelude until the next jobs report on Friday, September 5, and the next consumer inflation report on Thursday, September 11.
“This week’s docket will provide plenty of fodder for the policy debate at the September FOMC meeting,” writes Deutsche Bank Chief U.S. Economist Matthew Luzzetti. Incoming data includes weekly jobless claims on Thursday and the Personal Consumption Expenditures Price Index (PCE) on Friday.
“That being said, these releases are merely the appetizer and will largely serve to provide context around the following weeks’ August employment and CPI reports, both of which will weigh more heavily in Fed officials’ deliberations.”
We’ll also hear from multiple Fed speakers, including Richmond Fed President Tom Barkin twice and Fed Governor Chris Waller on Thursday. Waller is prominent on the list of potential answers to the question, who will replace Jerome Powell as Fed chair?
In addition to his (and Barkin’s) views on current as well as longer-term issues of monetary policy, investors will seek clues in Waller’s and (Barkin’s) words on how to invest for a fall rate cut by the Fed.
Trump investigates furniture
The story of President Trump’s tariffs took another particular turn late Friday when he took to Truth Social to announce his administration had launched an investigation into imported furniture.
“Within the next 50 days,” the President said, “that Investigation will be completed, and Furniture coming from other Countries into the United States will be Tariffed at a Rate yet to be determined.”
According to Trump, “This will bring the Furniture Business back to North Carolina, South Carolina, Michigan, and States all across the Union.”
Wayfair (W), RH (RH) and Williams-Sonoma (WSM) are among the consumer discretionary stocks that sell imported furniture. They started selling off in the after-hours market Friday and suffered more losses Monday, W falling 6.0%, RH 5.3% and WSM 2.7%.
La-Z-Boy (LZB), which relies on a mostly domestic supply chain, was up 0.2%.
Can NKE stock just do it again?
Nike (NKE, +1.0%) was one of just two of the 30 Dow Jones stocks to close in the green Monday, joining NVDA in putting up a gain of just greater than 1% on a day when most of the rest of the market struggled to catch bids.
So what’s up? Well, according to Jefferies analyst Randal Konik, Nike is about to start selling its products again on Amazon.com (AMZN, -0.4%) for the first time since 2019 and will have a dedicated page on the ecommerce behemoth’s site.
“We believe this partnership reinforces the brand’s ubiquity and large total addressable market,” Konik notes. In fact, this reunification of icons could mark a turning point for the Swoosh.
“As NKE rebalances wholesale distribution and inventories normalize,” the analyst concludes, “we believe last quarter marked the bottom.” Konik rates NKE stock Buy with a 12-month target price of $115, 45.2% upside from its closing price on Monday.
Konik also says he’s an “aggressive buyer” at these levels. “We still see a V-shaped recovery in fiscal 2027 as innovation resonates and margins rebound.” NKE stock, he notes, is trading at a price-to-sales ratio near 10-year lows.
