- Wall Street is heading into a pivotal week, with stocks riding high on expectations that the Federal Reserve will cut rates next month and signs that tariffs aren’t weighing on the economy as much as feared, so far. But minutes from the Fed’s last meeting, Jerome Powell’s Jackson Hole speech, and retail earnings will put the market’s views to the test.
U.S. stock futures pointed higher on Sunday evening ahead of a critical stretch for markets as investors brace for fresh clues on rate cuts and tariffs.
Futures tied to the Dow Jones Industrial Average rose 48 points, or 0.11%. S&P 500 futures were up 0.12%, and Nasdaq futures added 0.18%.
The yield on the 10-year Treasury was flat at 4.322%. The U.S. dollar was down 0.07% against the euro but up 0.07% against the yen.
Gold fell 0.25% to $3,374.10 per ounce. U.S. oil prices dropped 0.27% to $62.63 per barrel, and Brent crude fell 0.41% to $65.58.
Energy markets will also be in focus this week amid continued diplomacy to end Russia’s war on Ukraine as harsher U.S. sanctions on Moscow could target its oil exports, though President Donald Trump refrained from announcing any fresh penalties after ceasefire talks Friday failed to produce a deal.
Stocks have notched two consecutive weekly gains, with the S&P 500 hitting a fresh all-time high last week. That’s as corporate earnings have continued to come in strong and as the latest inflation readings were mixed but still haven’t set off panic about the effect of tariffs.
With the labor market also looking weaker, Wall Street overwhelmingly sees the inflation data giving the Federal Reserve a green light to resume rate cuts next month, further fueling market optimism.
But those views will be tested this week. On Wednesday, the Fed will release minutes from its policy meeting in July, when central bankers kept rates steady though two officials dissented. The details should show how much debate occurred and to what extent other policymakers were leaning a certain way.
Then the main attraction will take place on Friday, when Fed Chair Jerome Powell will deliver a speech at a gathering in Jackson Hole, Wyo. The annual event previously has served as an opportunity for policymakers to tease forthcoming rate moves.
Last year, Powell signaled a pivot to cuts, saying “the time has come for policy to adjust” and that “my confidence has grown that inflation is on a sustainable path back to 2%.” But he may not drop big hints this year, potentially setting up Wall Street for major disappointment.
Meanwhile, earnings season is winding down, but the coming week will feature several top retailers. Home Depot reports Tuesday, with Lowe’s and Target due on Wednesday. Walmart will put out its numbers on Thursday.
Their quarterly updates will provide new insights into how much tariffs are affecting prices and who is picking up the extra costs. The precise impact of tariffs on inflation remains somewhat of a mystery.
While companies may be absorbing much of the tariff costs for now, it’s not clear how much longer they can keep it up and how much consumers will be able to shoulder later.
If the retail giants keep eating tariff costs, that will show up on the bottom line and in their guidance. Citi doesn’t expect consumers to get hit with big price hikes in the future, even as more levies are expected to roll out.
“Softer demand means firms will have difficulty passing tariff costs on to consumers,” chief US economist Andrew Hollenhorst said in a note. “While some firms might still attempt to slowly increase prices in coming months, the experience so far suggests these increases will be modest in size. This should reduce concerns about upside risk to inflation and increase concerns that decreased profit margins will cause firms to pullback on hiring.”
