Powell, Tariffs, and the Uneasy Optimism of Wall Street

Jerome Powell does not speak in headlines, yet markets have learned to treat his every phrase as prophecy. Last Friday, the Federal Reserve Chair offered a measured suggestion: that an interest-rate cut could be under consideration when policymakers gather again in September. The language was cautious, hedged with qualifications, but it was enough to set off a burst of enthusiasm. The Dow closed at a record high for the first time since last December, brokerages rushed to raise their year-end targets for the S&P 500, and traders convinced themselves that the era of tight money might soon be winding down.

It was a familiar pattern in American finance: hope assembled around a conditional verb. For months, Powell had stuck to the narrative that monetary policy was "well positioned", the labour market was resilient, and the Fed was in no rush, choosing instead to monitor the impact of tariffs on inflation. But in Jackson Hole, the tone shifted. He placed greater emphasis on the risks facing the labour market and appeared to view the inflationary effect of tariffs as a transitory shock.

By Monday morning, the mood had already cooled. Stock index futures slipped, with S&P 500 contracts down 0.3% and Nasdaq futures lower by 0.4%. The stumble was modest, yet telling: the momentum Powell sparked was real, but fragile. Markets are restless when asked to wait, and Powell had been careful to remind investors that a cut was not assured.

The sense of hesitation comes at a delicate moment. Recent labor market data point to weakness, and for many traders, that softness is itself bullish. The logic is circular but durable: weaker jobs numbers increase the likelihood that the Fed will ease policy, and looser money often translates into higher asset prices. Yet another variable presses against that hope: tariffs. The latest round of duties has begun to show up in import prices, and while many economists insist the inflationary effects will prove transitory, the specter of higher costs lingers. Powell's colleagues on the Federal Open Market Committee have been warning, with varying degrees of urgency, that tariffs could complicate the inflation fight.

The coming days will deliver more clarity, or at least more data. The Personal Consumption Expenditures Price Index, the Fed's preferred inflation gauge, arrives Friday. Nonfarm payrolls will follow next week. Together, they will provide the backdrop against which Powell and his colleagues will decide whether September brings a rate cut or another wait-and-see. For now, markets have priced in an 83% chance of easing, according to the CME Fedwatch tool.

Beyond monetary policy, there are plenty of corporate news. Keurig Dr Pepper announced an $18.4 billion cash acquisition of Dutch coffee chain JDE Peet's, a move that sent its own shares tumbling 8% even as Peet's stock surged more than 17% in Europe. Intel gained after President Trump revealed that the U.S. government would take a 9.9% stake in the chipmaker, an $8.9 billion vote of confidence in domestic semiconductor capacity. E-commerce group PDD Holdings beat quarterly revenue estimates, while Verint Systems soared on reports of a takeover by private equity firm Thoma Bravo.

And then there is Nvidia, the chip designer that has come to symbolize both the promise and the excess of the artificial intelligence boom. Its $4 trillion valuation, almost unimaginable two years ago, will face another test when the company reports earnings this week. Investors are waiting to see whether the company's revenue-sharing deal with the U.S. government will enhance or diminish its breakneck growth. The outcome matters not just for Nvidia's shareholders but for the broader narrative of an AI-fueled market rally.

In Asia-Pacific, markets ended firmly in the green, while European indices are bearish.

Today's economic highlights:

On today's agenda: the Ifo Business Climate Index, Current Assessment, and Expectations in Germany; in the United States, the Chicago Fed National Activity Index and new home sales. See the full calendar here.

• Dollar index: 97,905
• Gold: $3,370
• Crude Oil (BRENT): $68.11 (WTI) $64.08
• United States 10 years: 4.27%
• BITCOIN: $111,500

In corporate news:

• Intel signed a deal with the US government for an $8.9 billion investment, giving the government a 9.9% stake as part of a broader $11.1 billion CHIPS Act-related funding initiative to boost domestic chip manufacturing.
• Bristol-Myers Squibb will present new data on Camzyos at the upcoming ESC Congress, including findings from real-world and Phase 3 trials for hypertrophic cardiomyopathy.
• Moody's Corp will acquire a majority stake in Egyptian credit rating agency MERIS, which will operate as an independent affiliate post-transaction.
• Keurig Dr Pepper announced an $18.4 billion deal to acquire JDE Peet's, followed by plans to split into two independent companies focused on coffee and beverages.
• Coinbase Global and Robinhood Markets shares fell after global stock exchanges urged regulators to tighten rules on tokenized stocks, citing investor risk and lack of safeguards.
• Procter & Gamble is selling China-made "bumbum" luxury diapers at Target as its US diaper brands lose market share to imports, signaling a shift in its manufacturing strategy.
• ONEOK, MPLX, Enbridge, and WhiteWater finalized investment plans to construct the Eiger Express Pipeline from West Texas to the Gulf Coast, aiming for mid-2028 service.
• BeOne Medicines agreed to sell royalty rights outside China on Amgen's lung cancer drug Imdelltra to Royalty Pharma for up to $950 million, with $885 million paid upfront.
• Blue Owl Capital, Chirisa Technology Parks, and Machine Investment Group closed a $4 billion funding deal to build a CoreWeave-leased AI data center in Pennsylvania.
• PDD Holdings beat Q2 revenue estimates but saw profits decline due to rising competition and costs, despite its Temu platform stabilizing in the US market.
• Thoma Bravo is nearing a deal to acquire Verint Systems for roughly $2 billion.
• SpaceX has postponed the test launch of its Starship rocket due to ground support equipment issues.

Analyst Recommendations:

• Alaska Air Group, Inc.: Raymond James upgrades to outperform from market perform with a target price of USD 70.
• American Airlines Group Inc.: Raymond James downgrades to market perform from outperform.
• Dr Horton: William O'Neil & Co Incorporated initiates coverage with a buy recommendation.
• Firstenergy Corp.: Barclays upgrades to overweight from equalweight with a price target raised from USD 43 to USD 49.
• Lazard: Keefe Bruyette & Woods upgrades to outperform from market perform and raises the target price from USD 60 to USD 65.
• Quest Diagnostics Incorporated: Baird downgrades to neutral from outperform with a target price of USD 194.
• Dollar Tree, Inc.: Gordon Haskett maintains its hold recommendation and raises the target price from USD 90 to USD 110.
• Symbotic Inc.: D.A. Davidson downgrades to neutral from buy and raises the target price from USD 35 to USD 47.
• Williams-Sonoma, Inc.: KeyBanc Capital Markets maintains its overweight recommendation and raises the target price from USD 181 to USD 230.