US Stocks Rally Loses Steam After Fed Rate Cut Enthusiasm Fades

US stocks drifted lower Monday, after last week’s euphoria over the potential for interest-rate cuts faded as traders turned their attention back to tariffs and corporate America’s profit outlook.

The S&P 500 Index was down 0.2% as of 9:35 a.m. in New York, after leaping 1.5% on Friday for its first gain in six sessions to trade just shy of records. The Nasdaq 100 Index fell 0.3% ahead of earnings from artificial-intelligence darling Nvidia Corp. on Wednesday. A basket tracking the Magnificent Seven stocks including Apple Inc., Alphabet Inc. and Meta Platforms Inc., fell 0.4%. Intel Corp. jumped 1.8% after the US agreed to take a 10% stake in the chipmaker.

Among individual stocks, Keurig Dr Pepper Inc. declined 8.2% after agreeing to buy JDE Peet’s NV for $18.4 billion to bolster its struggling coffee business before kicking off a split of its operations. Furniture stocks slumped after President Donald Trump announced a “major Tariff Investigation on Furniture coming into the United States.” Arhaus and RH respectively dropped 3.9% and 9.1%. Wayfair slid 8.2% while Ethan Allen edged up 0.4%.

Traders are breathing easier heading into this week after Federal Reserve Chair Jerome Powell indicated on Friday in a speech in Jackson Hole, Wyoming, that interest rate cuts are coming. The next test for the stock market will be a read on what’s been driving gains for the past few years: artificial intelligence euphoria.

“Tech is a big wildcard,” wrote Adam Crisafulli, founder of Vital Knowledge. “Stocks rallied across the board on Friday after Powell, but the recent aggressive rotation trade out of tech and into cyclical/value is still fresh in people’s memory…Nvidia will need to be particularly robust to spur an aggressive pivot back into the industry.”

Traders are hoping Nvidia can soothe fears about AI spending and effectively confirm that the stock market’s latest rally isn’t just a technology bubble. Nvidia’s role as a key supplier of chips for artificial intelligence and its heavy weighting give it outsized influence as a bellwether for the broader market. Dell Technologies Inc. and Marvell Technology Inc. also report results later this week.

More than 90% of S&P 500 companies have reported their results this earnings season. They’re on track for an eighth-straight quarter of growth, with profits estimated to climb by nearly 11% — more than triple the preseason estimate, according to data compiled by Bloomberg Intelligence.

Elsewhere, Verint Systems Inc. declined 1.2% after Thoma Bravo agreed to buy the call center software maker for $1.23 billion in cash as the private equity firm builds out its software portfolio. And PDD Holdings Inc. slipped 1.9% after company behind the popular Temu platform reported net income and adjusted earnings per American depositary receipts that beat the average analyst estimates.

Meantime, American Eagle Outfitters fell 3.9% after Bank of America Global Research cut the recommendation on the apparel retailer to underperform amid tariff pressures on profitability.

Traders’ eyes on Friday will remain glued to the Fed’s preferred measure of underlying US inflation — the so-called core personal consumption expenditures price index — which is forecast to climb 2.9% in July from a year earlier, well below the central bank’s 2% target.

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