US stock markets fell on Monday after a strong rebound on Friday, following comments by Federal Reserve Chair Jerome Powell. Powell suggested a September interest rate cut is possible but not guaranteed, creating mixed reactions among investors.
Last week, the US dollar dropped after Powell’s remarks at the Fed’s annual Jackson Hole symposium in Wyoming. On Monday, the dollar rebounded, and Treasury yields moved higher, signaling cautious market sentiment.
Major banks, including Barclays, BNP Paribas, and Deutsche Bank, now anticipate a 25-basis-point cut from the Fed in September. Futures traders are pricing in an 84% chance of a September rate reduction, according to the CME Group’s FedWatch Tool.
“On Friday, there was a lot of excitement after Powell hinted at a likely rate cut. The market may have overreacted,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York. Cardillo added that a 25-basis-point cut is likely, but more depends on upcoming economic data. “A lot hinges on this Friday’s personal consumption expenditures (PCE) price index. It will influence the Fed’s next move,” he said.
Investors are now closely watching the August PCE inflation data, due before the Fed’s September 16-17 meeting. The PCE index is considered the Fed’s preferred gauge of inflation, and its results could shape whether the central bank moves forward with the expected rate cut.
The US stock market’s pullback on Monday reflects investor caution, as many reassess expectations after last week’s strong gains. Analysts say markets may adjust further depending on economic readings and Fed signals in the coming days.
While a Fed rate cut is widely expected, experts warn the size and timing remain uncertain. Many investors are preparing for modest moves, keeping an eye on inflation trends and economic growth indicators. The dollar’s strength may continue to influence trading in global markets, as currency shifts affect export and import sectors, corporate earnings, and investor sentiment. Treasury yields are also being monitored for clues about future Fed policy and economic health.
Overall, markets remain sensitive to both Fed guidance and key economic data. Investors are balancing optimism about potential rate cuts with caution over persistent inflation pressures and economic signals.
