Trump Turns Up the Heat on the Fed

Good Morning, folks.

Today, markets are locking in bets on a September Fed rate cut—though investors can’t quite agree on what the road looks like beyond that first move.

Monday’s late-day retreat showed just how jittery sentiment remains, with stocks slipping as traders weigh growth risks and earnings pressure.

– Truly yours, Fred Frost

📉 Yesterday's Market Recap

Yesterday, Wall Street took a breather after last week's rally, with mixed signals across the board. The S&P 500 dipped 0.2%, the Dow dropped 0.7%, and the Nasdaq eked out a 0.1% gain. Tariffs and Fed rate cut uncertainties kept investors on edge.

• Healthcare Stocks Drag: Eli Lilly’s weight-loss pill didn’t work so well, and the stock is plunging → Market Watch


• Tech Holds Firm: Earnings live: PDD Holdings stock falls after hours, Wolfspeed gains as Nvidia's earnings countdown begins. → Yahoo Finance


• Keurig Dr Pepper Sinks: Keurig Dr Pepper will buy a Dutch coffee group for over $18 billion and split into two companies → CNN

📉 Daily Performance Snapshot

🔭 What to Watch Today

Today’s lineup could sway markets with key data drops and corporate earnings on deck, testing investor sentiment amid tariff talks and Fed uncertainty.

💡 Opportunity Watch

With geopolitical tensions and market shifts in play, here are a few angles for savvy investors to consider.

• Sprott Physical Platinum Trust (SPPP): Up 32% YTD with a soaring Growth score, a hedge against inflation. → Benzinga
• First Solar (FSLR): Trading at $199.44 with strong EPS, a bet on green energy growth. → MarketBeat
• Vital Energy (VTLE): Stock surged 13% on a $3.1 billion acquisition by Crescent Energy. → CNBC

🔥 The Big Bullet

Markets price a September Fed cut while the post-cut path stays uncertain

What happened: Investors leaned into the view that the Federal Reserve will reduce rates in September, even as Monday's session showed mixed conviction. After last week's surge, stocks wobbled with a broad retreat into the close. A detailed look at positioning and commentary shows that markets are confident about a first cut but unsure about what follows. That uncertainty helped push the Dow and S&P lower by the close. Meanwhile, the Nasdaq's early strength faded as traders reassessed growth expectations and earnings risk. Closing data confirmed a downside tilt as U.S. stocks finished lower on the day. Overseas, sentiment tracked Wall Street's swings heading into Asia's Tuesday trade. Overall, the story is a market still betting on relief but bracing for a bumpier road beyond the first move.

Why it matters: The pace and size of any easing cycle will shape equity valuations, credit spreads, and dollar moves. A faster track could lift rate-sensitive sectors, while a slower path could keep financial conditions tighter for longer. Chair Powell's stance at Jackson Hole signaled flexibility, and several observers framed it as a calculated risk; his “big gamble” message reinforced that policy will remain data-dependent. Global spillovers are already visible as Asian shares tracked Wall Street's swings on rate-cut hopes. For fixed income, the trajectory of cuts will drive curve shape and real yields, with knock-on effects for mortgages and corporate funding costs. For equities, earnings multiples are sensitive to the risk-free rate, especially in tech and other long-duration names. For commodities and FX, a gentler Fed could weaken the dollar and support cyclicals, but a hesitant Fed could do the opposite. In short, the “how fast” question may matter more to pricing than the “if” on the first move.

What's next: Traders will watch incoming data and guidance to refine the path beyond September. Near-term market tone may hinge on mega-cap earnings and supply dynamics, with attention on tech leadership as Nvidia's results loom. On the macro side, risks around growth, inflation stickiness, and credit are front and center; a concise risk map comes from five potential market problems flagged for the fall. Watch whether forward guidance points to a one-and-pause, a gradual pace, or a quicker sequence of cuts. Also monitor how financial conditions evolve after each policy signal. Equity breadth and small-cap performance could reveal whether easing truly supports the broader market. In fixed income, follow term premium behavior and demand at auctions as rate expectations shift. Finally, track cross-asset volatility for signs that positioning is too one-sided on the first cut.

• Trading Day: Pivoting on Powell's pivot - Reuters
• Dow Loses About 350 Points After Record-Breaking Run - Wall Street Journal
• The sector winners and losers of interest rate cuts - Axios