Wall Street Pauses After Fed-Fueled Rally, All Eyes on Nvidia

Wall Street hit the brakes Monday after last week’s surge on hopes the Federal Reserve will finally start cutting rates.

The S&P 500 slipped 0.2%, hanging just shy of record highs, while the Dow Jones Industrial Average lost 279 points, or 0.6%, after setting its own record on Friday. The Nasdaq managed to eke out a 0.2% gain, thanks to Big Tech.

Nvidia and Alphabet both climbed nearly 2%, giving the market some cushion ahead of Nvidia’s earnings on Wednesday — an event investors are treating like a referendum on the AI boom.

“This is an incredibly important event,” said Michael Green at Simplify Asset Management.

With Nvidia making up nearly 8% of the S&P 500, the results could ripple across retirement funds and portfolios everywhere.

Not all stocks got a lift. Keurig Dr Pepper cratered almost 10% after announcing an $18 billion deal to buy JDE Peet’s, the Dutch coffee company behind Peet’s Coffee. Railroad stocks also sank after Warren Buffett said he wasn’t interested in buying CSX — shares of the rail operator tumbled more than 4%.

In bonds, Treasury yields ticked higher after Friday’s big drop. The 10-year yield rose to 4.27%, a sign traders are still digesting what’s next for interest rates. Markets are betting there’s about an 86% chance the Fed cuts by a quarter-point in September.

This week brings two big tests: consumer confidence data on Tuesday and the Fed’s preferred inflation gauge on Friday. Economists expect the PCE index to show prices up 2.6% year over year — just above the Fed’s target.

For now, the mood is cautious. As Jake Dollarhide of Longbow Asset Management put it:

“The market has a Jackson Hole hangover. Investors are taking a little bit of a breather.”

Bloomberg, CNBC, Reuters, and the Associated Press contributed to this report.