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US stocks drifted lower on Monday following last week’s optimism over potential interest rate cuts. Traders shifted their attention back to tariffs and corporate earnings, with the S&P 500 Index dipping 0.2% by 9:35 a.m. in New York. The NASDAQ 100 Index fell 0.3%, while a basket tracking the Magnificent Seven stocks, including Apple and Meta, dropped 0.4%.
Stocks faced a setback as the market pivoted away from the euphoria sparked by expectations of rate cuts. Last week’s rally, where the S&P 500 rose 1.5%, seemed to fade quickly. Market participants focused on President Trump’s announcement of a “major Tariff Investigation on Furniture coming into the United States.” Furniture stocks like Arhaus and RH saw declines, dropping 3.9% and 9.1%, respectively. Wayfair followed suit, falling 8.2%.
The stock market also began to focus on corporate earnings, particularly with uncertainty about the effects of tariffs on profits. Bank of America lowered American Eagle Outfitters, citing the pressure from rising tariffs. The retailer expects to get a boost from the Sydney Sweeney campaign and is likely to take a nosedive under the influence of tariff-associated expenses.
Despite the broader market retreat, NVIDIA remains a focal point. As a leader in artificial intelligence chips, NVIDIA holds considerable weight in the market’s movement. Analysts anticipate that NVIDIA’s earnings report on Wednesday could either confirm the sustainability of the AI-driven rally or prompt concerns about overvaluation. With a strong position in the S&P 500, NVIDIA’s performance may act as a bellwether for broader tech market trends.
Tech stocks like Intel, which gained 1.8% following news of a US government stake, are also in focus. Although NVIDIA's performance is viewed as important to AI spending levels, recent developments indicate a heavier emphasis on cyclical/value stocks, creating further ambiguity about the tech future within the market. Analysts like Adam Crisafulli emphasize that NVIDIA’s earnings must be robust to reignite investor confidence in the sector.
With traders digesting the most recent developments, all eyes are on key economic data to be released. The personal consumption expenditures (PCE) price index, which is a key indicator of inflation to the Federal Reserve, will be released this week.
The core PCE is expected to increase by 2.9% in July compared to the same month last year, which may influence the Fed's future rate decisions. Uncertainty over inflation and tariffs is making it difficult to keep the market elevated without new catalysts.
Also Read: US Stock Market Today: S&P 500 Plummets, Dow Jones Falls 100 Points, Walmart Stock Drops 4%
