US, European Stocks Dip as Fed Rate-Cut Optimism Fades

U.S. and European stock futures declined following a strong rally fueled by Federal Reserve Chair Jerome Powell's speech, which hinted at potential interest rate cuts as early as September. Despite the retreat, traders remain optimistic with an 84% probability of a Fed rate cut next month, driven by signs of a softening labor market and easing inflation pressures. The Dow Jones Industrial Average recently reached a record high, with tech stocks, including Nvidia, surging in anticipation of strong earnings and further AI-driven growth. However, uncertainties linger around tariffs, inflation, corporate profits, and the broader macroeconomic environment, prompting some profit-taking. President Trump’s pressure on the Fed to influence monetary policy was a notable theme at the recent Jackson Hole gathering, adding political complexity to the Fed’s cautious approach. Investors are now focused on upcoming key events, including Nvidia’s earnings report and July’s personal consumption expenditures inflation data, which will guide expectations for future Fed actions.