Stocks fell on Monday as investors await multiple inflation reports due out later in the week that could shape the direction of the Federal Reserve's next policy meeting in September.
The Dow Jones Industrial Average
This week hosts two key inflation readings for July: the consumer price index on Tuesday and producer price index on Thursday. Hotter-than-expected inflation reports could impact the probability of an interest rate cut at the central bank's next policy meeting. Traders are currently pricing in a 87% chance policymakers will reduce rates next month, according to CME Group's FedWatch tool.
President Donald Trump's tariffs also clouded outlooks on Monday as market participants accessed their potential impact on consumer prices, retail sales and sentiment and what it could mean for the overall economy. Goldman Sachs economists led by Jan Hatzius wrote in a note on Monday that U.S. companies have taken much of the tariff impacts so far, with consumers facing about 22% of tariff costs through June, but that trend is likely to end with the latest "reciprocal" duties enacted last week on major trading partners.
Goldman economists predict that inflation will rise in response to increased tariffs, forecasting that December's core personal consumer expenditure index will reach 3.2% annually -- this reading is one of the Fed's preferred inflation readings as it excludes more volatile energy and food costs. That rising inflation could lead the central bank to hold interest rates higher-for-longer to stabilize prices.
Bank of America economist Claudio Irigoyen wrote in a note Monday that July's bleak jobs report and subsequent downward revisions for June and May could halt the Fed from issuing a September rate cut entirely, arguing that reducing interest rates next month "may risk starting the easing cycle without evidence that inflation has peaked."
"The downward revision to nonfarm payrolls increases the probability of what w view as the most likely alternate scenario: 'bad cuts,' due to deterioration in the labor market," Irigoyen wrote. "We view the combination of policies to be mildly stagflationary, with significant uncertainty regarding the size and timing of the impact on inflation and growth."
Semiconductors remained in focus on Monday, as multiple news outlets reported Nvidia
Under the agreement, the companies will receive export licenses to sell Nvidia's H20 and AMD's M1308 in the Chinese market.
"To call this unusual or unprecedented would be a staggering understatement," Stephen Olson, a former U.S. trade negotiator, told Bloomberg. "What we are seeing is in effect the monetization of US trade policy in which US companies must pay the US government for permission to export. If that's the case, we've entered into a new and dangerous world."
Offering a brightspot to the ever-changing tariff front, President Trump said Monday that gold imports will not face duties. The announcement caused December futures for gold to close nearly 2.5% lower at $3.404.70 on Monday. The previous metal previously reached a record high on Friday on reports that the U.S. Customs and Border Protection that 1 kilogram and 100 ounce gold bars from Switzerland were subject to the 39% tariff imposed on the country.
Moreover, the Trump administration delayed the higher U.S. tariff rates on Chinese imports for another 90 days on Monday as trade officials from both Washington and Beijing continue negotiations. If the deadline was not extended, U.S. blanket tariffs on goods from China would have rose back to 145%; tariffs between the two nations will remain at 30% for Chinese imports to the U.S. and 10% for U.S. imports to China until mid-November.
Looking ahead, market participants will turn their attention towards July's CPI report due out Tuesday morning. Economists expect headline and core CPI to tick higher to 2.8% and 0.3%, respectively. Notable earnings reports for Tuesday include Circle Internet
