Stocks pulled back moderately from Friday's levels. But the big three indexes remain near their all-time highs, while the small-cap Russell 2000 remains near their YTD highs.

Fed Chair Jerome Powell's Jackson Hole speech last Friday sent stocks soaring. And the implications, in spite of yesterday's pullback, are likely to last for a while.

In short, Mr. Powell indicated the Fed might be warranted to cut rates at their next meeting on September 16-17.

He noted that while inflation is still elevated, the risks to the labor market have increased, echoing the concerns that Fed Governors Christopher Waller and Michelle Bowman cited at the last meeting in July, when they dissented from the consensus in voting for a rate cut vs. keeping rates steady.

The latest employment report, which came in under expectations, might have finally provided the data point Mr. Powell and the rest of the Fed needed, in order to shift their focus from inflation to the labor market.

Make no mistake, inflation is still top of mind for the Fed. But he acknowledged that the "base case" remains that the recent price increases (which are showing up in moderate rises in inflation), will be a "one-time" shift due to tariffs, rather than ongoing increases.

But a rate cut in September is not a done deal. As always, the Fed maintains it will be data dependent. And two important data points that will directly tie into their dual mandate of price stability and maximizing employment come out later this week and next.

On Friday, 8/29, we'll get the next Personal Consumption Expenditures (PCE) report (which is the Fed's preferred inflation gauge).

And then next week, on Friday, 9/5, we'll get the Employment Situation report.

With expectations for a rate cut in September jumping from 75% before Friday's speech to 82.6% now, it's looking more and more likely for a cut. And short of inflation coming in well above expectations, and/or job gains coming in sharply higher, it's looking like a cut it'll be. But you never know. So all eyes will be on those next two reports.

In the meantime, the market will also have its eyes on NVIDIA's earnings on Wednesday, 8/27, after the close, when they 'officially' close out Q2's earnings season.

Their last time out, they posted a negative EPS surprise (albeit just barely of -3.75%), but that translated to a 32% quarterly EPS growth rate, and a sales growth of 69%. And they rallied 33.6% since then. Prior to that they positively surprised for 9 quarters in a row. Since February of 2023, they're up 821%. So NVIDIA will be closely watched, not just to see their results, but because they have become a bellwether for the semiconductor industry and the AI trade.

But we have to get thru today first.

On the economic report front today we'll get Durable Goods Orders, the Case-Shiller Home Price Index, the Richmond Fed Manufacturing Index, and the Consumer Confidence report (always an important report given that roughly 70% of GDP comes from consumer spending, and a happy and confident consumer is generally one that spends).

See you tomorrow,