Fed’s hawkish tilt tempers rate cut hopes

• Stocks continue to reprice, yet Big Tech found bargain hunters.
• FOMC mins were a bit hawkish.
• More Eco data today to consider.
• JJ takes center stage tomorrow…. lots of speculation about what he will say.
• Try the Farfalle con Salmone.

Stocks continued to sell off yesterday, with the Nasdaq down another 2% by mid-morning and the Mag 7 off 2.6%. PLTR tumbled another 9% (bringing the slide from its summer high to nearly 25%), while NVDA fell 3.7% and TSLA dropped 4.4%. I could go on—but you get the picture.

Then it happened. Around 11:10 a.m., the selloff stalled. Traders, investors, and even the algos began sniffing around, looking for opportunities in the very sector that has taken us higher—and lower. The buy programs kicked in, and suddenly the names under the most pressure started attracting bargain hunters. By the close, stocks still finished lower—but well off their lows.

The Dow +16 pts, S&P -15 pts (-0.25%), Nasdaq -142 pts (-0.7%), Russell -7 pts (-0.3%), Transports -300 pts (-1.9%), Equal-Weight S&P -6 pts (-0.1%) while the Mag 7 -327 pts (-1.1%).

PLTR ultimately closed down just 1%, NVDA slipped 0.1%, and TSLA lost 1.6%.

Eco data revealed that Mortgage applications fell 1.4%, and the FOMC minutes leaned “hawkish”—cooling hopes of multiple rate cuts and setting up potential disappointment when JJ takes the stage tomorrow. The mins showed ‘broad support’ (not unanimity) for holding rates steady…. Fed Fund Futures now price in an 80% chance of a 25-bps cut in September, but the odds of follow-up cuts in October and December are fading.

The dream of 3.5% rates this year? Pretty much gone. Marco Casiraghi, Sr. Economist at Evercore, noted that the minutes are “a bit stale” given the weaker July NFP report, but added that the Fed is “well positioned to respond in a timely way to potential economic developments.” Translation: we may not get the 100 bps of cuts markets in 2025 once hoped for, but if the data shifts, the Fed is ready to act. None of this should surprise anyone—JJ has been clear all along: the Fed is data-dependent.

But again – the selloff in tech was not the whole story - we saw strength in other sectors…..Utilities up 0.1%, Financials + 0.5%, Consumer Staples +0.5%, Energy +0.8%, Healthcare + 0.5%, Basic Materials +0.1% and Real Estate + 0.4%.

Bonds rose – the TLT and TLH both up 0.2%. Yields are holding steady.

Oil rose and pierced trendline resistance ($62.60) to end the day $62.70. This morning – it is up another 70 cts at $63.40 – setting us up for a test higher…..Look – oil stockpiles fell by 6 million barrels last week, gasoline stockpiles also declined and what does that suggest? Demand is strong…. but we also know that supply is plentiful – so I don’t think we push much higher, I think we are in a tight trading range…. $62.60/$63.80.

Gold rose 1%, gaining $33 per ounce to close at $3,392, remaining within its established range of $3,380 to $3,415. Despite a 4% decline from its August high, the price continues to find support along with the rising trendline established from April lows, indicating ongoing buyer interest. Absent any significant catalyst, gold is likely to stay within these trendlines, maintaining its current trajectory.

Expectations of less aggressive interest rate cuts are tempering upside potential; lower rates typically bolster gold prices by reducing the appeal of yield-bearing assets,(think bonds) while higher rates put downward pressure on gold. Geopolitical developments, such as de-escalation in the Russia/Ukraine conflict, should cut the risk premium embedded in gold’s price, potentially limiting gains. For now, gold appears to be following the trendlines and will only be disrupted by unexpected headlines.

Eco data today includes both Manufacturing and Services PMI’s – Manufacturing expected to be in contractionary territory while Services remains in expansionary territory. Composite PMI – should remain well into the expansion zone. We will also get Existing Home Sales expected to show a decline of 0.3%.

US futures are lower again this morning…..Dow -175 pts, the S&P’s down 15, the Nasdaq is down 30 while the Russell is down 14 pts.

Some analysts warn that ongoing weakness in Big Tech could trigger a broader selloff. The logic is simple: if the sector that’s been leading higher continues to slide, investors may lose patience and rotate to cash. But I say—not so fast, big boy. That’s not what happened in April. When the institutions and hedge funds bailed, retail investors stepped in and kept buying—and that turned out to be the right call. But each market decline (or advance) is defined by its own terms, so make sure you understand those terms, and always talk to your advisor for clarity.

The focus today is squarely on Jackson Hole tomorrow. As noted - I don’t expect JJ to hijack the stage with an impromptu FOMC press conference, but investors will be listening for even the faintest hint on NOT the path of rates (because it is assumed they are going lower), but rather the speed at which they will decline. For now, the market seems resigned to a single 25 bps cut this year—repricing from the earlier expectation of 100 bps. And that’s fine. That’s how markets work: they discount the future. The only question is—how far into the future will it discount this time because that will tell you how much of a repricing we can expect!

The market is currently trading at 25 times trailing earnings, notably above the historical average of 16–18x. Looking to year-end 2026, the forward P/E ratio of 21x remains elevated but is more reasonable, driven by expectations of earnings growth and lower interest rates. High P/E multiples typically reflect optimism about future corporate performance and a supportive low-rate environment, which has been the prevailing market narrative. However, if interest rates remain elevated or economic growth slows, valuations will face pressure to adjust, its Econ 102. Remember, Investors are preparing for a slower economy and somewhat higher prices, so this drawdown does make some sense.

The VIX did breach trendline resistance yesterday but pulled back when buyers stepped in to buy the dip…. this morning it is up 30 cts at 15.98 – still below resistance…..but it feels a bit antsy.

European markets are all lower…..by about 0.4%.

The S&P closed at 6395 – down 15 pts. This morning futures are suggesting further weakness…..but remember – the market is frothy, valuations are rich, so a pullback is healthy. Now we wait to see what JJ says. If hawkish then expect more downside, Neutral? Expect more churn…..I still think the S&P needs to test 6200 on the chart…. which would represent a 3% move lower from here…. – which only means I am more cautious on where I allocate. Doing nothing is a decision – remember – you don’t have to do something all the time…. Let your portfolio do the work…. Brace yourself for a volatile September.

Farfalle con Salmone (Salmon pasta)

This is simple and makes a great summer dish.

For this you need Farfalle pasta (bowties), diced red onion, diced carrots, sliced cherry tomatoes, olive oil, s&p and thin sliced salmon (cut into bite sized pieces).

Bring a pot of salted water to a rolling boil.

In a large sauté pan, heat up some olive oil and add in the onion – sauté until soft. Now add in the diced carrots and sauté for 10 mins.

Now add in the sliced cherry tomatoes, season with s&p and sauté until they begin to melt and create a ‘sauce’.

Now – Add the pasta to the water and cook until aldente.

When done, add the pasta directly to the sauté pan, add in 1 ladle of the pasta water and toss.

Now add the salmon – keeping the heat on med low…. mix well to allow the salmon to cook. (3 – 4 mins).

Serve immediately…..It’s simple and delicious.