Powell Warns Inflation Still Elevated

AI Cooldown – The S&P 500 retreated from record highs as traders locked in profits from Nvidia and other megacaps that had led the summer rally.

Profit Taking – Powell’s warning that equities look “fairly highly valued” gave investors a green light to trim exposure in overextended sectors.

Thin Liquidity – Futures steadied slightly after hours, but shallow depth left markets hypersensitive to Fed commentary and economic data.

Measured Cut – The Fed delivered a 25 bps rate reduction to 4.00%–4.25%, framed as risk management rather than a full pivot toward aggressive easing.

Tariff Shock – Powell emphasized that inflation’s recent uptick comes mostly from tariffs, which act like one-time tax hikes rather than broad demand surges.

Data Dependent – Powell repeated that policy is not locked in, and upcoming labor and inflation prints will decide whether additional cuts happen.

Slower Growth – GDP growth cooled to 1.5% from 2.5% last year, signaling a slower expansion that leaves less room for policy mistakes.

Labor Strain – Job gains averaged just 29,000 per month this summer, pushing unemployment to 4.3% and highlighting a labor market losing momentum.

Sticky Prices – Core PCE inflation rose 2.9% year over year, showing that underlying price pressures remain despite Powell’s call for patience.

Leverage Flush – Over $1.5 billion in leveraged long bets were liquidated Monday, marking the largest crypto washout in months.

Bitcoin Struggles – Bitcoin traded near $113K, its weakest level in two weeks, as traders braced for Friday’s record $23 billion options expiry.

Ethereum Anchor – Ethereum found modest support after a sharp sell-off, with ETF inflows continuing to provide steady demand despite volatility.

Nvidia’s Bet – Nvidia committed $100 billion in chips to OpenAI, reinforcing its dominance in AI infrastructure even as shares corrected from highs.

Micron Momentum – Micron’s earnings showed strength in memory demand, yet investors reacted cautiously after a stretch of heavy tech gains.

Narrow Breadth – With market leadership concentrated in a handful of AI stocks, indexes risk outsized moves if momentum in those names falters.

Mortgage Squeeze – Mortgage rates stayed elevated as 10-year yields remained sticky, limiting affordability gains despite Fed easing.

GSE Gambit – Analysts floated that Fannie and Freddie could expand MBS holdings to narrow spreads, but no concrete policy has emerged.

Builders Bend – Builders leaned harder on record incentives to move inventory, but affordability ceilings kept sales momentum capped.

Financials Focus – Accumulate $JPM ( ▲ 0.01% ) on weakness as large banks benefit from balance sheet strength and better lending spreads during gradual easing.

Defensive Growth – Add $KO ( ▼ 0.71% ) for dependable earnings and global exposure that cushions portfolios if consumer sentiment weakens.

Metals Mix – Hold partial gold exposure but increase allocation to $CPER ( ▼ 0.64% ) to capture industrial demand tied to AI and EV infrastructure.

Tech Reset – Scale into $MSFT ( ▼ 0.61% ) as it offers both AI upside and diversified cash flow less vulnerable to sector volatility than pure hardware plays.

Crypto Discipline – Continue dollar-cost averaging into $ETH.X ( ▼ 5.38% ) while keeping altcoin positions lean until market liquidity improves post-expiry.