Markets Cool as Powell Stays Vague on Cuts; Tech Takes a Breather

U.S. equities slipped from record highs Tuesday, led by a sharp pullback in the "Magnificent Seven" tech names. Investors digested Fed Chair Jerome Powell’s cautious comments, which offered no strong signal on the path of interest rates ahead of the October meeting. While most S&P 500 stocks advanced, the index finished modestly lower, reflecting a sector rotation out of mega-cap tech. Bonds gained as the 10-year Treasury yield fell to 4.11%, and gold set another record. Oil rallied on geopolitical tensions, and Micron jumped late after issuing a bullish forecast.

Key Headlines & Market Movers

• Powell Keeps Rate Path Unclear: Speaking publicly for the first time since the Fed’s recent rate cut, Chair Jerome Powell struck a balanced tone, acknowledging labor and inflation risks but avoiding commitment to further easing. While some policymakers are calling for faster cuts due to labor softness, others warn of renewed inflation risks, particularly from tariffs. Powell's remarks seemed aimed at keeping policy optionality intact, dampening expectations for an October move without spooking markets.
• Tech Megacaps Led Pullback: The Magnificent Seven fell 1.5%, pulling broader indexes off highs. Nvidia gave back nearly 3% after surging Monday on its AI partnership with OpenAI. Oracle tumbled over 4% following Monday’s rally, reflecting a volatile reaction to leadership changes. Despite optimism around AI and solid earnings, the sector showed signs of exhaustion after powering recent market gains.
• Gold and Oil Climb on Geopolitics: Gold closed at a new high near $3,800/oz, extending its rally amid persistent inflation concerns and rising geopolitical stress. Crude oil rose over 2% as tensions escalated between NATO and Russia. Commodities appear to be firming as investors hedge against both inflation and global instability.
• IPO Market Reawakens: September is on track to be the busiest IPO month since late 2021, led by Klarna and Netskope. Nearly $7.6B has been raised so far, excluding SPACs. Strong debut performance (+17% average return) is encouraging, but it remains to be seen whether this momentum can extend into Q4 amid ongoing macro uncertainty.

S&P 500 Sector Performance

Markets may remain choppy in the near term as investors recalibrate expectations for further Fed action. With the S&P 500 hovering above most year-end targets, any signs of economic softening or earnings fatigue could prompt a pullback. Still, strong corporate fundamentals, easing inflation, and a resilient labor market offer support. Attention now turns to upcoming inflation data, employment reports, and corporate guidance heading into Q4.