Critical Follow-Through Week for Equity Markets

Federal Reserve Chair Jerome Powell’s widely noted comment “with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,” ignited an aggressive rally in risk assets on Friday. Markets interpreted this as a clear signal that the Fed is preparing to begin its rate-cutting cycle. According to the CME FedWatch Tool, the probability of a 25-basis-point cut in September climbed to 83% as of Monday morning.

Small caps led the charge, with the Russell 2000 surging 3.86% on the day. However, for bulls, the key will be follow-through this week as critical economic, and earnings catalysts hit the calendar.

Key Economic Data Ahead

Tuesday: Durable Goods Orders and the Conference Board’s Consumer Confidence Index.

Thursday: Preliminary Q2 GDP (consensus: 3.0% quarter-over-quarter growth), Initial

Friday: PCE inflation, with both headline and core prices expected to rise 0.3% month-over-month — slightly hotter than the Fed’s comfort zone.

The big question is whether markets will discount near-term inflation readings now that Powell has suggested tariff-driven price spikes could be one-off effects that pass through the economy rather than signal persistent inflation.

On the earnings front, Nvidia (NVDA) will dominate headlines when it reports after the close on Wednesday. Expectations are elevated, and beyond the quarterly numbers, investors will be looking for updates on China sales, H20 demand, and potential new product launches tailored to the Chinese market.

Following Friday’s sharp rebound, sustained follow-through will be critical in the days ahead — especially with seasonal headwinds looming as August transitions into September, historically a more volatile stretch for equities.