S&P 500 rally slows down amid Fed rate cut expectations

The S&P 500 Index (SPX) opened Monday's trading session at $6,456.6. Investors reacted positively to Federal Reserve Chairman Jerome Powell's speech at the Jackson Hole Symposium last week. Despite lingering inflation concerns, Powell said the regulator is willing to consider rate cuts at its September meeting as risks to the labor market are rising. This was seen as a fairly clear signal that the central bank was ready to ease monetary policy, which immediately revived investor appetite for risk, thus halting the S&P 500's slide and sending it back to record highs.

Even so, market prices now mostly mirror these predictions for a September rate reduction (estimated at 84%), which could limit the index's near-term growth.

Several key data are set to be released prior to the Fed meeting: Nvidia earnings on August 27, inflation figures on August 29, and employment reports on September 5. Any deviation from current forecasts may lead to increased volatility.

A robust Nvidia report that highlights the continued demand for AI technologies, along with positive inflation data that reinforces the Fed's timely policy easing, could spur additional hikes and push quotes up to new record highs.

Conversely, disappointing Nvidia results suggesting a peak in AI investment, or a higher-than-expected CPI report undermining confidence in the Fed, would trigger a technical correction given current increased valuations. 

From a technical standpoint, it appears that the market has completed a recent correction. Prices found support at the lower boundary of the ascending channel and resumed climbing, with the RSI indicating sustained buying pressure.

The following trading strategy may come into play:

Sell at the current price. Take profit: $6,377. Stop loss: $6,510.

This forecast is valid from August 25 to September 1, 2025.