Wall Street’s main indexes dipped on Monday, retreating from gains made in the previous session after U.S. Federal Reserve Chair Jerome Powell hinted that an interest-rate cut could be considered at next month’s central bank meeting.

Recent economic data suggesting labor market weakness has boosted investor confidence that the central bank could switch to a dovish stance in September, despite a majority of policymakers warning that U.S. tariffs could add to inflationary pressures in the coming months.

The Personal Consumption Expenditures Price index – the Fed’s preferred inflation gauge – is due to be released on Friday, while official nonfarm payrolls data is expected next week. The reports will be crucial, especially after Powell said a dovish verdict was not a certainty.

“The most important report between now and September is not the inflation numbers, rather the jobs report,” said Thomas Hayes, chairman at Great Hill Capital, New York.

“As long as we show continued cracks in the labor market, the cut in September will happen, barring some egregiously high inflation numbers.”

Powell’s comments nudged major brokerages to revise their expectations, with Barclays, BNP Paribas and Deutsche Bank currently seeing a 25-basis-point reduction in borrowing costs next month.

Traders now see a 79.6% chance of a Fed rate cut in September, according to data compiled by LSEG.

At 09:56 a.m. ET, the Dow Jones Industrial Average fell 117.50 points, or 0.26%, to 45,514.24, the S&P 500 lost 13.20 points, or 0.20%, to 6,453.71, and the Nasdaq Composite lost 40.29 points, or 0.18%, to 21,457.09.

Friday’s optimism helped the blue-chip Dow close at a record high for the first time since December 2024 and the benchmark S&P 500 log its strongest daily gain since May.

On Monday, Jefferies became the latest brokerage to raise its year-end target for the S&P 500, at a time when companies have tempered tariff-related forecasts.

Ten of the 11 S&P 500 sub-sectors edged lower, with consumer discretionary leading losses with a 0.5% drop.

Traders are awaiting AI darling Nvidia’s earnings on Wednesday to see if its $4 trillion valuation is justified.

The potential impact on Nvidia’s forecasts from its recent revenue-sharing deal with the U.S. government will be closely watched. The chip major’s shares were flat in early trading.

In deals-related moves, beverage company Keurig Dr Pepper slid 8% after saying it would buy JDE Peet’s for $18.4 billion in cash.

Furniture retailers RH and Wayfair declined about 7% each after U.S. President Donald Trump said on Friday his administration would conduct a tariff investigation on furniture imports.

Intel dipped after Trump said the U.S. government was taking a stake in the chipmaker, which the company said could limit its international sales and future government grants.

Trump also said that he would make more deals similar to the one with Intel.

Remarks from New York Fed President John Williams, later in the day will be scrutinized to see if he shares Powell’s policy outlook.

Declining issues outnumbered advancers by a 1.72-to-1 ratio on the NYSE and by a 1.75-to-1 ratio on the Nasdaq.

The S&P 500 posted seven new 52-week highs and no new lows, while the Nasdaq Composite recorded 59 new highs and 13 new lows.

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(Reporting by Johann M Cherian and Sanchayaita Roy in Bengaluru; Editing by Pooja Desai)