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On Friday, U.S. Federal Reserve chair Jerome Powell cracked open the door to lower interest rates in the coming months in a speech in Jackson Hole, Wyo. She added that markets viewed this speech as positive, sparking the rally on Friday. 

“And now that optimism has subsided somewhat early on this week, and I think that's largely driven by the inflation side of the Fed's mandate,� Bangsund said.  

She added that U.S. inflation is still above the Fed’s two per cent target. 

“I think what's happening today is investors are now thinking ahead to Friday's release of the inflation data in the U.S., and that's actually the Fed's preferred gauge of underlying inflation. It's the core personal consumption expenditures price index,� Bangsund said. 

“So the potential there for a strong and elevated reading may bring into question those wagers for aggressive rate cuts and dampen that optimistic mood in the market.� 

Economists expect the PCE to show that prices rose 2.6 per cent in July, compared with a year ago. That’s unchanged from the rate in June and hovering just above the Fed’s preferred target of two per cent.

“So again, we're not out of the woods yet. Inflation is still very much alive and well,� she said. 

As a result, Friday’s rally may have been “a little too far, too fast,� Bangsund said, noting some investors were taking profits during Monday’s trading session.

The Dow Jones industrial average was down 349.27 points at 45,282.47. The S&P 500 index was down 27.59 points at 6,439.32, while the Nasdaq composite was down 47.24 points at 21,449.29.

In Toronto, the S&P/TSX composite index was down 163.19 points at 28,169.94.

Gains for several big technology stocks helped offset broader losses in the U.S. market. Alphabet, Google's parent company, rose 1.16 per cent. Technology heavyweight Nvidia rose 1.03 per cent.

“I think that really comes down to Nvidia. They're reporting earnings Wednesday after close, and so far, the so-called Magnificent Seven megacaps have been exceeding expectations,� Bangsund said. 

“They've had a great earnings season, and I think there's speculation for a similar result from Nvidia, so that's probably why you're seeing Nasdaq ... bucking that global trend and actually edging higher today, while the S&P 500 and TSX are both modestly lower.� 

On the TSX, Bangsund said some of the declines were likely cyclical. 

“In Canada, … everything is pretty much in the red, except for staples and materials are modestly higher because gold's higher,� she said. 

“But outside of that, it's probably just more of a cyclical trade where you're seeing larger declines in some of the more economically sensitive corners of the market.�  

The Canadian dollar traded for 72.28 cents US compared with 72.18 cents US on Friday.

The October crude oil contract was up US$1.14 at US$64.80 per barrel. The December gold contract was down US$1.00 at US$3,417.50 an ounce.

This report by °µÍø½ûÇø was first published Aug. 25, 2025.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)