Good morning Traders and Quants! Wall Street ended a strong week with a mixed close Friday. The Nasdaq gained 0.4 percent, the S&P 500 was flat, and the Dow slipped 0.6 percent. Overseas markets leaned higher, with Europe mostly green and Japan’s Nikkei up nearly 1 percent. Treasuries eased as the 10-year rose 4 bps to 4.06 percent, still near the low end of this year’s range. The dollar edged up and WTI oil ticked higher on fears that Ukrainian drones could hit Russian supply.

Confidence took a hit after the University of Michigan survey showed sentiment at its weakest since May. Long-term inflation expectations climbed to 3.9 percent from 3.5 percent. Against this backdrop, markets head into the September 16–17 Fed meeting with a 25 bp cut fully priced. The key focus is Powell’s tone. In June, Fed officials penciled in only three cuts through 2026, far below the six cuts now priced by markets. Investors want clarity on how the Fed weighs job softness against sticky inflation.

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The week opens with tech and trade in focus. Nvidia came under pressure after China’s antitrust regulator said a probe found possible violations. At the same time, Beijing opened new checks on U.S. chip imports. In Madrid, Treasury Secretary Scott Bessent and Vice Premier He Lifeng continued trade talks, with signs of progress on TikTok. Futures point higher but stay cautious ahead of Wednesday’s Fed decision. The setup is simple: a cut plus easing bias extends the rally, while hawkish signals risk a pause.

Global policy is also in play. The Bank of England, Bank of Japan, and Bank of Canada announce decisions this week. Ten-year yields start near 4.08 percent, and gold has cooled after its record run. Strategists warn that a dovish Fed path is already priced in. Upside may need weaker growth data or sharper Fed concern over jobs. Base case: a 25 bp cut and a wait-and-see stance that allows more easing if labor weakens further.

Russia’s largest NATO airspace breach in 75 years put Europe’s defenses under a harsh spotlight. Nineteen drones crossed into Poland, and Romania reported another incursion soon after. NATO scrambled fighters, tankers, and Patriot systems, but only a few drones were intercepted. Many were judged decoys. The broader issue is clear: Europe’s air defenses look strong on paper but remain thin at the low-cost drone layer, especially after months of sending gear to Ukraine. Markets see steady defense spending ahead, while energy risk stays low unless attacks hit key assets.

U.S.–China tensions are back at center stage. Trade talks in Madrid enter day two, with Washington pressing for real concessions ahead of a possible Trump visit to Beijing. TikTok remains the test case. Beijing’s export controls on its algorithm are the main hurdle. China also opened new chip probes, using Nvidia as leverage, and pushed back on U.S. calls for secondary tariffs tied to Russian oil. Likely outcome: a narrow truce that produces headlines but leaves deeper fights unresolved. For investors, semis face headline risk, tariff policy drives cyclicals, and any TikTok breakthrough could briefly lift risk appetite, but structural rivalry keeps a ceiling on valuations.

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The Fed takes the spotlight. The Senate votes tonight on Stephen Miran’s nomination to the Fed Board, just hours before the FOMC begins. If sworn in quickly, he may join this week’s decision and likely push for a bigger cut. At the same time, the White House is trying to block Governor Lisa Cook from voting. The mix of personnel drama and policy debate will shape how markets read the dots and Powell’s tone.

Data credibility is also under fire. Falling survey response rates have caused bigger revisions, fueling criticism after the 911k payroll benchmark change. Trump’s nominee to lead the BLS, E.J. Antoni, is expected to focus on response rates and data collection, though budget cuts add pressure. Investors should expect larger revisions in near-term jobs data. Separately, budget talks are heating up as Democrats tie support to extending ACA subsidies, while some Republicans are open to avoid premium spikes. The result: headline risk around Fed governance, data quality, and spending battles may add volatility even if the Fed delivers a standard 25 bp cut and data-driven guidance.

Markets face a crossroads. Jobs are cooling, inflation is still above target, and Fed credibility is in the spotlight. If Powell couples a 25 bp cut with clear concern on employment and a path to more easing, stocks likely push higher and long yields test below 4 percent. A hawkish tone could spark consolidation. Either way, the next move depends on how the Fed balances growth risks with inflation that has yet to fully bend.