U.S. stocks slipped Monday as traders shifted to wait-and-see mode ahead of NVIDIA’s earnings midweek and the Fed’s preferred inflation measure later this week. The Dow pulled back from record highs while the S&P and Nasdaq closed modestly lower, with small caps also lagging. Sector leadership rotated to communication services and energy, while staples, health care, and utilities trailed. Bond yields edged higher, with the 10-year back near 4.28%, and the dollar strengthened. Overseas, Asia traded firm with fresh highs in Hong Kong and Shanghai, but Europe cooled despite upbeat German business sentiment.

Markets remain caught between Powell’s dovish tilt at Jackson Hole and Trump’s latest confrontation with the Fed, where he declared Fed Governor Lisa Cook “fired.” The move is already rattling Washington and Wall Street, raising questions over central bank independence just as investors look to September for a potential policy shift. The result: a market in limbo, clinging to Powell’s softening stance while bracing for political drama.

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Investor focus is squarely on NVIDIA, which reports earnings after the close Wednesday. Expectations are sky-high: analysts forecast EPS of $1.01, nearly 50% higher than a year ago, alongside robust revenue gains from unrelenting AI demand. Yet sentiment is jittery, valuations are stretched, and the Nasdaq has already pulled back 2% this month. A blowout print could re-anchor tech leadership, but any stumble risks unwinding a big chunk of this year’s gains.

Beyond NVIDIA, the broader earnings season has been surprisingly strong. Roughly 81% of S&P 500 companies beat estimates, lifting Q2 earnings growth to 11.8%, nearly triple the pace expected in June. Gains have been broad across sectors, with only energy reporting a decline. That’s helped keep the S&P and Dow near records, though questions linger over how much more juice earnings can provide heading into year-end.

Trade remains front and center. The U.S. is pressing ahead with new tariff investigations, with furniture and rare-earth magnets now on Trump’s radar. The president warned that “digital taxes” levied abroad on U.S. tech firms could also spark fresh retaliation. At the same time, China’s top trade negotiator is preparing to travel to Washington, a sign that despite escalating rhetoric, both sides are still talking.

On the geopolitical front, Ukrainian strikes on Russian energy infrastructure are keeping oil prices supported, with fears of additional sanctions looming. Meanwhile, China is once again at the center of the innovation debate. A new report from The Economist argues that Beijing has cemented itself as an innovation powerhouse, not just a copycat, intensifying concerns over the long-term tech rivalry with the U.S.

President Trump’s abrupt move to remove Fed Governor Lisa Cook marks an unprecedented escalation in his campaign to reshape the Federal Reserve. Citing alleged mortgage fraud, a claim that legal experts say does not qualify as “cause” under the Federal Reserve Act, Trump declared the firing effective immediately, aiming to tilt the Board in favor of soft monetary policy. Cook, refusing to resign, has vowed to remain in her post and contest the move in court.

Markets are holding their breath. Trump’s action has rattled the notion of central bank independence, stirring concern that monetary policy could become an extension of political will. As investors await both tomorrow’s Fed-favored PCE inflation data and NVIDIA’s earnings, the tension between the Fed’s traditional insulation and growing political overreach casts a long shadow over the outlook.

Markets are balancing Powell’s hint of a September cut against Trump’s direct intervention at the Fed, all while holding their breath for NVIDIA. If earnings deliver, tech could reclaim leadership. If not, the market’s concentration risk may finally come home to roost. With tariffs simmering, politics heating, and PCE inflation on deck, it’s shaping up to be one of those weeks where calm can vanish in a heartbeat.