Good morning,

July ended with a sputter. The major indexes barely moved yesterday, but August won’t let us ease in.

Today's agenda is packed with jobs numbers, consumer sentiment, PMI readings, and another barrage of earnings, all while Trump’s global tariffs kick in.

September rate cuts aren’t as much of a lock as Wall Street hoped for, either. 

“We have made no decisions about September,” Powell said yesterday, knocking market odds of a cut next month from 65% to 45%.

That did nothing to slow Wall Street’s AI binge. Microsoft officially joined Nvidia in the $4 trillion club as Big Tech’s record-breaking rally rolls on.

Let's dive in! 

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Five things to know before opening bell

🇺🇸 Trump rolls out global tariffs

President Trump has announced a sweeping set of tariffs that will push the average U.S. rate on imported goods to 15.2%, according to Bloomberg Economics. That’s up from 13.3% earlier this year and far above the 2.3% level before he took office, marking one of the most significant tariff hikes in decades.

🤝 Mexico gets a timeout

The big surprise ahead of today’s tariff deadline came from Mexico. After talks with President Claudia Sheinbaum, Trump granted a 90-day extension to keep current rates in place while both sides try to hammer out a deal. “We will be talking to Mexico over the next 90 days with the goal of signing a Trade Deal,” he wrote.

💰 Microsoft hits $4 trillion

Nvidia has company in the stratosphere. Microsoft became the second publicly traded firm to hit a $4 trillion market cap, riding a stellar earnings report and a $75 billion year-over-year jump in Azure cloud revenue. AMZN stock closed nearly 4% higher yesterday, cementing Big Tech’s record-breaking run.

📉 Jobs data front and center

Labor market tea leaves keep piling up. Job openings disappointed earlier this week, private payrolls beat expectations, and jobless claims ticked up slightly but stayed below forecasts. Today’s BLS Employment Situation report could reveal fresh signs of a cooling jobs market, with unemployment holding near 4.1% last month.

📊 Data dump to close the week

In addition to job numbers, PMI readings, the Michigan consumer sentiment survey, and June’s construction spending report are due today. There’s also another round of earnings coming from giants, including Colgate-Palmolive, ExxonMobil, and Chevron.

🎙️ Powell: Hold your horses on September cut bets

The Fed’s midweek decision to hold rates steady was no surprise. What has changed since then is how analysts are recalculating the odds of a cut.

🎙️ Powell sets the tone

Shortly after the announcement, Fed chair Jerome Powell shot down expectations that a September cut was already in the bag. “We have made no decisions about September,” Powell said. 

“We don’t do that in advance.”

That was enough to drag the CME FedWatch tool’s odds of a September cut from 65% to 45%.

Elyse Ausenbaugh, head of investment strategy at JP Morgan Wealth Management, agrees with Powell, saying the Fed's approach made sense.

“The expectation for this meeting wasn’t a rate cut, and I don’t think there would have been much upside to Powell signaling that one was imminent,” she said. 

“The data, as it stands today, isn’t yet calling for one, and a lot could change between now and the FOMC’s next decision point in September.”

⚖️ A tough balancing act

With GDP growth coming in hotter than expected, inflation still running above target, and unemployment expected to tick higher in today’s report, the Fed’s balancing act is getting trickier. 

Holding rates higher is meant to cool borrowing and demand, but price hikes keep drifting away from the 2% target, while the labor market shows signs of softening.

President Donald Trump hasn’t let up in his campaign for cuts, and economists are increasingly siding with him. Two FOMC members even voted against holding rates steady.

John Velis, strategist at BNY, expects the Fed will have to act eventually.

“They’ll have to cut [rates] before the end of the year,” Velis said, predicting “the economy will have weakened by then and they’ll have clarity on the price impact of tariffs.”

He sees a “low probability” of a September cut and says December looks more likely.

Jill Gateman, co-head of US commercial banking at TD Bank, was more blunt. “It almost feels like they’re not going to make a decision until [Powell] can say there’s no uncertainty in the economy,” Gateman said.

With uncertainty now “the new constant,” she argued the Fed shouldn’t keep dragging its feet.

“There’s just too many moving parts to think that we’re going to wait uncertainty away before a decision can be rendered,” Gateman added.

📦 Trump follows through this time around

Months of speculation ended late Thursday as President Donald Trump signed an order unveiling sweeping new tariffs that could reshape global trade for good.

The average U.S. tariff rate will climb to 15.2%, up from 13.3% earlier this year and well above the 2.3% level before Trump took office.

This marks the highest average levies since the World War II era.

🌎 Who’s getting hit

Major economies including the European Union, Japan, and South Korea will now face 15% duties on their exports to the U.S. 

Canada’s goods will be hit harder, with tariffs rising to 35% from 25%, and Switzerland and New Zealand also saw their rates increased. 

In all, imports from roughly 40 countries will face the new 15% baseline rate, while about a dozen economies were slapped with higher duties.

Some standouts:

• India: 25% levy on exports

• Taiwan: 20% duties

• South Africa: 30% duties

• Thailand & Cambodia: 19% rates, matching tariffs on Indonesia and the Philippines

• Vietnam: 20% tariffs

Trump is expected to unveil separate sectoral tariffs soon, targeting pharmaceuticals, semiconductors, critical minerals, and other industrial products.

Meanwhile, Mexico avoided immediate hikes, with Trump granting a 90-day extension for negotiations after talks with President Claudia Sheinbaum. 

🏭 What’s next

Most new tariffs will take effect after midnight on August 7 to give U.S. Customs time to adjust. 

Trump’s order also included penalties of at least 40% for so-called “tariff dodging,” where products are rerouted through other countries.

“The reality is that we’re still going to see higher tariffs than pre-Liberation Day and we’ll start to see some economic impact of that in the months ahead,” said Shane Oliver, chief investment officer at AMP.

“There’s still uncertainty about China, Mexico has been delayed by another 90 days and details around sectoral tariffs are also yet to come.”

The announcement closes a months-long wait-and-see game but signals that Trump’s tariff campaign is far from over.

🤖 Earnings playbook: Spend on AI no matter what

Amazon and Apple capped a blockbuster earnings stretch for Big Tech, both topping expectations and cementing what’s now obvious: AI is the only buzzword that moves Wall Street.

💸 Mega investments in AI

Meta’s long road from social media drama to AI powerhouse is starting to click. 

The stock jumped 11% after Wednesday’s earnings beat, helped by a revised full-year capital expenditure forecast of $66–72 billion. 

After shamefully missing the first run, CEO Mark Zuckerberg is betting those billions will help cement Meta’s role in the next AI wave.

Meanwhile, Microsoft’s own AI spending spree helped power its market cap past $4 trillion. The company’s fiscal Q1 capex will top $30 billion, over $5 billion higher than analysts expected.

The catch is those AI spending plans are just that... plans. Whether all that capex ever trickles down to the bottom line is a whole other question.

🔌 Wall Street money flows upstream

All that AI infrastructure is good news for suppliers. 

Citi analysts estimate Microsoft drives about 8% of AMD’s purchases, while Meta accounts for roughly 2% of Broadcom’s sales. 

Both chipmakers are set to be “the primary beneficiaries of Microsoft’s and Meta’s increased capex,” the analysts said in a recent note.

The AI tide isn't lifting all boats, though. 

For example, Qualcomm crashed as investors braced for Apple’s results and mulled how new tariffs could snarl chip supply chains.