Investors hit the brakes: Dow Jones tumbles amid rate cut fears

The Dow Jones Industrial Average fell to its lowest point in over a week on Thursday as investors grew cautious about the prospects for a Federal Reserve interest rate cut in September. While some positive economic data helped to limit losses, the market remains concerned that rising inflation—fueled by tariffs—could change the Fed’s plans.

The Dow (DJIA) dropped to 44,600 before recovering slightly to 44,750. While the index is still above its 50-day Exponential Moving Average (EMA) of 44,000, it’s struggling to hold onto its gains. Bullish momentum has stalled, making it more difficult to reach new record highs.

Fed policy in the spotlight

The annual Jackson Hole economic symposium, hosted by the Fed Bank of Kansas City, is underway, and all eyes are on Fed Chair Jerome Powell’s speech on Friday. Though markets are still betting on a rate cut on September 17, recent comments from Fed officials have shifted focus back to inflation. This has spooked investors, causing the probability of a September rate cut to drop from 90% last week to just under 75%, according to the CME’s FedWatch Tool.

Tariffs and a struggling retail giant

Positive news from the S&P Global Purchasing Managers Index (PMI) for August provided a mixed picture. Manufacturing PMI hit a 39-month high of 53.3, but businesses remain worried about the impact of tariffs. Companies are increasingly building up inventory to prepare for future supply chain disruptions, a move that is likely to pass tariff costs directly on to U.S. consumers.

Walmart (WMT) single-handedly dragged the Dow down, with its stock falling 5% on the day. Despite a strong quarter and raising its full-year sales outlook, the company missed its quarterly earnings forecast for the first time in over three years. Walmart’s leadership noted that while online sales are strong, consumers are increasingly bargain-hunting due to rising prices caused by tariffs, and warned that more price increases are likely.

Walmart’s CFO, John David, confirmed that some tariff costs have already been passed on to consumers and that more can be expected. It’s becoming clear that the burden of tariffs may not be falling on foreign exporters, but on American consumers.