Business

Monday Market Momentum: Can a Jackson Hole Dovish Pivot and Retail Earnings Send the S&P 500 Soaring—or Stall?

As markets react to Powell’s dovish tone, AI optimism, and mixed retail results, Monday could mark either a breakout or a breather for U.S. stocks. Here's what to watch—and how to position.

Shafeeq Ahmad

August 23, 2025

Published: Saturday, August 23, 2025 – 11:45 PM ET
Author: Shafeeq Ahmad (Editor-in-Chief, Red Bulletins)
Publisher: Red Bulletins

Market Snapshot: What Sets the Stage for Monday

Late-Friday trading saw a surge across U.S. indices, driven by Fed Chair Powell’s hopeful tone on interest rates at Jackson Hole and encouraging breadth beyond mega-tech. The S&P 500, hovering near its record intraday high of 6,481.34, ended the week strongly, backed by sectors beyond the “Magnificent 7” including consumer, industrials, energy, and financials Reuters+1 Barron’s Wikipedia Schwab Brokerage.

Key Movers:

UBS raised its year-end S&P 500 target to 6,600, up 3.6% from the last close of 6,370.17, citing robust earnings and easing trade pressures Reuters.
Conversely, a Reuters poll suggests skepticism persists, forecasting the S&P 500 to stall around 6,300 by year-end amid tariff fears and inflation concerns Reuters.
Wells Fargo sees a bold path for the S&P 500 to reach 7,007 by year-end—a nearly 11% gain—buoyed by AI momentum, strong consumer spending, M&A activity, and anticipated Fed rate cuts Business Insider.
Morgan Stanley projects AI may add $13–16 trillion to S&P 500 market cap, a massive tailwind for tech giants Barron’s.
Morgan Stanley’s Mike Wilson also remains bullish for the next 6–12 months, citing stronger earnings, Fed rate-cut expectations in 2026, and resilient geopolitics —though he warns of speculative excess MarketWatch.

Anticipated Market Drivers for Monday

1. Fed Dovishness & Technical Setup

Markets are pricing in a firm likelihood (~70–85%) of a September rate cut Reuters S&P Global.
Technically, major indices are resuming their uptrends, with intermediate-term support lining up at the 20-day moving average—an optimistic signal for bulls Schwab Brokerage.

2. Retail Earnings Heat Monday

Earnings from PDD Holdings and Heico Corp. will hint at consumer strength amid rising prices. This follows a mixed picture: Walmart missed earnings but raised guidance; Lowe’s ahead of expectations; Target beat but retreating Schwab Brokerage Investors.

3. AI & Megacap Sector Dominance

Tech giants remain key drivers—RBC notes the “Fab Four” of AI leadership (Meta, Microsoft, Nvidia, Broadcom) are top earnings catalysts Barron’s.
AI investments across mega-cap tech could lift operating profits significantly Barron’s.

4. Lingering Risks

Tariff anxieties, inflation, and narrow market breadth could stall momentum—even as optimism around AI persists Reuters Barron’s.
Strategists urge caution for the traditionally volatile late-August to October period The Australian.

Monday Prediction: Directions & Scenarios

Scenario	Likely Move	Commentary
Bullish	S&P 500 breaks above 6,481, potentially pushing toward 6,500–6,550.	Catalyst: Strong retail earnings + dovish Fed + AI tailwinds.
Base Case (Balanced)	Partial continuation—modest gains but capped near record highs.	Market paused to digest earnings amid cautious macro backdrop.
Cautious	Pullback toward 6,400–6,450 if earnings disappoint or tariff headlines overshadow optimism.	Trigger: weak retail data or renewed geopolitical tensions.

Top picks and sectors to watch:

Large-cap tech / AI names (Microsoft, Nvidia, Meta)—expected to lead.
Cyclicals (industrial, consumer discretionary)—rotation story persists.
Home Depot may rally post-earnings, given stable small-project demand despite caution on big-ticket projects Investors.

Will Monday kick off a breakout or correction?

A breakout toward 6,500 is possible if retail earnings impress and Fed sentiment holds. Otherwise, expect modest action or a small pullback.

Can AI propel long-term gains?

Analysts are bullish—Wells Fargo targets 7,007; AI investments alone could add $13–16 trillion to market cap Barron’s Business Insider.

What’s the main downside risk?

Tariff escalation, inflation persistence, or disappointing earnings could derail momentum, especially as the August-October window is historically choppy Barron’s The Australian.

Closing Thought

Monday, August 25, may redefine short-term sentiment: a breakout fueled by AI optimism and dovish Fed cues—or a pause as economic data and trade risks weigh in. Investors would do well to watch retail earnings and tech leadership, while staying alert to geopolitical surprises.