Fed rate hike expectations cool, AI sentiment rebounds, Nasdaq futures rise, storage chip stocks generally up, gold climbs back above $4,400

U.S. retail sales unexpectedly declined in July, further intensifying market concerns over a cooling U.S. economy. Market expectations for a Fed rate hike in September quickly cooled, putting continued pressure on the dollar. Meanwhile, AI-driven trading sentiment partially recovered, and U.S. stock index futures showed a mixed performance in pre-market trading, with Nasdaq futures moving higher.

On Monday, U.S. stock index futures were mixed, with Dow futures down 0.13% and Nasdaq 100 index futures up 0.5%. In pre-market trading, storage chip stocks broadly rose: SanDisk gained about 6%, SK Hynix up around 4%, Seagate Technology up about 3%, Western Digital up approximately 4%, and Micron Technology up around 3%.

The U.S. Dollar Index fell for the third consecutive day, approaching its lowest level since May. U.S. retail sales in July posted the largest drop in over a year, with expectations for a Fed rate hike in September dropping below 30%. At the same time, continued pressure from Trump on the Fed also led markets to further question the dollar's safe-haven status.

On the geopolitical front, the Middle East situation has not shown signs of further escalation for now, but risks remain unresolved. According to CCTV International News, responding to U.S. President Trump’s recent claim that the U.S. would soon declare the Strait of Hormuz as U.S. territory after "defeating Iran," Iranian Army Commander Hatami stated during a public event on August 16 that even as a joke, such reckless speech is a grave mistake. Hatami also asserted that "this is Iran, and the guardians will break the legs of any invader." Oil prices edged lower, with WTI crude down 0.6%.

Kyle Rodda, Senior Analyst at Capital.com, said: "Currently, the biggest negative facing markets remains geopolitical uncertainty, which continues to impact market sentiment; however, the relatively limited military activity in the Middle East of late has to some degree reduced volatility."

Key market movements are as follows:

• U.S. stock index futures were mixed: Dow futures fell 0.13%, S&P 500 futures rose 0.1%, Nasdaq 100 index futures climbed 0.4%.

• Europe's Stoxx 50 opened up 0.3%, Germany's DAX was up 0.2%, the UK's FTSE 100 gained 0.3%, and France's CAC 40 was up 0.04%.

• Nikkei 225 closed up 0.6% at 6,922.05 points. The TOPIX index ended 0.3% lower at 4,184.11 points.

• The U.S. 2-year Treasury yield fell 2 basis points to 4.15%. Yields on both the 10-year and 30-year Treasury notes slipped 1 basis point each.

• Japan's 10-year government bond yield jumped to 2.91%, the highest since 1996.

• The Dollar Index fell 0.3% to 99.32.

• The pound rose 0.2% against the dollar to 1.3565, a three-month high.

• Spot gold gained 0.78%, priced at $4,409 per ounce.

• Crude oil fell, with Brent down more than 0.3% and WTI dropping over 0.6%.

Dow Futures Under Pressure, Nasdaq Futures Rise

U.S. stock index futures showed a mixed performance: Dow futures fell 0.13%, S&P 500 futures rose 0.1%, and Nasdaq 100 index futures climbed 0.5%. Previously, the S&P 500 index continued to hit record highs, and the market remains focused on economic data and Fed policy direction.

On the economic data front, investors will watch the August New York State Manufacturing Index and NAHB Housing Market Index for further clues on U.S. economic momentum. On the Federal Reserve front, the market expects the July FOMC meeting minutes on Wednesday to provide more hints regarding the interest rate path and policy divisions within the Fed.

As for earnings, retail companies will have a heavy period of disclosures this week: Home Depot and Lowe's will release earnings on Tuesday and Wednesday, respectively, while Walmart reports Thursday. U.S. consumer spending performance will be a key window into economic resilience.

Dollar Slides for Third Consecutive Day, Nears May Lows as Fed Independence Concerns Loom

The U.S. Dollar Index dropped for the third straight day, approaching its lowest level since May. Weak U.S. economic data has dampened market expectations for further monetary tightening from the Federal Reserve and undermined rate-driven dollar support.

Richard Franulovich, Head of FX Strategy at Westpac, Sydney, said that regular conversations between Trump and Fed Chair Kevin Walsh, along with Trump’s renewed efforts to remove Fed Governor Lisa Cook, are adding pressure on the dollar.

He noted that frequent communications between Trump and Walsh, repeated attempts to remove Cook, and uncertainty over how the Fed will react in the coming months are all increasing skepticism about the dollar’s safe-haven nature. Furthermore, 'de-dollarization' is back in focus, while the recent surge in long-term U.S. Treasury yields has reinforced this trend.

Fed Rate Hike Expectations Cool, Gold Prices Rise

Spot gold climbed 0.78% to $4,409 per ounce. The weakening dollar and soft U.S. economic data have relieved market worries about further Fed tightening, offering support to gold prices.

Latest data show U.S. consumer confidence falling for the first time in three months while retail sales suffered their biggest monthly drop in over a year. This has reinforced market concerns over a slowdown in growth and further cooled expectations for Fed rate hikes.

Meanwhile, a rebound in investor demand and continued gold accumulation by global central banks further support gold prices. Last week, gold prices broke above the 100-day moving average for the first time since April and remain near this level.

According to ANZ Bank, in Q1 2026, global central bank gold purchases totaled 244 tons—the strongest quarterly buying since Q4 2024.