Good morning, traders.
After nearly a week of steady gains, Wall Street finally lost a step Tuesday.
The Dow Jones Industrial Average gave up about 0.4%, dragged down in part by Home Depot’s latest earnings.
The home improvement giant posted results that were — at best — a mixed bag.
Revenue came in lighter than expected, and while the company reiterated its full-year guidance, it wasn’t enough to light a fire under the stock.
Investors were looking for strength, maybe even a little upside surprise.
Instead, they got a flatline report in a market that’s been stretched and leaning bullish for days.
Here’s what that could mean for traders.
Subtle Shift
The Dow/Home Depot scenario set the tone early, and the selling didn’t stop with the Dow.
The S&P 500 and Nasdaq each shed around 0.4%, putting the brakes on what had been a six-day win streak.
Traders who have been riding the wave were reminded that rallies don’t move in straight lines.
It was a mild pullback, but it carried weight, especially as momentum cooled and tech stocks took a breather.
Under the surface, the mood felt different.
It wasn’t panic.
It was hesitation.
A sense that the market had gotten ahead of itself. That the bar for earnings and macro optimism is now sky-high.
Then came some perspective from the Fed — calm, measured, but with a clear message.
Fed Holds the Line
Alberto Musalem, the relatively new President of the Federal Reserve Bank of St. Louis, didn’t react directly to Tuesday’s market moves.
But for traders trying to understand where the Fed stands after months of will-they-won’t-they speculation on rate cuts, his comments added some clarity.
Speaking to the Economic Club of Minnesota, Musalem acknowledged the recent cooling in U.S.-China trade tensions — a potential tailwind for markets.
He didn’t dismiss the progress, but he also didn’t celebrate it.
In his view, de-escalation might help the labor market stay strong and could support inflation drifting back toward the Fed’s 2% target.
In that scenario, he said, the Fed’s current policy stance would still be appropriate.
But Musalem didn’t stop there.
If long-term inflation expectations begin to slip their anchor, he indicated the Fed should prioritize price stability over anything else.
That means keeping rates higher for longer, no matter how loudly the market begs for cuts.
He repeated that the central bank shouldn’t commit to easing policy until there’s more clarity on whether tariffs and supply chain shifts will lead to temporary inflation or something more persistent.
Time to Pay Attention
For options traders, days like this are a signal.
Not because of any one event, but because of the way sentiment starts to shift.
The pullback off recent highs isn’t the beginning of a collapse.
It’s a reminder that markets have been pricing in perfection.
And as Fed officials like Musalem remind us that inflation is still a concern, and volatility could start creeping back in.
That makes it a good time to stay flexible.
It’s not about being overly bearish.
It’s about being ready for range, chop, and opportunity on both sides.
Stay focused,
— Jeff Zananiri
Markets just broke a six-day win streak — and the Fed’s hinting rate cuts aren’t coming anytime soon.
Join Danny Phee Saturday at 8 p.m. ET to see how he’s trading this shift and where the real opportunity is now.
*Past performance does not indicate future results.
