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Stocks ended the day with a mixed bag of results on Wall Street, as some late-day selling took the wind out of the market's sails. The S&P 500 ended up basically going nowhere, erasing an earlier gain of almost 1% and settling back to square one.

If you're adept at reading the flow—whether in stocks, forex, or oil—you might have sensed a systematic push in the market, with models ready to buy the dip in this low-volatility environment.

Sure, the S&P 500's intraday rally lost some steam, but 75% of stocks still ended the day in the green. This raises a compelling question: is the AI "Golden Goose" losing its grip on market sentiment? As Nvidia Corp. extended its selloff to 6%, it seems the tech giant’s stranglehold on mood and direction might be loosening, offering the broader market some breathing room. The silver lining? Most U.S. stocks advanced.

Let’s be honest—the market’s lukewarm reaction to the AI trailblazer's quarterly results was par for the course in this earnings season’s “so you beat expectations, big deal” saga. These stocks aren’t just pricey; they’ve skyrocketed in no time, setting a bar so high that even a triple somersault might not impress.

Sure, the $3.1 trillion-valued Nvidia had everyone on the edge of their seats, but the broader market didn’t exactly implode. The hype around Nvidia's earnings highlights the long-standing jitters about putting all your eggs in a few mega-cap baskets. But let’s face it: the ripple effect was more of a gentle wave than a tsunami.

The real headline-grabber overnight was the GDP revision, which showed the economy grew at a 3% annualized rate during the April-June period, up from the previous estimate of 2.8%. Personal spending, the main growth engine, also got an upgrade to 2.9% from 2.3%. Meanwhile, unemployment claims held steady at 231,000, all of which continue to inject a hefty dose of confidence into the market and ease growth fears for now.

But the real litmus test for the market is just around the corner: the August jobs report on September 6th. A weak report that nudges the unemployment rate higher could quickly reignite growth anxieties and set the stage for another correction, much like last month. The pressure is mounting, especially after last week’s unexpectedly harsh revision to payroll data for the 12 months ending in March. This puts even more weight on the upcoming jobs report to deliver.

We’ve learned that a 50 basis point cut might not be the market's best buddy if it comes hand-in-hand with labour market weakness. In that scenario, cuts could be seen less as a safety net and more as a desperate attempt to stave off a hard landing. A steady stream of 25 basis point cuts might be the sweet spot for equity multiples, provided they’re accompanied by stable growth.

It’s often said that the Fed takes the stairs up and the elevator down in an interest rate cycle, raising rates gradually and cutting them quickly when the economy faces a threat. So far, though, this cycle has been a bit of a role reversal.

From March 2022 to July 2023, rate hikes came fast and furious—elevator up—as policymakers reacted to a sudden inflation spike. As we enter the unwinding phase, the descent might seem more like a cautious stroll down the stairs. With no recession looming large for now, the Fed might just pull off that elusive soft landing.

With a bold 100 basis points of Fed easing still baked into the futures market by year-end, there might be some room to dial back those expectations, even if the first move in September remains on the table. The market seems poised for potential recalibration, underpinning the US dollar, especially if stable data rolls in and the Fed's messaging continues to evolve.

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