Futures tied to the Dow Jones Industrial Average rose 48 points, or 0.11%. S&P 500 futures were up 0.12%, and Nasdaq futures added 0.18%.

The yield on the 10-year Treasury was flat at 4.322%. The U.S. dollar was down 0.07% against the euro but up 0.07% against the yen.

Gold fell 0.25% to $3,374.10 per ounce. U.S. oil prices dropped 0.27% to $62.63 per barrel, and Brent crude fell 0.41% to $65.58.

Energy markets will also be in focus this week amid continued diplomacy to end Russia’s war on Ukraine as harsher U.S. sanctions on Moscow could target its oil exports, though President Donald Trump refrained from announcing any fresh penalties after ceasefire talks Friday failed to produce a deal.

Stocks have notched two consecutive weekly gains, with the S&P 500 hitting a fresh all-time high last week. That’s as corporate earnings have continued to come in strong and as the latest inflation readings were mixed but still haven’t set off panic about the effect of tariffs.

With the labor market also looking weaker, Wall Street overwhelmingly sees the inflation data giving the Federal Reserve a green light to resume rate cuts next month, further fueling market optimism.

But those views will be tested this week. On Wednesday, the Fed will release minutes from its policy meeting in July, when central bankers kept rates steady though two officials dissented. The details should show how much debate occurred and to what extent other policymakers were leaning a certain way.

Then the main attraction will take place on Friday, when Fed Chair Jerome Powell will deliver a speech at a gathering in Jackson Hole, Wyo. The annual event previously has served as an opportunity for policymakers to tease forthcoming rate moves.

Last year, Powell signaled a pivot to cuts, saying “the time has come for policy to adjust” and that “my confidence has grown that inflation is on a sustainable path back to 2%.” But he may not drop big hints this year, potentially setting up Wall Street for major disappointment.

Meanwhile, earnings season is winding down, but the coming week will feature several top retailers. Home Depot reports Tuesday, with Lowe’s and Target due on Wednesday. Walmart will put out its numbers on Thursday.

Their quarterly updates will provide new insights into how much tariffs are affecting prices and who is picking up the extra costs. The precise impact of tariffs on inflation remains somewhat of a mystery.

While companies may be absorbing much of the tariff costs for now, it’s not clear how much longer they can keep it up and how much consumers will be able to shoulder later.

If the retail giants keep eating tariff costs, that will show up on the bottom line and in their guidance. Citi doesn’t expect consumers to get hit with big price hikes in the future, even as more levies are expected to roll out.

“Softer demand means firms will have difficulty passing tariff costs on to consumers,” chief US economist Andrew Hollenhorst said in a note. “While some firms might still attempt to slowly increase prices in coming months, the experience so far suggests these increases will be modest in size. This should reduce concerns about upside risk to inflation and increase concerns that decreased profit margins will cause firms to pullback on hiring.”

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The Federal Open Market Committee (FOMC) had previously left rates unchanged at a range of 4.25% to 4.50% at its July meeting, despite internal disagreements, growing signs that economic conditions warranted a more dovish approach, and mounting pressure from President Donald Trump on Fed Chair Jerome Powell to cut. The July jobs report, of course, is changing the picture rapidly.

The Labor Department reported a gain of just 73,000 nonfarm payroll jobs in July, well below consensus forecasts. More troubling were the significant downward revisions for May and June, which cut a combined 258,000 jobs from the previous estimates and reduced those months’ average gains to less than 20,000 jobs per month. While July’s number alone would not spell crisis, the back-to-back weakness and hefty revisions roused investor concerns about potential cracks forming in the U.S. labor market. Powell has repeatedly emphasized the balance between labor supply and demand, and said the unemployment rate is the “key indicator to watch.” July’s unemployment rate ticked up to 4.2%, just shy of a 12-month high, providing further evidence of softening conditions.

Market reaction was swift. Stephen Brown, Deputy Chief North America Economist for research firm Capital Economics, called it a “payrolls shocker.” He noted an immediate change in markets, which repriced the likelihood of a September rate cut at 85%, a jump from below 50% prior to the jobs data, as futures traders bet that the Federal Open Market Committee will need to respond to mounting evidence of economic softening.

“The July jobs report goes a long way toward providing the evidence of a weaker labor market that the Fed needs to justify cutting interest rates in the face of above-target inflation,” said Brian Rose, senior U.S. Economist at UBS Global Wealth Management, in a statement to Fortune Intelligence. Rose noted that GDP data had shown the economy’s growth slowing to an annualized 1.2% pace in the first half of 2025, well below the longer-term trend rate of 2.0%. “We expect soft data in the second half of 2025 as well. This should help to offset some of the inflationary pressure driven by tariff hikes,” he added.

Other recent data reinforce the picture of an economy under strain. Survey indicators such as the ISM manufacturing employment index fell further in July, while measures of business capital spending have only recovered modestly after disruptions following April’s “Liberation Day.” Meanwhile, President Trump’s new tariff measures have pushed up import costs, adding to the inflation outlook.

Fiendishly mixed signals

The July payroll dip, coming on the heels of the disruptive “Liberation Day” in April, may not yet herald a deeper jobs slide, other data suggests. Brown noted that initial jobless claims ticked down to 218,000 last week, and continuing claims have declined steadily since peaking in early June.

Analysts expect Powell to use the upcoming Jackson Hole Economic Symposium, to be held August 21–23, as an opportunity to signal the central bank’s readiness to act if labor market weakness persists and larger inflation effects from tariffs do not materialize.

Rose’s baseline scenario now sees the Fed resuming rate cuts at its September meeting and continuing to cut by 25 basis points each meeting through January, trimming the federal funds rate by a full percentage point to bring borrowing costs back to a “roughly neutral” level.

“Given this morning’s data, Powell may be willing to drop a hint that the Fed is leaning toward a September cut,” Rose said.

For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing. 

Trump said the project cost $3.1 billion, much higher than the Fed’s $2.5 billion figure, while Powell, standing next to him, silently shook his head.

“This came from us?” Powell said, then figuring out that Trump was including the renovation of the Martin Building that was finished five years ago.

“Do you expect any more additional cost overruns?” Trump asked.

“Don’t expect them,” Powell said.

Trump said in his career as a real estate developer he would fire someone for cost overruns. The president joked that he would back off Powell if he lowered interest rates.

THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.

WASHINGTON (AP) — The Federal Reserve, known for its tight lips, structured formality and extraordinary power to shape the global economy, opened up a costly building renovation Thursday to reporters and President Donald Trump.

Trump and his allies say a $2.5 billion renovation of the Fed headquarters and a neighboring building reflects an institution run amok — a belief they hope to verify in an afternoon tour of the construction site. The Fed allowed reporters to tour the building before the visit by Trump, who, in his real estate career, has bragged about his lavish spending on architectural accoutrements that gave a Versailles-like golden flair to his buildings.

The visit is an attempt to further ratchet up pressure on Fed Chair Jerome Powell, whom the Republican president has relentlessly attacked for not cutting borrowing costs. Trump’s criticisms have put the Fed, a historically independent institution, under a harsh spotlight. Undermining its independence could reduce the Fed’s ability to calm financial markets and stabilize the U.S. economy.

“This stubborn guy at the Fed just doesn’t get it — Never did, and never will,” Trump said Wednesday on Truth Social. “The Board should act, but they don’t have the Courage to do so!”

Journalists get rare tour of Fed renovation

On Thursday, reporters wound through cement mixers, front loaders, and plastic pipes as they got a close-up view of the active construction site that encompasses the Fed’s historic headquarters, known as the Marriner S. Eccles building, and a second building across 20th Street in Washington.

Fed staff, who declined to be identified, said that greater security requirements, rising materials costs and tariffs, and the need to comply with historic preservation measures drove up the cost of the project, which was budgeted in 2022 at $1.9 billion.

The staff pointed out new blast-resistant windows and seismic walls that were needed to comply with modern building codes and security standards set out by the Department of Homeland Security. The Fed has to build with the highest level of security in mind, Fed staff said, including something called “progressive collapse,” in which only parts of the building would fall if hit with explosives.

Sensitivity to the president’s pending visit among Fed staff was high during the tour. Reporters were ushered into a small room outside the Fed’s boardroom, where 19 officials meet eight times a year to decide whether to change short-term interest rates. The room, which will have a security booth, is oval-shaped, and someone had written “oval office” on plywood walls.

The Fed staff downplayed the inscription as a joke. When reporters returned to the room later, it had been painted over.

During the tour, Fed staff also showed the elevator shaft that congressional critics have said is for “VIPs” only. Powell has since said it will be open to all Fed staff. The renovation includes an 18-inch (45-cm) extension so the elevator reaches a slightly elevated area that is now accessible only by steps or a ramp. A planning document that said the elevator will only be for the Fed’s seven governors was erroneous and later amended, staff said.

Renovations have been in the works for a while

Plans for the renovation were first approved by the Fed’s governing board in 2017. The project then wended its way through several local commissions for approval, at least one of which, the Commission for Fine Arts, included several Trump appointees. The commission pushed for more marble in the second of the two buildings the Fed is renovating, known as 1951 Constitution Avenue, specifically in a mostly glass extension that some of Trump’s appointees derided as a “glass box.”

Fed staff also said tariffs and inflationary increases in building material prices drove up costs. Trump in 2018 imposed a 25% duty on steel and 10% on aluminum. He increased them this year to 50%. Steel prices are up about 60% since the plans were approved, while construction materials costs overall are up about 50%, according to government data.

Fed staff also pointed to the complication of historic renovations — both buildings have significant preservation needs. Constructing a new building on an empty site would have been cheaper, they said.

As one example, the staff pointed reporters to where they had excavated beneath the Eccles building to add a floor of mechanical rooms, storage space, and some offices. The Fed staff acknowledged such structural additions underground are expensive, but said it was done to avoid adding HVAC equipment and other mechanics on the roof, which is historic.

The Fed has previously attributed much of the project’s cost to underground construction. It is also adding three underground levels of parking for its second building. Initially the central bank proposed building more above ground, but ran into Washington, D.C.’s height restrictions, forcing more underground construction.

Renovation project could be impetus to push out Powell

Trump wants Powell to dramatically slash the Fed’s benchmark interest rate under the belief that inflation is not a problem, but Powell wants to see how Trump’s tariffs impact the economy before making any rate cuts that could potentially cause inflation to accelerate.

The renovation project has emerged as a possible justification by Trump to take the extraordinary step of firing Powell for cause, an act that some administration officials have played down given that the Fed chair’s term ends in May 2026. White House budget director Russell Vought suggested in a July 10 letter to Powell that changes to the renovations in order to save money might have violated the National Capital Planning Act.

Fed staff said there were just two changes to the plans they had submitted to the National Capital Planning Commission, and neither were significant enough to warrant a re-submission of the plans. They removed a seating area on the roof of the Eccles building, because it was an amenity, and two water features in front of the second building, which they said saved money.

More recently, Trump has said he has no plans to oust Powell, which could be illegal based on a note in a May Supreme Court ruling. The Supreme Court found that Trump had the power to remove board members of other independent agencies, but indicated that a Fed chair could only be removed for cause.

Pushing Powell out also would almost certainly jilt global markets, potentially having the opposite effect that Trump wants as he pushes for lower borrowing costs.

Not everyone in Trump’s administration agrees with the president’s contention that Powell needs to resign.

“There’s nothing that tells me that he should step down right now,” said Treasury Secretary Scott Bessent, whom Trump has floated as a potential replacement for Powell, in a recent interview with Fox Business. “He’s been a good public servant.”

When asked last week if the costly rebuilding could be grounds to fire Powell, Trump said, “I think it sort of is.”

“When you spend $2.5 billion on, really, a renovation,” Trump said, “I think it’s really disgraceful.”

Trump this week said Powell should “resign immediately,” if allegations from an administration official that the central banker misled lawmakers over renovations to the Fed’s headquarters prove true. The remark added to growing criticism of the Fed chair by Trump, who has demanded aggressive interest rate cuts and signaled he may nominate a successor before Powell’s term ends.

Powell has resisted pressure to ease monetary policy and said he won’t step down if asked by the president, given the Fed’s independence. While acknowledging cost overruns related to the renovation work, Powell has disputed portions of reports about the issue and called them “flatly misleading.”

George Saravelos, Deutsche’s global head of FX strategy, said in a report to clients that the market is “pricing a very low probability” of Powell being removed from office. He pointed to Polymarket, a betting platform, which assigned less than a 20% chance of it happening, and noted that the dollar has been broadly stable recently. 

If Trump were to force Powell out, the subsequent 24 hours would probably see a drop of at least 3% to 4% in the trade-weighted dollar, as well as a 30 to 40 basis point fixed-income selloff, Saravelos said. The greenback and bonds would carry a “persistent” risk premium, he said, adding that investors may also grow anxious about the potential politicization of the Fed’s swap lines with other central banks.

“Investors would likely interpret such an event as a direct affront to Fed independence, putting the central bank under extreme institutional duress,” Saravelos said. “With the Fed sitting at the pinnacle of the global dollar monetary system, it is also stating the obvious that the consequences would reverberate far beyond US borders.”

How markets continue to react beyond the initial news would depend on whether other Fed officials publicly coalesced around the central bank’s independence, Trump’s nomination for Powell’s successor and the state of the economy, Saravelos said.

“Beyond that, we worry about the very vulnerable external funding position which the US economy currently finds itself in,” he said. “This raises the risk of far larger and more disruptive price moves than the ones we have outlined.”

In another report, ING Groep NV strategists including Padhraic Garvey said an early exit by Powell was “unlikely,” but would lead to a steepening of the Treasury yield curve as investors priced in lower rates, faster inflation and diminished Fed independence.

They said it would also create a “toxic mix” for the dollar, with the euro, yen and Swiss franc set to benefit most.