Dow Jones Industrial Average retreats ahead of Fed rate call

• The Dow Jones stepped lower on Tuesday as investors brace for a hectic week.
• The latest Fed rate call is due on Wednesday, crimping risk appetite.
• A hefty round of key US economic data is also weighing on the week.

The Dow Jones Industrial Average (DJIA) softened on Tuesday, falling back for a second straight day as bullish-prone equity markets pivot into a defensive stance ahead of the latest interest rate decision from the Federal Reserve (Fed). A raft of key United States (US) economic data is stuffing the chute through the rest of the week, with Gross Domestic Product (GDP), US Personal Consumption Expenditure Price Index (PCE) inflation, and the latest Nonfarm Payrolls report.

The Dow Jones slipped back below 44,800, shedding around 200 points and backsliding four-tenths of one percent on the day. Bearish pressure continues to build overhead, crimping further upside after the Dow posted a record intraday high of 45,130 earlier this week. Charts are still catching technical support from a messy congestion zone north of 44,000, but traders should expect price action to be driven by headlines this week.

Mag7 earnings, Fed rate call in the barrel for Wednesday

Adding further pressure to equity markets, four of the "Magnificent 7" will be publishing their latest quarterly earnings on Wednesday and Thursday. Meta Platforms (META), Microsoft (MSFT), Apple (AAPL) and Amazon (AMZN) will all be posting their quarterly results during the midweek, and investors will be hoping for signs of ongoing expansion and accelerating profit growth from key stocks that represent the well-stuffed top echelons of corporate valuations.

With a combined market capitalization of $11.17T, the four key earnings names this week account for over a fifth of the market cap of the entire Standard & Poor's 500 (SP500) major equity index.

The Fed's latest interest rate decision is slated for Wednesday and is expected to draw plenty of investor attention. The US central bank is broadly expected to keep interest rates on hold in the 4.25-4.5% range this week, but traders will be looking for signs that the Fed is still on track to deliver a fresh quarter-point rate trim at its next meeting on September 17.

US GDP, PCE inflation, and NFP job gains all on the docket this week

Besides an interest rate call from the most powerful central bank in the world, investors will also be contending with a US GDP update early Wednesday. Quarterly US GDP growth last clocked in at a disappointing -0.5% in Q1, and markets are hoping for a sharp recovery to 2.4% in annualized growth in Q2.

US PCE inflation, due on Thursday, is expected to accelerate slightly, with analysts anticipating an uptick to 0.3% MoM in June compared to the previous month's 0.2%. A resurgence of inflationary pressure is the last thing investors want, as it could spell doom for ongoing rate cut expectations.

Friday's NFP jobs report could add further fuel to rate hold fears. July's NFP net employment gains report is expected to hold in positive territory after seasonal adjustments. However, the figure is expected to ease to 110K from June's 147K.

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