U.S. stocks pared gains and finished lower on Monday after the S&P 500 and Nasdaq briefly touched fresh records earlier in the session, as market attention turned to a two-day Federal Reserve meeting and a surprisingly strong retail-sales report for August. The S&P 500 slipped about 0.5 percent, the Nasdaq fell roughly 0.8 percent, and the Dow Jones Industrial Average declined 0.2 percent, reversing a stretch of benchmark advances driven by enthusiasm for artificial-intelligence-linked names.

The Commerce Department’s retail-sales release, highlighted by Investopedia’s coverage, showed a 0.6 percent month-over-month increase in August, beating a consensus view near 0.3 percent and signaling that consumer spending remains resilient. The outperformance rattled investors who had been banking on cooling demand to clear the way for Federal Reserve rate cuts next year. The 10-year Treasury yield rose to approximately 4.25 percent from about 4.18 percent late last week, reflecting an easing of expectations for near-term easing.

“The report makes the window for Fed easing narrower,” said a market strategist at a large asset manager who asked not to be named. “When the consumer spends at this pace, it raises the bar for the Fed to justify lowering rates, even if headline inflation shows modest improvement.”

The Fed meeting begins with the central bank widely expected to hold its policy rate steady. Officials will issue a policy statement, update economic projections and release a fresh dot plot that investors will parse for clues on the timing and size of potential cuts. With inflation still above the Fed’s 2 percent target on many measures and a tight labor market, officials face a familiar balancing act: tamping inflation while not over-tightening and stalling growth.

Equity leadership in recent weeks has been concentrated in technology, with semiconductor and chip-equipment stocks powering gains. That dynamic has introduced volatility: earlier in the stretch, shares of Nvidia and Broadcom moved the market after earnings, and a chip-sector slump in late August helped prompt a pullback from record levels. Monday’s modest declines carried through that theme as investors rotated toward defensive sectors while waiting for the Fed’s guidance and incoming inflation readings.

Market-implied pricing still leaves room for rate relief next year, but the retail-sales surprise tightened that outlook. Futures traders now expect fewer or later cuts than they did a month ago, a shift that reverberates across risk assets and fixed income. For investors, the near-term question is whether consumer strength is durable or a seasonal fluke; for policymakers, it is whether to give markets more clarity on the pace of disinflation.

Longer-term, the episode underscores an enduring trend: equity gains increasingly reflect concentrated leadership from a handful of megacap and AI-exposed firms, while macro releases and Fed communications continue to move broader market sentiment. As the Fed wraps up its meeting later this week and fresh inflation data arrive, markets will be tested again on whether recent rallies can broaden beyond a narrow set of winners.