The weekend newswires were dominated by the resignation of Japanese prime minister Ishiba after two crushing parliamentary defeats, political chaos and public disorder on the rise in the UK, France and Argentina, a brutal intensification of Russia’s assault on Ukraine and Trump’s plans to militarize the streets of Chicago and Memphis.
Stocks recovered from the previous Friday’s wobble, regaining some equilibrium on Monday at the start of a week likely to be dominated by key inflation data on Wednesday and Thursday. The indexes meandered around aimlessly for the entire session but closed a tad higher.
The annual revision of Bureau of Labour Statistics employment data came out on Tuesday. This is when the under-fire agency uses hindsight to transparently compare its monthly labor market survey findings to the actual facts. The mea culpa for the March 2024 to March 2025 period showed an estimate of 911k fewer jobs actually created than estimated by the surveys and provided ripe political fodder for Trump who delighted in the terrible-sounding number. The fact is, however, that this kind of delta represents a lower statistical margin of error than most other kinds of surveys.
Wall Street understands this even if Trump-world doesn’t and the meltup in stocks continued. Israel deciding to bomb key US ally Qatar kept a bit of a lid on things, but we still ended the day at more new all-time highs for the S&P 500 and the NASDAQ.
On Wednesday morning we got the first inflation drop of the week before markets opened. Wholesale PPI, which had surprised to the upside for July, surprised to the downside for August. Wall Street’s reaction was predictable, stocks jumped and interest rates fell.
Oracle issued a stunning earnings report with a fiercely aggressive forecast and the stock price skyrocketed by more than 35% (resulting in co-founder Larry Ellison blowing past Elon Musk as the world’s richest individual).
The stock indexes just about held on to their gains over the course of the day despite a Russian drone incursion into NATO domain in Poland and both the S&P 500 and the NASDAQ tiptoed a little deeper into fresh record high territory.
The last big data point release before the next Fed meeting was the retail CPI inflation report pre-market on Thursday. It came in slightly hotter than expected, accelerating to a 2.9% annualized rate with noticeable price increases in tariff-exposed products, but still kept a Federal Funds interest rate cut very much in play and that elated stock markets which zoomed higher again. A third consecutive day of new all-time highs, obviously.
The Epstein affair (or “hoax” depending who you talk to) rumbles on and claimed its first major political scalp on Thursday as Peter Mandelson, Britain’s US ambassador, was unceremoniously sacked just days before a Trump state visit to the UK.
On Friday, we learned that sentiment among American consumers had sunk again and the public’s long term inflation fears have increased. JP Morgan CEO Jamie Dimon began bandying the word “recession” around on CNBC. Healthcare stocks were hurt by reports that the Trump administration is set to preposterously claim that COVID vaccines routinely kill children.
Stocks flatlined as traders took something of a break from their seemingly endless buying spree, but the NASDAQ still managed to squeak out a fourth consecutive day of new all-time highs. Shorter term interest rates reversed course and moved higher but the longer end continued to head lower (see INTEREST RATES below).
Usually, the big questions in advance of a Fed policy meeting revolve around what the committee will do and what the chairman will say. This time, however, we don't even know for sure who will be in the room.
Senate Republicans are seeking to fast-track Trump’s hand-picked White House adviser Stephen Miran as a temporary Fed governor on Monday, which would allow him to join the meeting that begins on Tuesday morning and culminates on Wednesday afternoon with chairman Jerome Powell’s press conference.
Meanwhile, the court battle over whether the president can unilaterally fire Fed governor Lisa Cook has also been put in the fast lane. A district court judge last week ruled that he cannot legally do so until her case has been fully litigated and any wrong-doing proven in court. The Trump administration's appeal against that ruling could be heard before Tuesday.
The outcome of these two processes could not only determine the magnitude of the interest rate cut to be announced on Wednesday lunchtime (the expected quarter-point or a possible jumbo half-point?) but much more importantly, whether this cut will be just a mid-cycle adjustment to be followed by maybe a small number of measured trims here and there over the next couple of years or a beginning of the series of multiple frequent and dramatic cuts that Trump keeps demanding.
The stakes could not be higher; the upcoming trajectory of the entire US economy.
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ARTICLE OF THE WEEK ..
The guys at Dimensional (DFA) make excellent points about keeping calm in the face of all the doom-mongering noise out thereabout an imminent huge market crash.
.. AND I QUOTE ..
“Would you choose the cheapest dentist in town? The restaurant with rock-bottom prices? The cheapest used car on the lot? Most of us instinctively know the answer is no - yet when it comes to investing, many people fall into the dangerous trap of equating cheap with attractive and desirable.”
Bogumil Baranowski
LAST WEEK BY THE NUMBERS:
Last week’s market color courtesy of finviz.com
Last week’s best performing US sector: Technology (two biggest holdings: Nvidia, Microsoft) ⬆︎ 3.1% for the week
Last week’s worst performing US sector: Consumer Defensive (two biggest holdings: Walmart, Costco) ⬇︎ 0.7% for the week
* SPY, a US Large Cap ETF, tracks the S&P 500 index, made up of 500 stocks from a universe of the largest US companies. Its price rose 1.6% last week, is up 12.2% so far this year and ended the week 0.3% below its all-time record closing high (09/11/2025).
* IWM, a US Small Cap ETF, tracks the Russell 2000 index, made up of the bottom two-thirds in terms of company size of a universe of 3,000 of the largest US stocks. Its price rose 0.3% last week, is up 7.9% so far this year and ended the week 2.7% below its all-time record closing high (11/08/2021).
* VXUS, a Global Non-US ETF, tracks the MSCI ACWI Ex-US index, made up of over 8,500 of the largest names from a universe of stocks issued by companies from around the world excluding the United States, in both developed and emerging markets. Its price rose 1.8% last week, is up 24.0% so far this year and ended the week 0.2% below its all-time record closing high (09/11/2025).
INTEREST RATES:
* FED FUNDS * ⬌ 4.33% (unchanged)
* PRIME RATE ** ⬌ 7.50% (unchanged)
* 3 MONTH TREASURY ⬆︎ 4.08% (4.07% a week ago)
* 2 YEAR TREASURY ⬆︎ 3.56% (3.51% a week ago)
* 5 YEAR TREASURY ⬆︎ 3.63% (3.59% a week ago)
* 10 YEAR TREASURY *** ⬇︎ 4.06% (4.10% a week ago)
* 20 YEAR TREASURY ⬇︎ 4.65% (4.72% a week ago)
* 30 YEAR TREASURY ⬇︎ 4.68% (4.78% a week ago)
Data courtesy of the Federal Reserve and the Department of the Treasury as of the market close on Friday
* Decided upon by the Federal Reserve Open Market Committee. Used as a basis for overnight interbank loans and for determining high yield savings interest rates.
** Wall Street Journal Prime Rate as of Friday’s close. Used as a basis for determining many consumer loan interest rates such as credit cards, personal loans, home equity loans/lines of credit, securities-based lending and auto loans.
*** Used as a basis for determining mortgage interest rates and some business loans
AVERAGE 30-YEAR FIXED MORTGAGE RATE:
* ⬇︎ 6.35%
One week ago: 6.50%, one month ago: 6.60%, one year ago: 6.20%
Data courtesy of Freddie Mac Primary Mortgage Market Survey
INTEREST RATE EXPECTATIONS:
Where will the Fed Funds interest rate be after the next rate-setting meeting on September 17th?
* Unchanged from now .. ⬌ 0% probability (0% a week ago)
* 0.25% lower than now .. ⬆︎ 93% probability (89% a week ago)
* 0.50% lower than now .. ⬇︎ 7% probability (11% a week ago)
With three more rate-setting meetings left in 2025, what is the most commonly-expected number of remaining 0.25% Fed Funds interest rate cuts this year?
* ⬌ Three (unchanged from a week ago)
Data courtesy of CME FedWatch Tool
All data based on the Fed Funds interest rate (currently 4.33%). Calculated from Federal Funds futures prices as of the market close on Friday.
PERCENT OF S&P 500 STOCKS ABOVE THEIR 200-DAY MOVING AVERAGE:
* ⬌ 63%
One week ago: 63%, one month ago: 58%, one year ago: 70%
Data courtesy of MacroMicro as of Friday’s market close
This widely-used technical measure of market breadth is considered to be a robust indicator of the overall health of the S&P 500 index. A high percentage (above 70%) generally suggests broad market strength and a bullish trend, while a low percentage (below 30%) may indicate market weakness and a bearish trend.
FEAR & GREED INDEX:
“Be fearful when others are greedy and be greedy when others are fearful.” Warren Buffet.
Data courtesy of CNN Business as of Friday’s market close
The Fear & Greed Index from CNN Business can be used as an attempt to gauge whether or not stocks are fairly priced and to determine the mood of the market. It is a compilation of seven of the most important indicators that measure different aspects of stock market behavior. They are: market momentum, stock price strength, stock price breadth, put and call option ratio, junk bond demand, market volatility and safe haven demand.
Extreme Fear readings can lead to potential opportunities as investors may have driven prices “too low” from a possibly excessive risk-off negative sentiment.
Extreme Greed readings can be associated with possibly too-frothy prices and a sense of “FOMO” with investors chasing rallies in an excessively risk-on environment . This overcrowded positioning leaves the market potentially vulnerable to a sharp downward reversal at some point.
A “sweet spot” is considered to be in the lower-to-mid “Greed” zone.
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