Traders came into last week breathing easier after Fed chairman Powell strongly implied the previous Friday that a Federal Funds rate cut is coming on September 17th. But there are still plenty of data releases to navigate before then, including Nvidia’s earnings on Wednesday and more inflation dataon Friday.
Stocks unwound some of Friday’s gains over the course of a mostly quiet summer session on Monday, but it felt more like light short term profit-taking rather than any reassessment of optimism surrounding rate cuts and the indexes all closed somewhat lower.
Word that crackpot Health Secretary Kennedy was considering scrapping all COVID vaccines in the US and firing the head of the Center For Disease Control (CDC) for daring to push back against such a deranged proposal, actions supposedly endorsed by the president whose approval numbers are plunging according to polls released earlier in the day, sent many healthcare stocks reeling.
After the close, Trump announced that he was going to follow through on his threat to take the unprecedented step of firing Federal Reserve governor and voting member on the interest rate-setting committee Lisa Cook “for cause” on the basis of some evidence-free verbal allegations (but no charges, let alone a conviction) of mortgage fraud. Cook refused to roll over and vowed to fight Trump’s legally dubious decision in the courts. This undisguised attempt at a power-grab by the president has now clearly set up an epic showdown over the independence of the US central bank.
Asian and European stocks fell, as did the US Dollar, in advance of the New York open on Tuesday but Wall Street decided to take a more chill view of things and to watch how the potentially protracted legal battle over Governor Cook’s job plays out. The indexes kept calm and carried on, rising moderately on the day to almost exactly reverse Monday’s declines. Longer term interest rates inched higher while shorter term rates sank.
Nvidia Day dawned on Wednesday with the normally most impactful of quarterly earnings reports due after the closing bell. It was another session of gentle gains for the indexes, enough for the S&P 500 to close at another new all-time record high, a calm before the potential storm of the chipmaker’s Q2 numbers. Going into the report, NVDA was up 35% in 2025 and that rally alone had accounted for a quarter of the whole 10% year-to-date return of the S&P 500. It’s that big a factor in the performance of entire investment and retirement portfolios.
The results met expectations but failed to wow and, by Nvidia’s standards, that is a bit of a miss in Wall Street’s book and the stock price tumbled in the after-market. When the real market opened on Thursday, however, the indexes displayed continued zen as the main surprise from Nvidia report was that it had virtually zero effect on markets once the stock price stabilized. Nvidia who? There was also a slight tick up to 3.3% in the second of three estimates of Q2 Gross Domestic Product.
Once again, a slow and steady climb in stocks generated another all-time high in the S&P 500 which closed a hair’s breadth away from 6500.
The Fed watches the core version of PCE inflation data closely when making its interest rate decisions and we got the latest reading on Friday morning. It was bang in line with expectations, rising to 2.9% annualized, probably not enough to derail Fed Funds rate cut hopes (see INTEREST RATE EXPECTATIONS below).
Round one in what will be a marathon Trump/Cook legal fight ended in a tie as a judge deferred an initial ruling on the validity of the firing. While one voting Fed governor was fighting to keep their job, another was intensifying an audition for the role of chairman. Governor Chris Waller parroted Trump’s views in the financial media, minimizing tariff-impacted inflation risk and promoting the idea of multiple rate cuts over the coming months, quite clearly performing for an audience of one.
The indexes fell back from their record highs (helped lower by poor numbers from Dell), erasing the week’s gains but they still managed to finish higher for the month, heading into the “September scaries”. The month is historically the worst of the year for stock price returns.
And September might get off to a highly volatile start when markets open on Tuesday after the long weekend as a federal appellate court on Friday evening upheld a previous Court of International Trade ruling that struck down Trump’s use of the International Emergency Economic Powers Act (IEEPA) to impose tariffs as illegal, cutting off a major new source of cash for the government and raising huge questions about what on earth businesses are supposed to do next.
Strap in.
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ARTICLE OF THE WEEK ..
The wisdom of crowds. Why you absolutely have to respect price.
.. AND I QUOTE ..
"What keeps me up at night is not what I know, but what I do not know."
Franz Kafka
LAST WEEK BY THE NUMBERS:
Last week’s market color courtesy of finviz.com
Last week’s best performing US sector: Energy for the second week in a row(two biggest holdings: Exxon-Mobil, Chevron) ⬆︎ 2.6% for the week
Last week’s worst performing US sector: Consumer Defensive (two biggest holdings: Costco, Walmart) ⬇︎ 2.1% 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 was unchanged last week, is up 10.1% so far this year and ended the week 0.7% below its all-time record closing high (08/28/2025).
* 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 3.4% last week, is up 6.4% so far this year and ended the week 4.1% 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 fell 1.4%% last week, is up 21.1% so far this year and ended the week 4.1% below its all-time record closing high (11/22/2021).
INTEREST RATES:
* FED FUNDS * ⬌ 4.33% (unchanged)
* PRIME RATE ** ⬌ 7.50% (unchanged)
* 3 MONTH TREASURY ⬇︎ 4.23% (4.27% a week ago)
* 2 YEAR TREASURY ⬇︎ 3.59% (3.68% a week ago)
* 5 YEAR TREASURY ⬇︎ 3.68% (3.76% a week ago)
* 10 YEAR TREASURY *** ⬇︎ 4.23% (4.26% a week ago)
* 20 YEAR TREASURY ⬆︎ 4.86% (4.84% a week ago)
* 30 YEAR TREASURY ⬆︎ 4.92% (4.88% 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. 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 business loans
AVERAGE 30-YEAR FIXED MORTGAGE RATE:
* ⬇︎ 6.56%
One week ago: 6.58%, one month ago: 6.73%, one year ago: 6.35%
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 .. ⬇︎ 14% probability (16% a week ago)
* 0.25% lower than now .. ⬆︎ 86% probability (84% 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?
* ⬌ Two (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:
* ⬇︎ 65%
One week ago: 68%, one month ago: 61%, one year ago: 76%
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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