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Stocks, Rate Cut Odds Fade Into You, Jerome.
RiskReversal Recap: August 21, 2025
RiskReversal Media
August 21, 2025
MARKET WRAP
Stocks faced pressure again today, but no panic. Still, the market message this week is clear: traders are fading equities from the highs, dialing back September rate cut odds, and pricing tomorrow’s Jackson Hole speech as if it was an FOMC rate decision. We’ll see what it said tomorrow. For today, SPX -0.4%, QQQ -0.5% while IWM was +0.2%.
Elsewhere, the US10YY ticked higher into the Powell speech, now 4.33%. Oil was higher, Gold slightly lower, while the VIX once again ticked above 17 before settling in at 16.60.
Notable Gainers: CVX +1.5%, UNH+1.2%, PSKY +14.7%, HPE +3.7%
Notable Losers: WMT -4.5%, COST -2.5%, HD -1%, AMZN -1%
After hours: ZM is higher by +4%, WDAY is lower by -4% and ROST is higher by about +2% after their earnings releases. SPY is a tick higher after hours.
MRKT Call: Liz joins Guy and Dan to talk widening volatility, the risks of rotation into equal weight (which could lean into small caps at the wrong time), and she being less certain than most on a September rate cut. The group hits Walmart’s post-earnings drop and Liz shares SoFi’s latest perspectives on AI capex.
RiskReversal Pod: Dan and Guy on yesterday’s Fed minutes, and what to watch at Jackson Hole. Then retail earnings, Target’s struggles, Walmart and TJX’s reports. Finally, Palantir’s swings, the AI trade and how much of the current economic uncertainty is self inflicted.
MRKT MATRIX: TODAY’S TOP STORIES
S&P 500 posts fifth losing day ahead of Powell speech, Dow drops 150 points (CNBC)
Trump official signals DOJ will investigate Fed Governor Cook (CNBC)
Trump half-billion-dollar civil fraud fine overturned by New York appeals court (CNBC)
EU, US Reach Agreement on Joint Statement Outlining Trade Deal (Bloomberg)
Meta Freezes AI Hiring After Blockbuster Spending Spree (WSJ)
Anthropic in Talks to Raise Up to $10 Billion in New Funding (Bloomberg)
What Matters More to the Stock Market? The Fed or Nvidia? (NYTimes)
China turns against Nvidia’s AI chip after ‘insulting’ Howard Lutnick remarks (Financial Times)
Walmart Lifts Guidance, Gaining Ground With Wary Consumers (Bloomberg)
Disney’s new ESPN flagship streaming app launches Thursday. Here’s what we know (CNBC)
WHAT’S NEXT?
Today capped off multiple days of weakness into the Jackson Hole speech tomorrow. That occurred alongside a shift from near certainty of a September rate cut (90%+) into something a little less certain (now closer to 70%). That uncertainty may be cleared up (or made worse?) with Powell’s speech tomorrow. This does seem to be one of the most hyped Jackson Hole events in memory and that anticipation has picked up over the past few days.
As we noted in this week’s preview, option vol was likely to rise into the event, and that’s played out. SPX vol for Friday has jumped from 13 at the start of the week to 20 into the speech, now implying a ~0.9% move. That is also very similar to what we’d see into an FOMC Rate Decision day.
In other words, traders are treating tomorrow much like they did the most recent (actual) FOMC day on July 30th. That day saw saw a negative reaction that was somewhat covered up the next day by some megacap earnings gaps to the upside. It took the market several more days (and a weekend) to fully react to what Powell said. In this case, markets have already faded both stocks and rate cut odds (although still high) into the speech, so the immediate reaction could play out differently.
Friday, August 22nd
10am - Fed Chair Powell Speech
SPX Expected move: 0.9% (6315-6425)
TLT Expected Move: 0.6%
TODAY’S EPISODES
Watch MRKT Call’s newest episode: The Market’s AI Spending Problem
Liz joins Guy and Dan and the conversation begins with a look at the widening of volatility bands, and the talk of rotation into equal weight. Liz points out that that entails going longer small cap, which she warns against timing wise. Liz also expresses some skepticism on the certainty of a September rate cut, as odds of a cut have fallen this week. A look at Walmart earnings and the move lower. Plus AI capex in perspective.
Analysis - SPX, IWM, RSP, DIA, WMT
SoFi Weekly Report - GDP effect of AI capex is equal to consumer spending right now. A comparison of the DotCom bubble spend vs AI spend now.
Learn more about our sponsor, SoFi.
Watch RiskReversal Podcast’s newest episode: The "Own Goal" Economy
Dan Nathan and Guy Adami discuss recent market volatility, the impact of Federal Reserve minutes, and the upcoming Jackson Hole symposium. They analyze retail earnings, with a focus on the poor performance of Target and the contrasting success of Walmart and TJX. The conversation touches on the challenges of inventory management and corporate governance at Target. They also delve into the implications of tariffs, the potential for geopolitical events to influence markets, and the resilience of market participants. The discussion includes insights on Palantir's stock movements, the potential for AI trade valuation growth, and the importance of monitoring economic indicators such as the PCE reading and jobs report. Finally, they contemplate the influence of political pressures on the Federal Reserve and the possible market reactions to Fed Chair Powell's upcoming speech at Jackson Hole.
Timecodes 0:00 - Retail Read-Thru 10:00 - PLTR Falls Off 15:35 - Fed Speak
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