Market Recap – Thursday, August 21, 2025

Stocks Drift Lower Ahead of Powell Speech

Stocks were mostly lower on Thursday as investors stayed cautious ahead of Friday’s big speech from Fed Chair Powell. The S&P 500 slipped 0.40%, notching its fifth straight day of losses, while the Nasdaq fell 0.34% and the Dow dropped 0.34%. Only the Russell 2000 managed a small gain of +0.21%, showing some relative strength in smaller stocks.

Big tech and AI names continued to slide, with Meta underperforming after reports of a pause in AI hiring. Other laggards included discount retailers like Walmart, homebuilders, airlines, cruise lines, and payment companies. On the flip side, healthcare, metals, and select industrials held up better, and copper and aluminum names got a boost. Treasury yields rose again, while the dollar strengthened and gold dipped. Bitcoin fell nearly 2%, and oil prices rose 1.3%.

Retail earnings took center stage, with Walmart under pressure after an earnings miss — even though the company actually raised its full-year outlook. The market seemed more focused on the higher bar of expectations and comments about tariffs squeezing lower-income consumers. Other names like Coty and Cracker Barrel also disappointed.

Economic data sent mixed signals. PMI (Purchasing Managers' Index) surveys showed surprising strength in both manufacturing and services, with hiring at its fastest pace in 3 years. But that came with a downside: input prices jumped sharply, mainly due to tariffs, raising fresh concerns about inflation. Meanwhile, jobless claims ticked higher, and a weak Philadelphia Fed report hinted at some cracks in the economy. The Fed’s recent comments were more hawkish, with several officials signaling they’re not ready to cut rates yet, keeping investors on edge.

Here’s Our Take

The market remains stuck in a cautious mode as investors digest strong economic data mixed with inflation warnings and hawkish Fed commentary. That combination is pushing bond yields higher and keeping pressure on stocks — especially the tech and growth names that have led all year. While the PMIs show the economy still has momentum, the rising cost pressures from tariffs and wage gains are clouding the outlook.

Walmart’s mixed results show that even defensive retail giants aren’t immune to margin pressure and macro headwinds, though consumer spending remains solid. We’re also seeing continued rotation into value and defensive sectors like healthcare and materials, suggesting a more cautious tone from investors. All eyes now turn to Friday’s speech from Fed Chair Powell, which could determine whether this market slump deepens — or sets the stage for a bounce.

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