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- Fed Chair, Jerome Powell, signaled at Jackson Hole Symposium that the Fed may cut rates sooner than expected, sparking a market rally even as policy remains data dependent.
- Retail earnings broadly exceeded expectations, although Walmart’s rare profit miss underscored ongoing cost pressures.
- Jobless claims rose modestly, but continuing claims hit their highest level since 2021, reflecting the challenges of finding a new job, even as layoffs remain limited.
- August marked the highest business activity of 2025 so far, even as tariffs drove costs higher and companies passed them on to consumers.
1. Powell’s Jackson Hole Remarks Lift Markets and Shape Rate Outlook
At the Federal Reserve’s Jackson Hole symposium, Chair Jerome Powell acknowledged persistent inflation pressures alongside growing labor market risks, signaling that the Fed may need to adjust policy sooner than previously expected. His comments were widely interpreted as dovish, with investors now pricing in a strong likelihood of a September rate cut.
Markets rallied in response, with equities moving higher, Treasury yields retreating, and the dollar weakening. While the remarks eased concerns about overly restrictive policy, Powell emphasized that any shift would remain data dependent, leaving open questions about how aggressively the Fed will respond if inflation proves resilient.
2. Retail Earnings Strong, but Walmart Profit Miss Stands Out
Retailers posted generally solid second-quarter results last week, pointing to steady consumer demand. Target and Lowe’s both beat earnings and sales expectations, adding to evidence that households remain resilient despite a cooling labor market. With about 94% of S&P 500 Index companies having now reported earnings, 82% overcame estimates, delivering an average earnings surprise of 8.2%.1 Forecasts for second-quarter earnings growth were revised sharply higher to 10.4%, up from 3.8% at quarter-end, while full-year growth is projected at 10.3%.1
Walmart presented a more mixed picture. U.S. comparable sales increased by 4.6%, Sam’s Club sales climbed 5.9%, and revenue of $177.4 billion exceeded expectations.1 But adjusted EPS came in at $0.68, below forecasts, due to legal and structural charges.1 Management raised its sales outlook but cautioned that tariff-related cost pressures will likely persist. Shares fell more than 4% following the earnings miss.1
3. Jobless Claims Edge Higher, Continuing Claims Hit Post-2021 High
Initial claims for unemployment benefits rose slightly above expectations last week to 235,000, up from 224,000 the prior week.2 Despite the increase, new filings remain within the range of 210,000 to 250,000 that has persisted for much of the past year, suggesting layoffs remain relatively contained.2
Continuing claims, which reflect the total number of people still receiving unemployment benefits, climbed to 1.97 million in early August, the highest level since November 2021.2 This rise points to a labor market where finding new jobs has become increasingly difficult, even as companies avoid large-scale layoffs.
Earlier revisions from the Bureau of Labor Statistics showed hiring was weaker this spring than previously reported, reinforcing signs of a slower labor market.2 Investors are watching closely as weaker demand and higher prices weigh on growth.
4. U.S. Business Activity Strengthens on Manufacturing Rebound
U.S. business activity accelerated in August at the fastest rate of the year so far, according to the S&P Global U.S. Flash Purchasing Managers’ Index (PMI) survey. The Composite PMI rose to 55.4, its highest reading since December, signaling continued private-sector expansion.3
Manufacturing led the improvement as new orders reached an 18-month high, with the PMI jumping from 49.8 to 53.3 in July, its best reading since May 2022.3 Services eased slightly to 55.4, but remained in growth territory.3
While the manufacturing figures appear strong, it is important to note that costs are rising. Input prices posted their fastest increase since May, primarily driven by tariffs, and businesses reported that they are passing more of those expenses on to customers. That pushed the prices-charged index to a three-year high, highlighting inflationary pressure that could temper momentum in the months ahead.
For the period ending 8/22/25.
* Small-cap stocks are represented by the Russell 2000® Index. International stocks are represented by the MSCI EAFE. Bonds are represented by the Bloomberg US Aggregate Bond Index. Oil is represented by WTI Oil (West Texas Intermediate Oil), a benchmark for light, sweet crude oil and a primary measure for pricing oil contracts and futures in the U.S.
Sources
1 The Wall Street Journal
2 Barrons
3 Reuters
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Additional Disclosures: International and Foreign Securities, Fixed Income Investments, the Consumer Price Index, the Producer Price Index.
Comparative Index Descriptions: The Standard & Poor’s (S&P) 500 Index, The Russell 200® Index, The NASDAQ Composite Index, The MSCI EAFE Index, Dow Jones Industrial Average® (Dow Jones or DJIA), The Bloomberg Barclays US Aggregate Bond Index (US Agg Bond), The CBOE Volatility Index (VIX). CSP2025061_23
