Powell Captivates the Market – by Justin Vaughn, Editor, Options Trading Report)

Markets charged ahead as the week ended Friday propelled by strong 2nd quarter earnings and by… Warren Buffet’s Berkshire Hathaway’s massive injection into the market. The bread and butter Dow Jones Industrial Average shot higher, peaked a new 2025 record then eased back a bit. “There’s a lot of market optimism and I am happy to see the Dow Jones moving,” said David Bahnsen, chief investment officer of Bahnsen Group. The Dow Jones closed just shy of the record of 45703.52. The S&P 5009 fell slightly, off 0.3%, with the tech-loaded Nasdaq Composite falling 0.4%. All three indexes had a good week, all were higher, led by the Dow Jones, with a heavy concentration of stocks in the financial and industrial sectors, leading the way. The 10-year Treasury note’s yield edged up to 4.325% (“yields rise as prices fall”). The University of Michigan Consumers Sentiment Survey dipped down as consumers worry about creeping inflation and stubborn interest rates. “Economic growth is moderating and that should continue to support the idea that we’re moving past the need for restrictive policy,” said Trevor Slaven, global head of asset allocation at Barings.

Monday’s opening was uneventful, with the indexes waffling throughout the session. The Dow Jones closed up 0.1% while the S&P 500 traded near flatline all day finishing 0.1% lower, while the Nasdaq was off 1.5%. Many investors and traders have commented that “the dog days of summer” have overtaken Wall Street. According to Wall Street Market Data the New York Stock Exchange had the lowest ‘full-day-volumn’ since May. Fed Chief Jerome Powell will hold a conference Friday to release meeting details, with Wall Street in serious expectation, looking anxiously for hints of a possible rate cut. The Russell 2000, a good barometer and pulse of market conditions, was up at close Tuesday 0.3%, as interest in smaller value blue chip companies experienced heavier than usual trading volume. According to FactSet, Russell’s value stocks have appreciated more than the S&P 500 over the past 3 months. Ending Monday, the 10-year Treasury note yield rose to 4.337%, and the dollar added value according to TradeWeb. Tuesday was another lackluster day with many investors and traders on the sidedlines awaiting Mr. Powell’s scheduled speech on Friday. Also many market ‘players’ were on vacation. The S&P 500 real estate sector was a winner, up 1.8% while the high techs were losers and led the sell offs. As trading was light, the indexes fell, with the S&P 500 and Nasdaq down 0.6% and 1.5% respectively.

Techs got hit and the general market skidded downward on Wednesday. The Dow Jones was contrary, moving a bit higher. The heavy tech Nasdaq, falling over 2% in the early session shook-off the trend and closed down 0.7%. After 2 days of sharp selling, magnificent 7 stocks were mostly down along with leading chip makers. “The revelation of the Fed minutes further detailed that the two governors who voted against leaving rates unchanged were in the minority.” Stocks fell again Thursday as disappointing news dragged the markets downward. Disappointing earnings, a negative Jobs Report and Jackson Hole Meeting fears dragged the market as all three indexes were off.

As the second quarter earnings season comes to a close, investors and traders are encouraged. A robust, across the board increase of 12% increase has boosted market confidence. Since President Trump proposed massive tariff increases in April, and the decline in the overall job market, early projections were dire. The opposite has occurred: The S&P 500 has ascended a wallopping 29%, and up 9.7% for the year, according to FactSet, far ahead of the 5% growth prediction. Sonu Vargheser, a global strategist at Carso Group commented; “Surprisingly businesses have come out of this whole thing looking better in some ways than they did in February or March.”

RUMBLINGS ON THE STREET

Scott Welch, partner and chief investment officer at Certuity, a wealth management firm, Barron’s – “‘The Liberation Day’ apocalypse didn’t play out like investors feared it might. There have not been a lot of negative effects from tariffs in the hard data.”

Tom Essaye, Stevens Report, Barron’s – “If a stagflationary economic environment emerges in the second half of 2025, equity markets are well over their skis, with the S&P 500 trading at a 22-times multiple of what could prove to be overly optimistic 2026 earnings expectations.

Bob Doll, chief executive officer at Crossmark Global Investments, WSJ – “We’re in a high-risk bull market.” Stocks, he added, are “discounting a near-perfect world and it’s not perfect.”