Wall Street Roundup: Markets Celebrate Powell’s Jackson Hole Comments

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Reactions to Jerome Powell’s comments at Jackson Hole (0:30). Walmart, Home Depot and retail earnings (3:55). Nvidia reports next week (6:00). Pressure on Powell (7:10). Palantir declines (9:30).

Transcript

Rena Sherbill: Brian Stewart, our Director of news at Seeking Alpha, welcome back to Wall Street Roundup. Good to be with you again.

Brian Stewart: Good to be here. Welcome back to you too, Rena. Appreciate it.

RS: Please note as always that we are recording this on Thursday afternoon, obviously before the Fed meeting.

But I did just talk to Fed expert, former insider, Danielle DiMartino Booth. So we’ll be including an excerpt of my interview with Danielle, which you can catch in full on our Investing Experts Podcast or on Seeking Alpha, you can read along or listen to the audio.

And we’re going to include a quick clip of her take on today’s meeting and statements from Fed Chair Jerome Powell.

Powell’s a little bit too late to this. I’ve been highly critical of him suggesting that in May, that in June, that in July, that the Fed should have already been in an easing stance.

And I think a lot of investors were anticipating that he would push back on that notion, and instead, he dove right in. And he said, we thought that job growth had been north of a hundred and fifty thousand a month. We learned that it was really 35,000 a month.

When he laid those actual numbers out, that was in more ways than any, his way of communicating that they would have otherwise been in an easing stance had they known how weak the job market was just a few months ago.

And again, I think that really surprised the markets and that they’re celebrating that the Fed’s going to begin easing, but it could become a situation where you have to watch what you wish for.

I think markets are gonna be very attentive to the New York Fed’s John Williams. He’s expected to speak right at the beginning of next week.

I think they’re gonna be listening to other Fed officials to see, now that Powell has finally stepped back from the shield of we’re going to wait and see how tariff inflation plays out.

It’ll be really interesting to see other Fed officials and how willing they are not just to cut rates in September, but rather let’s see what this entire easing cycle might look like.

I think one of the reasons that the markets are so excited, and, obviously, right now, you have declining bond yields, rising bond prices that are feeding into the stock market.

But I think one of the reasons that now there is a presupposition that it’s not just going to be one rate cut in September and then potentially go on hold is because Jerome Powell said that given the rapidity, basically, with which we’ve seen the labor market weaken that in historically speaking sometimes you end up seeing a a rapid rise in the unemployment rate.

And because he spoke to that historical tendency, now markets are pricing in a full easing cycle.

So they’re trying to say, is it going to be three rate cuts in 2025? Four rate cuts. I called at the beginning of the year, I said it was gonna be four.

And how far into 2026 are we gonna go with easing? But, again, I would be very cautious here because of why the Fed has decided to embark upon this easing campaign with much more surety than it had the last time that it met.

RS: So welcome back to more earnings talk. Slew of earnings that we’ve digested, that we have yet to digest. Where is top of mind for you?

BS: Well, the big news this week was in the retailing space, today as we record on Thursday, Walmart (WMT) is one of the top stories. It’s down about 4% on its earnings report.

It beat on revenue, pretty decisively, but missed on earnings. It was boosted by its e-commerce sales, which were up about 25% compared to last year. So that was a big engine behind the revenue beat.

But in terms of earnings, it ate a lot of tariff related costs during the quarter and warned that it will be raising prices in the near future because tariffs are starting to to become a reality.

So it’s just a general sign of where things are going. Retailers are seeing their margins crimped by the increased tariffs and are taking the strategic steps necessary to decide where to raise prices in order to make that up.

And we saw a similar thing from Home Depot (HD). Home Depot was up slightly on its earnings earlier this week. It rose about 3% after those earnings were raised, but that came in a in a general kind of malaise for the stock.

The stock was down ahead of its earnings and didn’t see any follow through after the slight earnings bump. So it’s basically flat over the last five days. It also missed slightly on earnings like Walmart did, and also warned of tariffs.

A large share of Home Depot’s products, this has came out in the the conference call, are domestically sourced and so not a tariff risk, but enough of its products are from overseas that it’s planning to raise some prices due to tariffs.

So I think that’s something to watch as we see more retailers come out with their results.

A number of high profile companies yet to come. I think the biggest one we’re looking for next week is NVIDIA (NVDA), obviously, the poster company for the AI boom.

The main sort of bull bear debate going on for NVIDIA is valuation versus long term prospects. So if you’re a bear, you’re basically saying growth is slowing for its data center, which is the key AI related part of its business.

The stock has already had a huge run up over the last couple years, so valuations are pretty hefty. You’re looking at a case where it would be difficult for the company to push higher.

However, bulls will say the AI spending has just begun. NVIDIA’s is well positioned, especially with the hyperscalers to provide the infrastructure needed for AI build out.

Whether or not the growth is gonna be the dramatic growth that we saw in previous quarters, it’s still going to hold the line as we move forward.

So it’s still a long term buy on that front. Whether or not the stock’s gonna be up or down after the earnings, obviously, is gonna depend on what those results say, but that’s the general debate that’s going on right now.

RS: Fed meeting? How are you preparing for that?

BS: Powell’s speech at the Jackson Hole conference. That’s gonna be a golden opportunity to get his feelings on the matter. Obviously, lots of pressure on Powell to cut rates. Obviously, the President is the number one advocate for lower interest rates. However, the market is starting to clamor for it as well.

We saw the the bad Jobs report that came out recently. So there’s signs that there’s some capitulation in the labor market. Lower rates would would help businesses borrow money and therefore expand, hire new employees. There’s a lot of pressure from that.

However, inflation remains stubbornly high. We got a bad PPI report showing wholesale inflation up a little more than 3%. This happened last week.

And so there’s a lot of debate about whether or not the rate cut’s gonna happen at the next meeting. Currently, the market’s pricing at about a 71% chance that they’ll cut rates. This is down from above 90% a week ago, so that PPI report really put a dent in that.

Powell has shown a willingness to stand up to whatever pressure you, the market, or the President put on him. So he’s gonna do what he thinks is best regardless of whether it kinda puts his chairmanship at risk. So I think his opinion on the matter is gonna be a major pivot point.

So I think that’s gonna be the next big bit of data that we’re gonna get.

RS: Bond market? Any updates there? Any noteworthy market updates for investors to to keep in mind as we digest that data?

BS: I haven’t checked the bond trading lately, but I will say that that’s probably the place to look in the immediate aftermath of Powell’s speech.

It’s more directly related to interest rates as opposed to the stock market, which filters it through the the lens of corporate earnings and things like that. So if you want an immediate understanding of how the market is following the chairman’s thinking, I think that would be the place to go.

RS: And what else should investors be keeping in mind these days?

BS: So the only really interesting story to point out from this week that we haven’t already talked about is Palantir (PLTR).

It’s down slightly today, and so on track now for seven consecutive days of declines. This includes a 9% drop on Tuesday. Basically, the stock got into overbought territory and you’re seeing a correction.

Then after reporting earnings early this month and reached an all time high on August 12, and it’s been sinking off that level since then.

Ahead of NVIDIA’s earnings next week. It’s a sign that there’s a little bit of skepticism on how far AI related stocks have traveled so far this year.

So you see other examples. So Oracle (ORCL) and Broadcom (AVGO) are both down about 6% in the last five days. Meanwhile, (AMD) is down about 8% in the past five days.

All these stocks are still holding on to large year to date gains. So Oracle up 40% year to date, Broadcom up 24% year to date, AMD up 35% year to date. And this is after the declines that I mentioned for the last five days.

Similarly, Palantir is still up more than 100% year to date even after the recent seven consecutive days of declines, is up 380% plus over the last twelve months.

So you’ve seen a huge upswing in a lot of these AI centric stocks. And in the last few days at least you’ve seen a little trimming of those positions, which provides interesting context for NVIDIA’s report next week.

There’s a lot of retailers reporting next week, so you’re gonna get some more data on that. Dollar General’s (DG) a big one, but other clothing retailers, Abercrombie and Fitch (ANF), Gap (GAP), things like that. So just on the retail front, we’re gonna get a lot more data from that.