Weekly Market Summary: The “Powell Pivot” Ignites a Friday Frenzy
For most of last week, the market was on edge. Stocks were down for five straight days as traders worried about the economy and what the Federal Reserve might do next. But on Friday, everything changed. A powerful speech from Federal Reserve Chair Jerome Powell sent a clear signal that interest rate cuts could be on the way, triggering a massive rally that erased the week’s losses for the S&P 500 and sent the Dow Jones to a new all-time high. The week served as a powerful reminder that in the current market, the Fed’s words can matter more than anything else.
Weekly Performance of Major Indices
Despite the volatility, two of the three major indices finished the week with gains, thanks entirely to Friday’s surge. The Dow was the clear winner, while the tech-heavy Nasdaq still ended the week slightly down.
| Index (ETF Ticker) | Closing Price (Aug 15) | Closing Price (Aug 22) | Weekly % Change |
| Dow Jones (DIA) | $449.53 | $456.64 | +1.58% |
| S&P 500 (SPY) | $643.44 | $645.31 | +0.29% |
| NASDAQ (QQQ) | $577.34 | $571.97 | -0.93% |
Key Economic Data vs. Expectations
Several key economic reports were released this week, painting a mixed picture of the U.S. economy. The most important piece of data for traders was the jobless claims report, which showed a potential cooling in the labor market—exactly the kind of news the Fed wanted to see before considering rate cuts.
Weekly Jobless Claims (Released Aug 21):
- Actual: 235,000
- Forecast: 226,000
What it means: More people filed for unemployment benefits than expected. This was a key sign that the hot job market might be slowing down, which reduces pressure on the Fed to keep rates high.
Existing Home Sales (Released Aug 21):
- Actual: 4.01 million (annual pace)
- Forecast: 3.92 million
What it means: Sales of previously owned homes were slightly better than expected, helped by a small dip in mortgage rates and more houses being available for sale.
Housing Starts (Released Aug 19):
- Actual: Up 5.2% in July
What it means: New home construction was surprisingly strong. However, forward-looking building permits fell by 2.8%, suggesting construction may slow down in the future.
Investopedia, Investing.com, Census.gov, American Chemistry, & Census.gov
Flash U.S. PMI (Released Aug 21):
- Actual (Manufacturing): 53.3
- Forecast (Manufacturing): 49.5
What it means: This report was a surprise. A number above 50 indicates expansion. Manufacturing activity, which had been in contraction, unexpectedly bounced back, showing resilience in the business sector.
Corporate Earnings Highlights
It was a busy week for earnings, especially in the retail sector. The reports showed that while consumers are still spending, some companies are feeling the pressure from rising costs.
Walmart (WMT): The retail giant reported strong sales, but its profits missed expectations due to higher costs. The stock fell nearly 5% after the report, weighing on the Dow.
The Home Depot (HD) & Lowe’s (LOW): Both home improvement retailers reported solid results that were largely in line with expectations, suggesting consumer spending in this area remains stable.
Investopedia, Home Depot, & Lowes
Palo Alto Networks (PANW): The cybersecurity firm beat earnings and revenue forecasts and gave a strong outlook for future business, causing its stock to jump in after-hours trading.
Analog Devices (ADI): The semiconductor company also delivered strong results and a bullish forecast, citing high demand related to AI infrastructure. Revenue reached $2.88 billion, outperforming an analyst consensus of $2.77 billion (GAAP) revenue. Management highlighted growth in every end market, improved non-GAAP margins, and strong non-GAAP free cash flow for the quarter, offering a positive assessment for the quarter.
The Week’s Biggest Catalysts
Two events drove the market’s direction this week, and both were related to the Federal Reserve.
1. The Main Event: Fed Chair Powell’s Jackson Hole Speech
The entire market was waiting for Friday’s speech from Fed Chair Jerome Powell at the annual Jackson Hole economic symposium. He delivered exactly what the bulls wanted to hear. Powell acknowledged the “shifting balance of risks” and stated that downside risks to employment are rising. Most importantly, he said that an adjustment to the Fed’s policy “may be warranted.” Traders immediately interpreted this as a green light for a potential interest rate cut in September. This single speech turned a losing week into a winning one for the Dow and S&P 500.
Federal Reserve, & Investopedia
2. The Justification: Weaker Job Market Data
Before Powell could signal a pivot, he needed data to back it up. He got it on Thursday. The weekly jobless claims report showed that the number of people filing for unemployment benefits rose to its highest level since June. This was the key piece of evidence the Fed needed to shift its focus from fighting inflation to supporting the labor market. This “bad news” for the economy was treated as “good news” by the market because it paved the way for Powell’s dovish speech the next day.
What’s Next?
Based on the market’s reaction to the events of last week, here is an outlook for what to expect in the week ahead, from August 25 to August 29, 2025.
The Powell Rally Faces Its First Test:
The market will enter the new week riding a wave of optimism generated by Federal Reserve Chair Jerome Powell’s speech. His signal that a rate cut could come as soon as September has shifted the market’s entire focus. The “bad news is good news” mindset is now firmly in control, where signs of a cooling economy are seen as a green light for the Fed to provide support.
However, this newfound optimism will be immediately tested by a series of critical economic reports. The coming week is all about whether the data will support the Fed’s dovish pivot or challenge it.
Key Events and Data to Watch
1. Friday’s Inflation Report: The Main Event
The most important economic release of the week will be the Personal Consumption Expenditures (PCE) Price Index for July, due on Friday, August 29. This is the Federal Reserve’s preferred measure of inflation, and it will carry more weight than the CPI and PPI reports from earlier in the month. SP Global
- What to Expect: Analysts are forecasting that the core PCE index, which excludes food and energy, will show a monthly increase of 0.2% or 0.3%. An in-line or cooler-than-expected number would reinforce the belief that a September rate cut is a near certainty, likely providing another boost to stocks. However, a surprisingly high reading could create significant volatility, forcing traders to question if the Fed can truly ignore rising price pressures, even with a slowing labor market.
2. Mid-Week Economic Health Check
Before Friday’s inflation data, several other reports will give traders a clearer picture of the economy’s health:
- Tuesday, Aug 26: Durable Goods Orders and the Conference Board’s Consumer Confidence survey will be released. Weakness in durable goods could signal that businesses are pulling back on investment due to tariff uncertainty, while a drop in consumer confidence would align with the recent weak University of Michigan survey, further supporting the case for a rate cut.
- Thursday, Aug 28: The second estimate of Q2 GDP will be released. The initial report showed 3.0% growth, but some economists expect this to be revised slightly higher. A significant upward revision could temper rate cut expectations, while a downward revision would strengthen them. The weekly Jobless Claims report on the same day will also be closely watched for further signs of a cooling labor market.
3. Nvidia Earnings: A Crucial Test for Tech and AI
The earnings season is winding down, but the most anticipated report of the quarter is scheduled for Wednesday, August 27, when Nvidia (NVDA) releases its results. Trading Economics
What it means: Nvidia is the bellwether for the artificial intelligence (AI) boom. Its results and, more importantly, its forward guidance will have a massive impact not just on the semiconductor sector but on the entire tech industry and the broader market. A strong report could reignite the AI-fueled rally, while any sign of slowing demand could trigger a significant tech sell-off, similar to the one seen two weeks ago.
Expected Market Behavior
Expect a market that is highly sensitive to economic data. With no major speeches from Fed officials scheduled, the numbers themselves will drive the narrative.
- Volatility is Likely: The strong rally on Friday has set high expectations. Any data point that contradicts the “slowing economy, imminent rate cut” narrative could lead to sharp, short-term pullbacks.
- Sector Rotation in Focus: The performance of the tech sector will hinge on Nvidia’s report. If Nvidia disappoints, we could see a renewed rotation out of tech and into more defensive sectors like healthcare and consumer staples, which have performed well during recent periods of uncertainty.
- The Dollar and Bond Yields: The U.S. Dollar fell sharply after Powell’s speech. If the week’s economic data comes in soft, expect the dollar to remain under pressure, which can be a positive for multinational companies’ earnings. Bond yields will also be a key indicator; falling yields would signal that the bond market is confident in upcoming rate cuts.
Disclaimer: This report is for informational purposes only and is based on the research materials provided for the week of August 18-22, 2025. It does not constitute financial advice, an offer to sell, or a solicitation of an offer to buy any securities. The author and the publishing firm are not responsible for any investment decisions made based on this analysis. All market data and economic figures are sourced from the provided research snippets and are subject to revision. Past performance is not indicative of future results.
