The S&P 500 (Index: SPX) gained 2.4% to close the trading week ending on Friday, 8 August 2025 at 6,389.45. The index is 32 cents per share shy of its all-time record.

The S&P 500's increase came as part of the ongoing fallout from the Federal Reserve's reliance upon faulty employment data to justify its decision to hold the Federal Funds Rate steady at its 29-30 July 2025 meetings, which we covered in the previous edition of the S&P 500 chaos series, but calls for additional analysis. If you follow the Fed, you'll recall that at the press conference following that announcement, Fed Chair Jerome Powell described the conditions of the U.S. job market as both "solid" and "in balance". He further stated "you do not see a weakening in the labor market".

The Bureau of Labor Statistics' large downward revision of its previously reported payroll jobs data included in its July 2025 employment situation report on Friday, 1 August 2025 changed that assessment. Instead of showing that "payroll job gains averaged 150 thousand per month over the past three months", as cited by Powell, total jobs in May and June 2025 were revised downward by a combined 258,000, eliminating most of the gains in these months Powell cited as "solid" in justifying holding interest rates steady.

At the same time, newly published research finds the Fed's other justification for sustaining interest rates higher for longer, that President Trump's tariffs might lead to persistent inflation, has little support in historic data. The research findings point to tariffs having only a short-lived transitory effect on prices, which undercuts arguments several Fed officials have offered for resisting cutting rates in recent months.

The continuing fallout from these realized policy errors have put the number, size and timing of interest rate cuts through the rest of the year into focus. The early departure of Federal Reserve official Adriana Kugler, who had strongly opposed rate cuts, as part of that fallout gives President Trump the opportunity to start moving the Fed toward implementing rate cuts sooner by appointing her replacement.

With the outlook for rate cuts changing because of the ongoing fallout, the CME Group's FedWatch Tool anticipates the Fed will cut the Federal Funds Rate by a quarter percent at its 17 September (2025-Q3) meeting. Beyond that date, the FedWatch tool forecasts additional quarter point rate cuts will take place on 29 October (2025-Q4) and 28 January (2026-Q1). Through Friday, 8 August 2025, the big question is whether there will be a third rate cut before the end of 2025, in December.

The latest update of the alternative futures chart hints at that possibility. At present, we find the S&P 500 is tracking along the bottom edge of the latest redzone forecast range we previously added to the chart, which is based on the assumption investors would maintain their forward-looking focus on the distant future quarter of 2026-Q1 in setting current day stock prices throughout the entire period it covers. We can't help but note that the index' trajectory over the past week is more consistent with investors having suddenly shifted their forward-looking attention inward to 2025-Q4, which suggests the problems at the Fed triggered a Lévy flight event because of the question over how many rate cuts the quarter will ultimately contain.

Here are the week's market-moving headlines to provide additional context:

Monday, 4 August 2025

• Signs and portents for the U.S. economy:
• Oil falls as OPEC+ output hike adds to oversupply concerns
• Mixed economic signs developing in China:
• China's services activity growth hits 14-month high in July, S&P PMI shows
• China's solar giants quietly shed a third of their workforces last year
• BOJ minions still dreaming of hiking interest rates in Japan, JapanGov minions thinking about hiking minimum wage to keep wage-price hike inflation going:
• Some in BOJ saw scope to hike rates if trade friction eases, June minutes show
• Japan panel proposes 6% minimum wage hike to counter inflation woes
• Eurozone economy showing faint growth signs, faces criticism over US tariff negotiation results:
• Euro zone business growth inched up in July but remained subdued, PMI shows
• Indexes post biggest daily pct gains since May 27 in rebound from Friday selloff
• Nasdaq ends +2%, Wall Street rebounds from Friday's sell-off

Tuesday, 5 August 2025

• Signs and portents for the U.S. economy:
• Oil prices fall as OPEC+ output hikes counter Russia disruption concerns
• Sliding US rig count outpaces efficiency gains, threatening onshore oil output
• Trump again threatens 'very substantial' tariff hikes for India over Russian oil
• US trade deficit hits nearly 2-year low in June; China gap plunges
• Fed minions start to capitulate on need for U.S. interest rate cuts:
• Exclusive: Fed's Daly says time is nearing for rate cuts, may need more than two
• Bigger trouble, stimulus developing in China:
• As China's renewable capacity soars, utilisation lags, data show
• China pledges more financial support for advanced manufacturing
• China allocates funds to support agriculture recovery in flood and drought-hit areas
• BOJ minions watch inflation erode purchasing power of Japan's people:
• Japan's real wage falls for sixth straight month in June
• Signs of slow growth in Eurozone:
• Euro zone business growth inched up in July but remained subdued, PMI shows
• Wall Street ends lower after more weaker-than-expected economic data, tariff threats
• Wall Street ends lower as investors consider tariff impact on results, economy

Wednesday, 6 August 2025

• Signs and portents for the U.S. economy:
• Oil prices slide to 8-week low as US-Russia talks stir sanction uncertainty
• What are the new tariff rates Trump set on US imports from dozens of countries?
• Trump says US will charge tariff of about 100% on semiconductor imports
• India-US spat over trade and oil threatens wider fallout
• Trump imposes extra 25% tariff on Indian goods, ties hit new low
• Exclusive: 'I won't humiliate myself': Brazil's president sees no point in tariff talks with Trump
• Brazil's economy ready to ride out Trump's 50% tariff
• Fed minions hear President Trump is starting to interview their replacements as they start to realize they blew their chance in July to resume rate cuts sooner:
• Trump set to fill Fed board vacancy by week's end, has narrowed chair search to four
• Trump says he has started interview process for Fed position, narrowed to 3 options
• Fed policymakers signal rising angst about cooling economy
• Fed will likely need to cut rates in coming months, Daly says
• Fed's Cook says tepid July jobs data merits concern
• BOJ minions hear from Japan politicians their rate hike plans are unwelcome:
• Japan ruling party heavyweight warns against BOJ rate hike
• ECB minions get data saying Eurozone economy not as bad as they thought, but is worse in Germany:
• Euro zone retail sales grow quicker than thought after revisions
• German industrial orders unexpectedly fall in June on subdued foreign demand
• Apple surge boosts U.S. stocks, sends Nasdaq up more than 1%
• Apple stock surges 6% ahead of expected $100B investment announcement

Thursday, 7 August 2025

• Signs and portents for the U.S. economy:
• Oil falls on announcement of Trump-Putin meeting
• US crude exports hit four-year low in July on low domestic supplies
• Some Fed minions still waiting for data to back their claim tariffs cause inflation:
• Bostic: Labor market risks rising, but a lot of data to come before September meeting
• Despite Bostic Fearmongering, Fed's Own Inflation Survey Shows No Signs Of Tariff Tantrum
• Bigger trouble, stimulus developing in China:
• China's central bank extends gold purchases to ninth straight month in July
• Bigger trouble developing in Japan:
• Japan's steel output may sink to lowest since 1968 as US tariff risks loom
• BOJ may be behind the curve on inflation risk, government council member says
• ECB minions / Bigger trouble developing in Eurozone:
• German industrial output lowest since pandemic, exports exceed forecasts
• S&P and Dow end lower, Nasdaq ekes out gain as traders weigh weak bond sale, Trump tariffs
• S&P 500 eases with Eli Lilly; Nasdaq manages record closing high
• Eli Lilly drops as trial data for oral obesity drug weigh on Q2 results

Friday, 8 August 2025

• Signs and portents for the U.S. economy:
• Oil steadies on reports of US-Russia deal, ends week about 5% lower
• More Fed minions realize they blew chance to resume rate cuts in July 2025, replacement minion named:
• Fed officials tilt dovish as US job market softens
• Fed's Musalem: There are risks now to both the inflation and jobs goals
• US Fed's Bowman: Latest jobs data stiffens support for three rate cuts in 2025
• Trump picks Stephen Miran to fill open spot on Fed Board
• Bigger trouble developing in China:
• China's July factory-gate prices miss forecast, deflation concerns persist
• China's consumer prices flat in July
• China's car sales growth slows in July, with weaker hybrid demand
• BOJ minions think bigger trouble is not developing in Japan:
• BOJ July minutes show increased openness to rate hike, boosted by upbeat outlook
• Japanese household spending rises in June; pace slowed by food prices
• Nasdaq notches record close, S&P just misses out as stocks rally

The Atlanta Fed's GDPNow tool projection of real GDP growth in the U.S. during the current quarter of 2025-Q2 rebounded to +2.5% after having dipped to +2.1% in the preceding week.

Image credit: Microsoft Copilot Designer. We went through multiple iterations before arriving at the final version of this week's editorial cartoon, so in the interest of keeping it simple, we asked Copilot to draft a prompt for generating it directly. Here is its prompt:

Draw a traditional editorial cartoon in ink and watercolor style. The scene shows three Federal Reserve officials seated at a wooden boardroom table, reacting with alarm to a framed chart on the wall labeled “REVISED JOBS DATA” with a sharply declining line.

• The central figure is an older man with white hair and glasses, wearing a dark suit and blue tie. He looks shocked and says, “OH, NO… WE SHOULD HAVE CUT RATES” in a speech bubble.
• To his left, a woman with shoulder-length brown hair presses her hands to her cheeks in disbelief.
• To his right, a balding man with a red tie clutches his head in panic.
• A nameplate on the table reads “FEDERAL RESERVE.”
• Peeking through a doorway on the right side of the cartoon is a smirking Wall Street bull with raised eyebrows, observing the scene.

Use muted sepia tones, bold outlines, and cross-hatching to evoke a classic editorial cartoon aesthetic.

This AI-generated prompt is a lot more detailed than any of the individual prompts we used along the way. For example, we only specified "Federal Reserve officials" without any descriptive personal characteristics like their number, sex, age, hair color, etc. With AI being what it is, we can't say with certainty that you would be able to reliably replicate our featured result, but hopefully whatever result you might get from using it would be somewhere in the same ballpark.