Wall Street Slips Ahead of Powell’s Speech

21 August 2025

Jerome Powell, Federal Reserve chairPhotographer: Ting Shen/Bloomberg

Thursday in New York brought a sobering tone to Wall Street, with all three major indexes slipping into negative territory as markets braced for what could be a pivotal speech from Federal Reserve Chair Jerome Powell the following day amid fading optimism over rate cuts and lingering unease about economic indicators. The Dow Jones Industrial Average lost approximately 0.34 percent, the S&P 500 dropped roughly 0.4 percent, and the Nasdaq Composite retreated about 0.34 percent, as each index succumbed to the pressure of potential hawkish undertones in Powell’s remarks.

A central concern for investors was the shifting odds around a September interest‑rate cut. In just the span of a week, market participants scaled back their expectations dramatically. At the start of the week, forecasts had placed the probability of a 25‑basis‑point cut at an almost certain level, but by Thursday it had narrowed appreciably to around 79 percent. The trading community was recalibrating, wondering whether Powell would indeed signal toward easing or shift into the realm of caution.

With the Jackson Hole Economic Policy Symposium approaching, anxiety was amplified by the notoriously thin trading volumes of August. On this particular Thursday, only 12.28 billion shares changed hands across U.S. exchanges a noticeable decline compared with the typical 20‑day average of 17.08 billion. The reduced liquidity meant that any strong moves in either direction could be exaggerated, further rattling investor sentiment in the lead‑up to Powell’s address.

Market watchers voiced the growing tension. Sam Stovall, CFRA Research’s chief investment strategist, explained that while the expectation of an eventual Fed rate cut remained intact in the medium term, the narrowing of those odds had triggered a wave of profit‑taking among investors. “We still have roughly an 80 percent likelihood that the Fed will cut interest rates, but that is now being brought into question. Investors are saying, ‘You know what? Let’s take some profits right now.’” Meanwhile, Adam Turnquist of LPL Financial warned that any deviation from dovish sentiment in Powell’s speech could spark a marked sell‑off, given how precariously sentiment rested on the upcoming remarks.

Retailer performance further stung the mood. Walmart, a longtime bellwether for consumer sentiment, reported disappointing quarterly earnings that fell short of forecast. The soft results weighed heavily on the consumer discretionary sector, reinforcing concerns about underlying demand trends and economic resilience.

Counterbalancing this was a surprise uptick in July’s existing home sales, signaling snippets of strength within the housing market an ambiguous data point that illustrated the complex patchwork of the recovery. Coupled with a private report showing increased business activity in August, the data reinforced that beneath a surface of risk aversion lay fragments of economic momentum. Still, the overarching message was one of uncertainty.

Across the Atlantic and beyond, global markets mirrored the cautious tone. In Europe, equity indexes were subdued, while the U.S. dollar strengthened driving gold prices slightly lower. The rally in the greenback, up about 0.4 percent, made dollar‑denominated assets like gold less attractive for investors overseas, while reinforcing narrative headwinds tied to inflation and global demand.

In short, markets entered this critical juncture laden with hesitancy. The dominant theme was that of a “wait‑and‑see” approach: investors seemed unwilling to commit long positions absent clear guidance from the Fed. The impending speech at Jackson Hole stood as a watershed moment. Higher‑than‑expected hawkishness could deflate any remaining hopes for September easing. Conversely, even a hint of dovish posture from Powell might reignite bets for rate relief. Either way, Thursday’s dip served as a clear reflection of opacity in the economic undercurrents and market psychology as policymakers held the floor.