EB Daily Market Report - Brief Update - Thursday, August 21, 2025

We're seeing a bit more of the same today - selling in the major indices, though it's mostly contained.  The small cap IWM is flat at last check, still holding its 20-day EMA.  The NASDAQ 100 ($NDX), though, is trading for a second straight day beneath its 20-day EMA, so slight technical deterioration there.

Large cap growth (IWF, -0.45%) is slightly underperforming its large cap value (IWD, -0.34%) counterpart, while consumer discretionary (XLY, -0.90%) is slightly outpacing consumer staples (XLP, -0.94%).  We've definitely shifted, at least temporarily, to more of a risk-off type of market environment, which makes good sense to me ahead of Fed Chief Powell's Jackson Hole speech slated for Friday morning.  He is likely to provide a glimpse into the Fed's next move at its September meeting and history tells us that Powell remains hawkish and inflation-driven.  It would seem like the hot July PPI report will keep Powell grounded in terms of interest rate cuts, but we'll find out tomorrow morning.

Because Powell has remained hawkish, while others around him await the resumption of rate cuts, I'm not at all surprised by the market's shift of late into defensive- and value-oriented areas of the market.  If we get a hint tomorrow of an upcoming rate cut, I'd fully expect to see interest-rate-sensitive areas of the market to get a big lift - areas like small caps, regional banks, transports, home construction, etc.

Health care (XLV) has been on the move the past two weeks, yesterday closing at its highest level since early May.  Biotechs ($DJUSBT) remain strong.

The big news clearly will be out tomorrow.  Let's sit back and relax a bit leading up to this speech and go from there.

Happy trading!

Tom