The fade continues

Briefing.com Summary:

*The price action of the mega-cap cohort and Walmart, after its earnings report, is underwhelming.

*Today’s economic data tips in a stagflation direction.

*Kansas City Fed President Schmid (FOMC voter) isn’t in a hurry to cut interest rates.

The S&P 500, in its fullness, is not doing badly this week. The equal-weighted S&P 500 is up 0.4%. The issue is that the mega-cap cohort is doing badly. It may be too strong, though, to say that cohort is doing badly given the degree to which it rallied from the April lows. What it is doing, really, is simply fading on some profit-taking/rebalancing efforts.

That fade is continuing this morning, which is putting some pressure on the equity futures market along with a 3.2% drop in Dow component Walmart (WMT) following its earnings report.

Currently, the S&P 500 futures are down 26 points and are trading 0.4% below fair value, the Nasdaq 100 futures are down 100 points and are trading 0.4% below fair value, and the Dow Jones Industrial Average futures are down 181 points and are trading 0.4% below fair value.

Walmart, for its part, came up shy of fiscal Q2 earnings expectations but showed some solid comparable store sales results, ex fuel (+4.6%), guided Q3 EPS above consensus, and reaffirmed its FY26 EPS guidance. The quarterly miss, however, is a blemish that hasn’t been overlooked for a stock trading at 40x FY26 earnings.

This morning’s economic data isn’t being overlooked either, as it tipped in a stagflation direction.

Initial jobless claims for the week ending August 16 increased by 11,000 to 235,000 (Briefing.com consensus: 222,000). Continuing jobless claims for the week ending August 9 increased by 30,000 to 1.972 million, which is the highest level since November 6, 2021.

The key takeaway from the report is that it covers the period in which the survey for the August employment report is completed. The jump in initial and continuing claims is apt to keep economists’ nonfarm payroll estimates in a soft growth zone.

Separately, the Philadelphia Manufacturing Business Outlook Survey dropped to -0.3 in August (Briefing.com consensus: 9.0) from 15.9 in July, while the indexes for prices paid (66.8 from 58.8) and prices received (36.1 from 34.8) both went up versus July. The dividing line between expansion and contraction for this survey is 0.0. The overall number, then, reflects a contraction in activity versus the prior month, while the price indexes denote an acceleration in price increases.

This survey data isn’t as meaningful as hard data; nonetheless, it plays into Kansas City Fed President Schmid’s (FOMC voter) acknowledgment in a CNBC interview today that it is fair to say he is not in a hurry to cut interest rates. It also plays into the majority opinion, noted in the FOMC Minutes for the July meeting, that the upside risk to inflation is greater than the downside risk to employment.

Of course, all anyone wants to know is if Fed Chair Powell feels the same (still). The world will know soon enough when he delivers his address at the Jackson Hole Symposium at 10:00 a.m. ET on Friday.

For now, the attention continues to be on the underwhelming price action of the mega-cap stocks and semiconductor shares; the news that the EU and U.S. have issued a joint statement on a trade framework that intends to eliminate all tariffs on U.S. industrial goods and sets the tariff rate on exports of EU goods at the higher of either the Most Favored Nation tariff rate or 15%; and a Wall Street Journal report that Meta Platforms (META) has frozen hiring for its AI unit.

—

Originally Posted August 21, 2025 – The fade continues