Key Points
Overview
The week of August 25-29, 2025, delivered a dramatic sequence of record-breaking highs followed by a reality check for financial markets. What began with optimism from Fed Chair Powell's dovish Jackson Hole speech quickly evolved into a complex narrative involving unprecedented political interference at the Federal Reserve, mixed corporate earnings, and persistent inflationary pressures. The week showcased both the market's resilience in reaching new peaks and its sensitivity to political uncertainty, as investors navigated between economic fundamentals and constitutional concerns about central bank independence.
Financial Markets Weekly Recap
Equities
Market Indices: The S&P 500 achieved a historic milestone, crossing 6,500 points for the first time and closing at a record high of 6,501.86 on Thursday. This marked the index's 20th record close of 2025, capping a remarkable week that saw gains of 0.32% on Thursday alone. The Nasdaq Composite gained 0.53% to reach 21,016 points, stopping just 8 points shy of its 21st record high of the year. The Dow Jones Industrial Average added 0.16% to close at 45,890 points, securing its second all-time high of 2025.
However, Friday brought a sobering reality check as all three major indices retreated from their peaks. The S&P 500 dropped 0.8% to 6,453.77, while the Nasdaq slid 1.3% and the Dow lost 202 points or 0.5%. Despite Friday's pullback, all indices remained firmly positive for August, with the Dow up more than 3%, the S&P 500 nearly 2%, and the Nasdaq about 2%.
Sector Performance: Technology stocks dominated the week's narrative, driven by artificial intelligence momentum and earnings anticipation. Energy and defense sectors also showed strength amid geopolitical considerations. However, the sector rotation became evident on Friday as technology led the decline, with investors taking profits after the sustained rally.
Corporate Highlights:
Currencies
US Dollar: The dollar initially weakened following Powell's dovish Jackson Hole speech but found support as political tensions around the Fed created safe-haven demand. The dollar index fluctuated as markets digested both the potential for rate cuts and concerns about central bank independence.
EUR/USD: The euro rallied roughly 1% on Friday after Powell's speech, cracking the 50-day moving average as rate cut expectations boosted risk appetite. However, the rally cooled as Fed drama unfolded during the week.
USD/JPY: The dollar remained stable near ¥148 as forex traders positioned ahead of major economic releases. The pair showed resilience despite broader dollar weakness following Powell's speech.
Commodities
Gold: Gold experienced significant volatility, initially shooting up to a two-week high of $3,390 per ounce amid Fed drama and political uncertainty. However, it reversed course and erased about $20 from its intraday peak as the dollar recovered and market sentiment stabilized.
Oil: Crude prices remained relatively stable during the week, with focus on economic growth prospects and demand indicators rather than geopolitical tensions.
Cryptocurrencies
Bitcoin: Bitcoin extended its technical pullback, sliding to a six-week low of $108,000 before bargain hunters stepped in to stabilize prices above $110,000. The cryptocurrency is now down roughly 12% from its all-time high of $124,500 hit earlier in the month, despite initial optimism following Powell's Jackson Hole speech.
Ethereum: Ethereum hit a new record high of $4,955 on Sunday but quickly retreated, dropping 7% to $4,600 on Monday as profit-taking fueled a sharp reversal. The selloff continued through the week, with prices hovering near $4,400 by Tuesday morning, representing a 12% decline from the fresh record.
Solana: Solana prices popped above $200 as treasury trades picked up momentum, with corporate adoption following the Bitcoin and Ethereum playbook of balance sheet accumulation.
Economic Indicators and Policy Developments
Powell's Jackson Hole Speech: Fed Chair Jerome Powell delivered a carefully calibrated speech that signaled openness to rate cuts while maintaining flexibility. He noted that "the balance of risks appears to be shifting" and that "the baseline outlook and evolving balance of risks may warrant an adjustment to our policy stance." Powell emphasized the labor market's unusual balance and warned that employment risks could materialize quickly.
PCE Inflation Data: The July Personal Consumption Expenditures price index rose 2.6% annually, matching expectations and June's reading. Core PCE inflation ticked up to 2.9% year-over-year, the highest in five months, suggesting persistent underlying inflationary pressures. The data reinforced expectations for a cautious Fed approach to rate cuts.
GDP Revision: Second-quarter GDP was revised higher to 3.3%, smashing expectations of 3.0% and easing fears about economic slowdown. The stronger-than-expected growth provided additional support for corporate earnings expectations and market confidence.
Fed Independence Crisis: President Trump's unprecedented attempt to fire Fed Governor Lisa Cook over mortgage fraud allegations created constitutional uncertainty. Cook filed a lawsuit challenging the dismissal, arguing Trump lacks the authority to remove her without proper cause. The case, assigned to Judge Jia M. Cobb, represents the first test of presidential power over Fed governance in the central bank's 112-year history.
Market Outlook
As markets head into September, investors face several critical developments:
The week's events highlighted the delicate balance between economic fundamentals, monetary policy, and political stability that underpins modern financial markets. While record highs demonstrated continued investor confidence in corporate America's growth prospects, the Friday pullback and ongoing Fed drama suggest that volatility may persist as markets navigate an increasingly complex landscape of competing forces in the coming weeks.