Diagnosis: General Economic Uncertainty
The big winners of late slid today... A reason to take note... Eyes on Jackson Hole this week... The market is expecting rate cuts... Homebuilding and buying could use a boost... What Home Depot's earnings say...
Here's something we haven't written in a while...
Tech stocks pulled the market lower today.
Nvidia (NVDA) lost 3%, Meta Platforms (META) was down about 2%, and most notably, popular AI name Palantir Technologies (PLTR) fell 9%. It was the worst-performing stock in the S&P 500 Index today. That marked its fifth straight day of losses.
In short, the leaders of the bull run since mid-April went the other way, and the headline indexes fell as a result. The Nasdaq Composite lost 1.5% and the benchmark S&P 500 was down 0.6%.
Frankly, this sort of thing is overdue in a healthy market... and one day isn't a signal to go "all out" of stocks if you're in this for the long term. I (Corey McLaughlin) repeat: We're not saying you should do that.
But we take note because it could be the start of a "rotation" out of tech stocks and into more "defensive" sectors. You see, it wasn't an "everything is down" day. About half of the S&P 500 sectors moved higher, like typically defensive health care and consumer staples.
In other words, with the Nasdaq and S&P 500 just a few days removed from setting new all-time highs, don't go chasing stocks like semiconductors right now, as our Ten Stock Trader editor Greg Diamond wrote to his subscribers today.
"A correction is unfolding," Greg wrote. He also noted that a catalyst for a break one way or another could be just around the corner...
All eyes are on Jackson Hole...
On Friday, Federal Reserve Chair Jerome Powell will make what could be one of his last speeches at a central-bankers symposium in Jackson Hole, Wyoming.
These events are where the Fed has made significant changes in its policies and outlook at times in the past.
Like when it "moved the goalposts" on its inflation target to seek above 2% price growth during the pandemic... Or when Powell warned of "pain" to come in the economy three years ago as the Fed went on an interest-rate raising spree to try to tame the record-high inflation it helped create.
After being called "too late" and "stupid" by President Donald Trump for not lowering interest rates already, we suspect Powell will use this speech to talk about the importance of "Fed independence."
Powell will be in front of an agreeable crowd. And since this may be his Jackson Hole swan song, it's his chance to leave an impression.
Wall Street will also be seeking clues on whether the Fed will lower rates at its next meeting in September. That's the market expectation right now. Federal-funds futures traders are betting with an 85% probability, but it's not a given.
Yes, the most recent jobs report was weak. But the picture on inflation is still mixed, as Nick Koziol wrote last week. Given Powell's messaging just a month ago, I'm not convinced the Fed will pull the trigger on an interest-rate cut next month. And as Greg noted today...
Will there be anything new for investors, between the minutes and Powell's statements? We'll have to see. But it seems that the Fed is still applying a wait-and-see approach to its monetary policy.
A significant change in interest-rate expectations – particularly if Powell has a "hawkish" tone in Wyoming – could create volatility. You see, the labor market isn't the only reason investors are betting on a rate cut... The residential real estate market could use it.
Homebuilder sentiment is in the gutter...
Yesterday, the National Association of Home Builders ("NAHB") monthly Housing Market Index showed how bad the mood is among homebuilders.
The overall index read 32 in August, matching the lowest level since December 2022. (A reading of 50 means 50% of respondents say the outlook is "good" and 50% say the outlook is "bad.")
Homebuilders posted pessimistic readings on all three segments of the survey – current sales conditions, the outlook over the next six months, and prospective buyers. The measure of prospective buyer traffic is near its lowest reading in the past five years.
In a press release, NAHB Chair Buddy Hughes gave one reason for the pessimism – affordability. He called affordability the "top challenge" for the housing market and said buyers are trying to wait out higher mortgage rates before buying homes (more on that in a bit).
To try and combat affordability issues, homebuilders are lowering prices. In August, 37% of homebuilders lowered prices – just about in line with the percentage of builders reporting price decreases over the past three months. And 66% of builders are offering incentives – up from 62% in July. That's the highest level since the COVID-19 pandemic in 2020.
Even with the incentives and price drops, builders are not optimistic about a housing rebound anytime soon.
Still, building activity is picking up...
This morning, the U.S. Census Bureau released its housing construction data for July. Last month, housing starts jumped 5% from June to an annualized rate of 1.43 million. That was up 13% from last July. It was the highest level for housing starts since February.
But a lot of that growth is coming from multifamily housing – like apartment buildings and condo complexes. Single-family housing starts rose slightly from an 11-month low in June.
As for housing completions, they rose 6% from June. And single-family housing completions jumped more than 11% from the prior month.
The latest housing construction data isn't the only sign there's a thaw in the housing market. As our colleague and True Wealth editor Brett Eversole wrote in the July 29 edition of the free DailyWealth e-letter...
The Purchase Index tracks the total number of new mortgage applications each week. This is where we saw a painful slowdown in recent years. But in a surprising twist, the index hit a two-year high this month. Take a look...
Mortgage applications have crashed in recent years. The Purchase Index dropped by more than 60% from its early 2021 high to its 2023 low. But as you can see, loan applications have increased in recent months.
This is all happening with mortgage rates at around 6.6% (for a 30-year fixed mortgage). But rates are moving in the right direction... They are at around the lowest level since last October and well below the 7.26% high from January.
A Fed rate cut as soon as next month, and the idea of more coming, could encourage mortgage rates to fall even further. That's good for housing activity. As Brett concluded...
That also gives us plenty of runway ahead... And I expect housing activity to soar from here once the Fed finally cuts interest rates.
This is good news for investors. Resilient home prices are acting as a backstop for the U.S. economy. And this new surge in activity will only continue when rates eventually fall.
Here's another signal that the residential real estate market would welcome a boost...
Retailer Home Depot (HD) reported its quarterly financials today. They fell shy of Wall Street consensus expectations, as the company has seen a slowdown in customers spending on major home-improvement projects.
Home Depot CEO Ted Decker said on the company's earnings call that "some relief on mortgage rates, in particular, could help" but also that the "the No. 1 reason for deferring the large project is general economic uncertainty."
General economic uncertainty. That certainly seems to be the market's diagnosis these days. As long-time readers know, it's a chronic condition for Mr. Market. There are always uncertainties that can tamp down sentiment for at least some period of time.
One side of the coin is that if or when "good" answers emerge, the skies brighten. For instance, Home Depot's shares rose 3% today because enough investors liked that the company still maintained its full-year guidance for almost 3% sales growth.
Home Depot's performance helped the 30-stock Dow Jones Industrial Average look "not as bad" today, as it finished little changed compared with losses for the Nasdaq, S&P 500, and small-cap Russell 2000 Index.
On the other hand, a worsening case of uncertainty (in this case, about the path of interest rates and/or tariff impacts on the economy, businesses, and consumers) could lead to more pessimism for individual stocks or the market as a whole.
This is all to say that when Powell steps up to the microphone on Friday, the market will be paying attention. And what he says – or doesn't say – could wake up a relatively sleepy market.
Tomorrow morning, join Ten Stock Trader editor Greg Diamond for his latest free Diamond's Edge Live video on YouTube. He'll be talking about the danger of "chasing stocks higher" right now...
Here's a direct link so you don't miss this free video beginning at 8:45 a.m. Eastern time tomorrow. And be sure to subscribe to our Stansberry Research YouTube page, so you can ask Greg a question while he's live...
In the meantime, you can learn more about Greg's technical trading strategy at TenStockTrader.com... And, as always, Ten Stock Trader subscribers and Stansberry Alliance members can find all of his analysis and trade recommendations right here.
New 52-week highs (as of 8/18/25): Barrick Mining (B), Alpha Architect 1-3 Month Box Fund (BOXX), WisdomTree Japan SmallCap Dividend Fund (DFJ), Franklin FTSE Japan Fund (FLJP), iShares Convertible Bond Fund (ICVT), Kinross Gold (KGC), Lynas Rare Earths (LYSDY), Ormat Technologies (ORA), Invesco WilderHill Clean Energy Fund (PBW), and Telefônica Brasil (VIV).
A quiet mailbag today. As always, send your notes to feedback@stansberryresearch.com.
All the best,
Corey McLaughlin and Nick Koziol
Baltimore, Maryland
August 19, 2025