Stock Market Fear Gauge Sinks. Why Fed Rate Moves Can Reverse That.

(FREDERIC J. BROWN/AFP via Getty Images)

The market’s annual summer lull appears to have finally arrived after months of on-off tariff drama. That doesn’t mean investors should reach for a piña colada and hit the beach.

The gauge that tracks stock market uncertainty—the Cboe Volatility Index , also known as the VIX or the ‘fear index’—slumped to its lowest level of 2025 on Wednesday. Fixed-income investors are also feeling relaxed: The ICE BofAML Move Index, which measures bond-market volatility, fell to its bottom for the year as well.

It’s not unusual for those fear indexes to dip in mid-August. It’s when Wall Street traders and brokers toggle on the “out of office” button and head to the Hamptons, leading to a sharp drop in volumes.

But this is more than a typical summer lull. Over the past couple of days, investors have become convinced the Federal Reserve is about to start slashing interest rates due to soft jobs data and a benign inflation reading. Treasury Secretary Scott Bessent is among those calling not just for a cut, but aggressive easing. If the Fed doesn’t play ball, it could be a shock for the market.

There’s money to be made in that sort of environment. Home builder stocks D.R. Horton and Lennar have jumped this week, with traders betting that lower borrowing costs will lead to a surge in construction. The small-cap Russell 2000 index has racked up solid gains, too.

Cryptocurrencies are also benefiting from rate-cut bets. Large-cap token Bitcoin hit a record high on Wednesday, and shares in CoinDesk owner Bullish skyrocketed 84% in a stellar initial public offering.

Volatility may be plummeting, but investors should be willing to swap their deck chair for a desktop. Piling into the rate-cut trade looks like an easy but risky way to make a quick buck.

— George Glover

***

Trump’s Emerging Markets Behavior Unsettles Some

Investors have typically penalized emerging markets such as Turkey, Argentina, and China over concerns about central bank independence, government intervention in the private sector, and rampant overspending. But now economists and strategists are raising similar concerns about the U.S., historically the paragon of a developed market.

• These strategists see unnerving parallels to emerging markets in the unconventional actions President Donald Trump has taken to swiftly upend geopolitical and economic norms. Stocks and other financial assets have gained value since January, but if the patterns hold that premium could shrink.
• Trump has pressured Federal Reserve Chair Jerome Powell to cut interest rates, warned judges to not rule against his tariffs, fired the head of the Bureau of Labor Statistics after a weak jobs report, called for the ouster of Intel’s CEO, and sought unprecedented concessions from companies and countries.
• There are newly heightened concerns about the sustainability of the U.S. fiscal deficit. Cornell professor and former IMF researcher Eswar Prasad told Barron’s that what is the norm in many emerging markets is becoming the new norm in the U.S., including undercutting agencies that gather data.
• Three things that have been crucial to the U.S. dollar’s dominance are the rule of law, checks and balances, and central bank independence, and “each of those pillars is significantly being undercut,” Prasad says. Dollar dominance is a factor in the premium typically commanded by U.S. assets.

What’s Next: Markets have been unfazed for now, with the S&P 500 and Nasdaq hitting new records on Wednesday. But observers warn that policy shifts could begin to weigh on stocks if cracks emerge in the optimism around AI to reshape the economy and fuel corporate spending. For the full story, read here.

— Reshma Kapadia

***

Amazon Takes Aim at Walmart in Grocery Delivery Push

Amazon is pushing into one of the few retail sectors it hasn’t conquered: groceries. The e-commerce giant is expanding same-day grocery deliveries in more than 1,000 places nationwide, with plans to expand to more than 2,300 locations by the end of 2025 in a challenge to Walmart.

• Prime members can get free deliveries on orders of $25 or more (or $2.99 for smaller orders), while nonmembers pay $12.99. Walmart and grocers Kroger, Albertsons, and Publix have a greater share of the trillion-dollar grocery market. Amazon’s 22.6% share lags behind Walmart’s 32%, Emarketer research said.
• It’s designed to complement Amazon’s existing grocery delivery services, which include Whole Foods’ online market and Amazon Fresh. The 2017 purchase of Whole Foods was aimed at boosting Amazon’s so-called last-mile delivery capabilities. It has tried to break into the grocery market for years.
• Meanwhile, it has seen fresh competition in food and grocery delivery from newer entrants, including Instacart, Uber Technologies, and DoorDash. Amazon plans to spend $4 billion to triple the size of its delivery network by 2026.
• Amazon Fresh has struggled to gain a foothold among consumers, particularly in bricks-and-mortar grocery, which remains the primary channel for grocery purchases. It temporarily halted opening more Fresh stores in 2023 and closed a couple of underperforming stores.

What’s Next: Walmart is expanding a 10% employee discount to nearly all groceries bought in-store and online year around, except for clearance items. The discount had previously excluded staples like milk, pasta, frozen pizza, or meat, except during the November-December holidays. Walmart reports July-quarter earnings on Aug. 21.

— Sabrina Escobar, Nate Wolf, and Janet H. Cho

***

Cisco Sees Big Opportunities in AI But Offers In-Line Forecast

Cisco Systems beat expectations for the fourth quarter but gave a tepid outlook for the full year 2026 even though the networking company sees a massive opportunity building in providing artificial intelligence infrastructure. CEO Chuck Robbins said AI infrastructure orders in 2025 were more than double their target.

• Fourth-quarter revenue for Cisco’s networking segment, which brings in the most revenue for the company and includes gear used in AI data centers, was $7.63 billion, a 12% increase from the prior year. Overall, it reported adjusted earnings of 99 cents a share on revenue of $14.7 billion.
• AI infrastructure orders from webscale customers came in over $800 million, bringing the full year 2025 total to more than $2 billion. That is more than its original estimate of $1 billion, Cisco said. Product orders overall rose 7% in the fourth quarter and were up across all geographies.
• Cisco expects first-quarter earnings in a range of 97 cents to 99 cents a share and revenue from $14.65 billion to $14.85 billion, in line with analyst estimates. It has also been boosting its security and monitoring software business since its $28 billion purchase of Splunk last year.
• Robbins told analysts that as companies move into the next phase of AI with agents autonomously conducting tasks alongside humans, networks will take on unprecedented amounts of traffic with rising security needs. He said 97% of businesses believe they need to upgrade their networks.

What’s Next: For the fiscal 2026 full year, Cisco is forecasting adjusted earnings of between $4 and $4.06 a share and revenue in a range of $59 billion to $60 billion, both also in line with Wall Street’s expectations.

— Liz Moyer and Angela Palumbo

***

CoinDesk Owner Bullish Is Latest IPO to Exceed Expectations

Cryptocurrency exchange Bullish soared 84% on Wednesday, in a promising debut that proved the market’s appetite for Bitcoin and initial public offerings. Bullish opened much higher at $90 a share, more than tripling its IPO price before closing at $68, with a market value of $10.5 billion.

• Shares of Bullish, which also owns the crypto news and data site CoinDesk, are trading under the ticker “BLSH” on the New York Stock Exchange. Its debut followed newly public stablecoin company Circle Internet Group, which has reported strong earnings.
• Bullish’s CEO Tom Farley is a former president of Intercontinental Exchange in charge of the New York Stock Exchange, who guided IPOs including Alibaba and Snap. Peter Thiel’s Founders Fund and Thiel Capital were early investors in blockchain software company Block.one that helped launch Bullish, and Galaxy Digital also has a stake.
• Bullish holds about $2 billion in crypto on its balance sheet, the bulk of which is in Bitcoin, which was hovering near its 52-week high of $123,166 on Wednesday. Bullish also has a small position in Ether, as well as some stablecoins.
• Ed Engel, an analyst with Compass Point Research & Trading, wrote before its IPO that Bullish’s institutional focus on Bitcoin and Ether “provides more consistent performance” than retail trading platforms that rely more on Altcoins and other cryptos whose trading activity tends to be more volatile.

What’s Next: Bullish reported a loss in the first quarter of 2025, but said in its most recent securities filing that it expects to earn $106.1 million to $109.1 million in this year’s second quarter. Crypto companies Gemini and Grayscale Investments have also filed paperwork to go public.

— Paul R. La Monica, Brian Swint, and Janet H. Cho

***

Paramount Skydance Stock Surges After Merger. Reasons for Excitement.

A flurry of excitement around a recently formed media conglomerate was boosting shares in the newly merged Paramount and Skydance.

• Paramount Skydance stock rose 40% to $15.32 Wednesday, following an 8.4% gain Tuesday. That’s the best two-day stretch on record for Paramount, dating back to its initial public offering in 1990, according to Dow Jones Market Data.
• The sharp rise raises questions about whether the merged company is behaving like a GameStop-style meme stock.
• It’s possible the shares were experiencing a short squeeze Wednesday. That’s when a heavily shorted stock rises suddenly, forcing short sellers to buy back shares to cover their positions and drives demand even higher.
• More fundamental factors may be behind the gain in the stock price, such as the multibillion-dollar seven-year agreement with TKO Group Holdings giving Paramount exclusive media rights to all Ultimate Fighting Championship events in the U.S.

What’s Next: Analysts don’t see shares going much higher. Guggenheim initiated coverage of the newly formed company with a Buy rating and a $13 price target, according to FactSet, but that’s one of few bullish takes on the stock. Among the 27 analysts covering it, the average target price is $11.25.

— Nate Wolf and Elsa Ohlen

***

—Newsletter edited by Liz Moyer, Patrick O’Donnell, Rupert Steiner