Stock Markets Hit Records Amid Fed Attacks, Nvidia Concerns, Tariff Fears. 3 Reasons Why.
Aug 29, 2025 06:23:00 -0400 | #Markets #The Barron's Daily
(Michael M. Santiago/Getty Images)
It’s been a long, strange summer for financial markets. In just the past week, we’ve had: new political attacks on the Federal Reserve; disappointing earnings from Nvidia, the biggest U.S. company by market value; and worries that tariffs on low-cost imports will hurt businesses.
And yet the S&P 500 closed Thursday at a record high. How can that be? First, markets aren’t a voting booth. Even though politicians love to take credit for stock gains, traders are not giving their approval or disapproval of President Donald Trump’s policies with their transactions. They’re merely judging how events might affect the price of assets, and for now they don’t see a threat that they didn’t already know about.
Second, no one believes the efficient markets hypothesis—the theory that the price of stocks is a rational reflection of all available information. Prices are set as much by emotion and momentum as they are by estimates of future earnings.
Third, the adage that stocks take the stairs up and the elevator down is absolutely true. When sentiment turns against the market it swings down hard. At the moment, the Cboe Volatility Index , or VIX, is near the lowest it’s been all year. The imminent court drama around Trump’s attempt to fire Fed Gov. Lisa Cook, better-than-expected economic growth, and a new inflation reading aren’t moving the needle.
The end of summer is a reminder that seasons change.
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Trump’s Fed Drama Heats Up With Hearing on Gov. Cook’s Dismissal
President Donald Trump’s efforts to oust Federal Reserve governor Lisa Cook took a dramatic turn as Cook sued to block him, asking a Washington, D.C., court for an emergency temporary restraining order to prevent her termination. A hearing scheduled today will review her request.
- The lawsuit said Cook’s termination, if allowed to occur, would subvert the Federal Reserve Act explicitly requiring a showing of “cause” for a governor’s removal, emphasizing that an unsubstantiated allegation about private mortgage applications before she was Senate confirmed doesn’t justify her dismissal.
- Cook’s lawsuit said Trump gave Cook no opportunity to respond before posting his letter terminating her on social media. She alleges that her attempted removal was meant to vacate a seat at the Fed Trump to fill as he sought to undermine the Fed’s independence.
- Trump has made a number of controversial personnel moves in his administration. Besides Cook, Federal Trade Commissioner Rebecca Kelly Slaughter and Centers for Disease Control and Prevention director Dr. Susan Monarez are also fighting their dismissals.
- The Supreme Court recently ruled that Trump could fire the heads of independent agencies like the National Labor Relations Board, but stressed that the Fed is a uniquely structured, quasi-private entity. A ruling on the Cook matter could clarify the extent of its independence.
What’s Next: Fed governor Christopher Waller, a contender to succeed Chair Jerome Powell said Thursday the central bank should begin cutting interest rates next month and keep going in the months ahead, making his most forceful case yet for an easing cycle.
—Megan Leonhardt, Nicole Goodkind, and Janet H. Cho
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Fed Rate Decisions Don’t Sway Mortgage Rates as Much as Trump Thinks
President Trump has criticized Fed Chair Powell for failing to cut interest rates, a move he believes would bring relief to the housing market through lower mortgage rates. But the Fed’s benchmark rate has only tangential sway over near-term mortgage rates. Economic data matters more.
- Thirty-year fixed-rate mortgages typically move with the 10-year Treasury yield, which is influenced by long-term expectations for the economy, including monetary policy and inflation. Two of the largest weekly declines in mortgage rates, in March and June, came as economic expectations softened.
- There haven’t been any cuts to the federal-funds target rate this year, but 30-year fixed mortgage rates have retreated nearly 0.5 percentage point from their 2025 peak of 7.04%. They reached 6.56% on Thursday, the lowest weekly average since October 2024, according to Freddie Mac.
- The Fed has the tools to influence mortgage rates directly, but has done so only in times of crisis, noted Walt Schmidt, FHN Financial senior vice president of mortgage strategies. The Fed bought mortgage-backed securities and Treasuries after the 2008-09 financial crisis and during the pandemic.
- Questions about the Fed’s independence could drive financing costs higher, Mortgage Bankers Association economists Mike Fratantoni and Joel Kan wrote recently. The trade group expects mortgage rates to hover in the mid-to-high 6% range through 2026.
What’s Next: “The U.S. has benefited for decades from a strong and independent Federal Reserve,” Fratantoni and Kan wrote. If the Fed is pushed to deliver short-term boosts to the economy, investors will fear higher inflation and that could send longer-term rates—including mortgages—higher.
— Shaina Mishkin and Janet H. Cho
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Another Round of Tariffs Kicks In, Focused on Low-Cost Imports
New tariffs on low-cost goods aimed at raising revenue and blocking the flow of counterfeit goods and fentanyl into the U.S. kicked in at midnight and could raise as much as $10 billion a year, U.S. trade advisor Peter Navarro told reporters Thursday.
- Since May, goods imported from China and Hong Kong were subject to the tariffs, which ended the so-called de minimis exemption on packages valued at $800 or less. The U.S. has brought in $492 million in tariffs from those imports so far.
- The end of the exemption on goods from around the world is already creating havoc with international shipments. Postal systems in Mexico, Japan, Taiwan, Australia, and several other countries have said they would halt such shipments at least temporarily.
- The new tariffs will be the same rate the U.S. imposes on imports from the country of origin or a flat fee of $80 to $200, also depending on origin. Gifts valued at $100 or less and $200 in items that U.S. travelers bring back with them are exempt.
- Over the past 10 years, de minimis shipments jumped to 1.36 billion from 139 million, according to Customs and Border Protection. Those tariff-free shipments were valued at an estimated $64.6 billion in 2024 and accounted for 92% of all cargo entering the country.
What’s Next: The end of the exemption could put pressure on overseas retailers such as Temu and Shein along with foreign sellers on platforms such as Etsy. The overall effect on the U.S. economy from the loophole ending is likely to be limited, according to Evercore ISI research.
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Kyvistar Stock Brings Ukraine to the Nasdaq
Friday is the day executives from Ukraine’s largest mobile and broadband operator Kyivstar Group ring the Nasdaq opening bell, after a busy few days of trans-Atlantic flights, presentations, and investor meetings.
- A delegation of business elites from the war-torn country descended on New York this week to drum up interest on Wall Street. Western investors, they say, have an opportunity to essentially buy low on Ukraine, more than 3 1⁄2 years after Russia invaded the country.
- The blitz followed Kyivstar’s blank-check merger with a special purpose acquisition company, or SPAC, on Aug. 15, which made it the first Ukrainian offering on U.S. public markets.
- “I am absolutely sure that Ukrainian assets are undervalued,” Kyivstar CEO Oleksandr Komarov, a Kyiv native, told Barron’s. The company pitched investment funds specializing in emerging markets and telecommunications in this week’s events, he said.
- With 22 million mobile customers and 1.1 million broadband subscribers, Kyivstar claims the largest share of both markets in Ukraine. The company has also been growing its digital segment, which includes a telehealth provider, a streaming service, an enterprise technology business, and the ride-hailing platform Uklon, purchased for $155 million earlier this year.
What’s Next: How the stock does in the coming months is one bellwether for Western investors’ willingness to pour money into a country still mired in war. Doing so carries obvious financial and security risks, but it might also be an opportunity to get in on the ground floor of Ukraine’s eventual reconstruction.
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Dell Beats Expectations and Raises Outlook on AI-Fueled Surge
Dell Technologies beat expectations for second-quarter financials, with record revenue from sales in servers and networking that power artificial intelligence, and it raised its full-year outlook. But its third-quarter forecast for earnings per share missed the mark.
- It reported second-quarter adjusted earnings of $2.32 a share and revenue of $29.8 billion. Sales from Infrastructure Solutions, the business that includes the servers, jumped 44% from a year ago and it raised its full-year guidance on AI shipping to $20 billion.
- Dell previously guided to AI server shipments of $15 billion for fiscal 2026. Despite the strong outlook, Dell also said it expects third-quarter adjusted earnings to fall around $2.45 a share at the midpoint, below expectations.
- Its Client Solutions revenue rose just 1% from a year ago, to $12.5 billion, which missed Wall Street estimates slightly. That’s the business that sells personal computers. The results came after competitor HP reported stronger-than-expected demand for personal computers on Wednesday.
- President Trump has implemented stiff tariffs on imports to force manufacturing back to the U.S. However, some tech hardware is exempt while the government investigates them for tariffs. Those investigations examine whether imports of certain products threaten national security.
What’s Next: Dell forecasts fiscal year revenue of $105 billion to $109 billion, up $4 billion from a previous estimate and above expectations on the higher end of the range. Adjusted profit is expected to be $9.55 a share for the year, also beating estimates.
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—Newsletter edited by Liz Moyer, Patrick O’Donnell, Rupert Steiner