August 14, 2025 • 13 mins
Fresh news and strategies for traders. SPY Trader episode #1337.
The U.S. stock market is hitting record highs, fueled by optimism for Federal Reserve interest rate cuts and strong corporate earnings, despite underlying concerns like inflation and market concentration. This episode covers key market movements, macroeconomic factors including inflation and GDP, the anticipated Fed rate cut, and a significant sector rotation towards cyclical stocks. Investment recommendations include maintaining broad market exposure with a cyclical tilt, selectively monitoring technology, considering interest rate sensitivities, exploring value and dividend stocks, and prioritizing risk management amidst market volatility and geopolitical developments.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Hello , Spy Trader listeners !
I'm your host , Sparky Stocks , and it's 6 am on Thursday , August 14th , 2025 , Pacific time .
Grab your coffee because we've got a lot to unpack this morning as the market continues its exhilarating ride .
The U.S.
stock market is buzzing , with major indices recently hitting some incredible record highs .
(00:25):
This surge is largely fueled by serious optimism about potential interest rate cuts from the Federal Reserve and some really robust corporate earnings we've been seeing .
However , we've also got some underlying currents like inflation concerns , a touch of geopolitical tension , and a market that's becoming quite concentrated , so we need to approach this with a nuanced view .
(00:48):
Let's quickly recap where we stood at the close yesterday , Wednesday , August 13th .
The U.S.
stock market closed higher for the second day in a row .
The Dow Jones Industrial Average gained a full 1 percent , or 463.66 points , settling at 44,922.27 .
(01:10):
It's now just 0.4 percent shy of its alltime high set back in December 2024 .
The Nasdaq Composite advanced 0.1 percent to close at a new high of 21,713.14 , even hitting a fresh intraday high of 21,803.75 .
(01:32):
And the S&P 500 rose 0.3 percent to finish at 6,466.58 , also a new closing high , notably closing above 6,400 for the very first time .
Now , looking at today , Thursday , August 14th , U.S.
stock futures are showing a slight pause after that recent rally , with Nasdaq 100 futures down a hair , S&P 500 futures down slightly , and Dow Jones futures also just a fraction lower in early trading .
(02:05):
Digging a bit deeper into what's driving this , yesterday , we saw a broad uplift , with 10 out of the 11 broad sectors within the S&P 500 closing in positive territory .
There's been a clear ' sector churn' happening , meaning market participants are showing a preference for cyclical stocks over some of those traditional growthoriented technology names , even though tech's influence is still huge .
(02:33):
The top performing sectors on August 13th included the Materials Select Sector SPDR , or XLB , which rose 1.9 percent , the Health Care Select Sector SPDR , XLV , up 1.6 percent , the Consumer Discretionary Select Sector SPDR , XLY , gaining 1.4 percent , and the Energy Select Sector SPDR , XLE , which climbed 1.2 percent .
(03:00):
Despite this shift , those bigcap technology stocks , often called the ' Magnificent Seven ' including powerhouses like NVIDIA , Microsoft , Apple , Amazon , Alphabet , Meta , and Broadcom , continue to be a primary driver for the S&P 500's overall ascent .
Their success comes from impressive earnings reports and the ongoing AI boom .
(03:25):
These top 10 stocks now make up a whopping 25 percent of the total U.S.
market capitalization , a concentration we haven't seen since the 1960s .
However , on August 13th , we did see some signs of cooling in the chip sector , with major players like Nvidia , AMD , Broadcom , Dell , Microsoft , and Oracle all experiencing declines .
(03:49):
From a macroeconomic standpoint , inflation continues to be a key story .
The Consumer Price Index for July 2025 increased by 0.2 percent on a seasonally adjusted basis , bringing the annual inflation rate to 2.7 percent , which is consistent with the previous month .
(04:09):
Core CPI , which excludes food and energy , rose 0.3 percent in July and 3.1 percent over the past 12 months , a slight increase from June .
Today , August 14th , we're awaiting the Producer Price Index , another inflation indicator , which is expected to show a 0.2 percent monthovermonth increase .
(04:33):
Hopes for the first Federal Reserve interest rate cut of 2025 are exceptionally high .
The market is fully pricing in a quarterpoint Fed cut in its upcoming September Federal Open Market Committee meeting , with the CME FedWatch Tool showing a 100 percent probability for a 25 basis point reduction .
(04:54):
Some are even hoping for a 50basispoint cut , bolstered by comments from Treasury Secretary Scott Bessent .
The current Fed funds rate is between 4.25 and 4.5 percent .
On the economic growth front , Real Gross Domestic Product , or GDP , rebounded significantly in the second quarter of 2025 , expanding at an annual rate of 3.0 percent .
(05:20):
This is a nice bounce back from a 0.5 percent contraction in the first quarter and was primarily driven by a decrease in imports and stronger consumer spending , which rose at an annual rate of 1.4 percent in Q2 .
The GDP price index , another inflation gauge , rose 2.0 percent in Q2 , down from 3.8 percent in Q1 , indicating easing inflationary pressures .
(05:47):
The Atlanta Fed's GDPNow model estimates third quarter GDP growth at 2.5 percent as of August 7th .
The labor market is also playing a role .
We've seen significantly weak job additions over the last three consecutive months , which has contributed to the increased expectations for a Federal Reserve rate cut .
(06:09):
We'll get more insight today as data on initial jobless claims for the week ending August 9th is released .
Finally , on trade , U.S.
tariffs implemented in 2025 are impacting consumer costs , with prices 2.7 percent higher in July compared to a year ago .
These tariffs are also estimated to lower U.S.
(06:32):
real GDP growth by half a percentage point annually in both 2025 and 2026.As for recent news and company events , traders are keeping a close eye on the upcoming TrumpPutin meeting scheduled for August 15th , which could certainly have implications for global markets .
(06:53):
The secondquarter earnings season is wrapping up , and results have generally been strong , with close to 83 percent of companies reporting so far beating estimates by an average of 800 basis points , showing corporate resilience .
However , there were some notable individual company movements yesterday , August 13th .
Elbit Systems Ltd.
(07:14):
, or ESLT , reported adjusted earnings of 3.23 per share , surpassing analyst estimates .
Brinker International , EAT , the owner of Chili's , gained 1.6 percent after expressing expectations for continued earnings momentum .
On the flip side , Cava Group , CAVA , plummeted 17 percent after reducing its annual sales outlook due to a sharp deceleration in the second quarter .
(07:43):
CoreWeave slumped 21 percent following a disappointing earnings outlook , citing margin pressures from rapid AI data center expansion .
Cisco Systems , CSCO , slipped after hours despite a narrow Q4 beat .
Ibotta plunged 23 percent after missing earnings targets , and Coherent , COHR , fell 18 percent despite beating estimates , attributing the decline to the sale of its defense division .
(08:11):
Today , August 14th , we're expecting earnings from Deere , DE , Tapestry , TPR , and JD.com , JD .
Notably , Deere's shares dropped over 6 percent in premarket trading after providing weakerthanexpected fullyear guidance .
So , what does all this mean for your portfolio ?
Given the current market environment characterized by record highs , optimism around rate cuts , easing inflation , and strong corporate earnings , here are some recommendations .
(08:42):
First , maintain broad market exposure with a cyclical tilt .
While tech has driven recent gains , the visible ' sector churn ' towards cyclical stocks suggests diversifying beyond just growth .
For your core exposure , continue to hold broad market ETFs like the SPDR S&P 500 ETF Trust , SPY , iShares CORE S&P 500 ETF , IVV , or the Vanguard S&P 500 ETF , VOO .
(09:13):
To capitalize on that cyclical shift , consider adding ETFs like the Materials Select Sector SPDR , XLB , Health Care Select Sector SPDR , XLV , Consumer Discretionary Select Sector SPDR , XLY , and Energy Select Sector SPDR , XLE.Second , monitor technology and AI for selective opportunities .
(09:38):
The ' Magnificent Seven ' continue to show strong fundamentals and drive the market , but there are signs of rotation and profittaking in the broader semiconductor and tech space .
For investors with a highrisk tolerance and conviction in the longterm AI trend , the Invesco QQQ Trust , QQQ , offers concentrated exposure to the Nasdaq100 , which is heavily weighted towards technology .
(10:05):
However , be mindful of potential volatility , as seen with companies like CoreWeave and some chipmakers recently .
For specific stock plays , consider established AI beneficiaries like Microsoft , MSFT , or Amazon , AMZN , rather than very speculative plays that have recently pulled back , unless you have strong research backing them .
(10:28):
Third , factor in interest rate sensitivities .
The strong likelihood of a September rate cut could benefit certain sectors and asset classes .
If interest rates fall , companies with higher debt burdens or those that are typically sensitive to borrowing costs , like real estate , could see benefits .
The Vanguard Real Estate ETF , VNQ , invests in REITs , offering exposure to commercial real estate .
(10:57):
Additionally , fixedincome ETFs like the iShares Core U.S.
Aggregate Bond ETF , AGG , or the Vanguard Total Bond Market ETF , BND , could become more attractive as bond yields potentially decline following Fed rate cuts , offering stability and income .
Fourth , consider value and dividend stocks .
(11:19):
In a market where growth has been highly concentrated , highquality value and dividendpaying stocks might offer more balanced returns and resilience .
Honeywell International , HON , a Dow Jones component , has been highlighted as a potential buy due to strong guidance , its resilience against tariffs , and an upcoming spinoff that could unlock value .
(11:42):
It's also a reliable dividend payer .
Finally , a word on risk management .
Given the high market concentration in a few largecap tech stocks , broad diversification through ETFs like the Vanguard Total Stock Market ETF , VTI , which covers the entire U.S.
market , is crucial to mitigate idiosyncratic risks .
(12:05):
The CBOE Volatility Index , or VIX , was down yesterday , suggesting relatively low fear , but rapid market shifts remain possible given geopolitical uncertainties like the TrumpPutin meeting and ongoing tariff impacts .
While overall earnings have been strong , individual company performances can be highly volatile , as demonstrated by the significant drops in Cava Group , CoreWeave , Ibotta , Coherent , and Deere following their reports .
(12:35):
Investors should carefully analyze individual company fundamentals rather than relying solely on broader market sentiment .
In conclusion , the U.S.
stock market is in a bullish phase , driven by hopes of monetary easing and solid corporate performance .
While largecap tech remains dominant , we are observing a rotational shift into cyclical sectors .
(12:59):
Investors should consider a diversified approach , blending broad market and tactical sectorspecific ETFs , while carefully evaluating individual stock opportunities and always managing risks associated with market concentration and geopolitical developments .
That's all for this morning's Spy Trader .
I'm Sparky Stocks , and I'll catch you next time !
Hello , Spy Trader listeners !
I'm your host , Sparky Stocks , and it's 6 am on Thursday , August 14th , 2025 , Pacific time .
Grab your coffee because we've got a lot to unpack this morning as the market continues its exhilarating ride .
The U.S.
stock market is buzzing , with major indices recently hitting some incredible record highs .
(00:25):
This surge is largely fueled by serious optimism about potential interest rate cuts from the Federal Reserve and some really robust corporate earnings we've been seeing .
However , we've also got some underlying currents like inflation concerns , a touch of geopolitical tension , and a market that's becoming quite concentrated , so we need to approach this with a nuanced view .
(00:48):
Let's quickly recap where we stood at the close yesterday , Wednesday , August 13th .
The U.S.
stock market closed higher for the second day in a row .
The Dow Jones Industrial Average gained a full 1 percent , or 463.66 points , settling at 44,922.27 .
(01:10):
It's now just 0.4 percent shy of its alltime high set back in December 2024 .
The Nasdaq Composite advanced 0.1 percent to close at a new high of 21,713.14 , even hitting a fresh intraday high of 21,803.75 .
(01:32):
And the S&P 500 rose 0.3 percent to finish at 6,466.58 , also a new closing high , notably closing above 6,400 for the very first time .
Now , looking at today , Thursday , August 14th , U.S.
stock futures are showing a slight pause after that recent rally , with Nasdaq 100 futures down a hair , S&P 500 futures down slightly , and Dow Jones futures also just a fraction lower in early trading .
(02:05):
Digging a bit deeper into what's driving this , yesterday , we saw a broad uplift , with 10 out of the 11 broad sectors within the S&P 500 closing in positive territory .
There's been a clear ' sector churn' happening , meaning market participants are showing a preference for cyclical stocks over some of those traditional growthoriented technology names , even though tech's influence is still huge .
(02:33):
The top performing sectors on August 13th included the Materials Select Sector SPDR , or XLB , which rose 1.9 percent , the Health Care Select Sector SPDR , XLV , up 1.6 percent , the Consumer Discretionary Select Sector SPDR , XLY , gaining 1.4 percent , and the Energy Select Sector SPDR , XLE , which climbed 1.2 percent .
(03:00):
Despite this shift , those bigcap technology stocks , often called the ' Magnificent Seven ' including powerhouses like NVIDIA , Microsoft , Apple , Amazon , Alphabet , Meta , and Broadcom , continue to be a primary driver for the S&P 500's overall ascent .
Their success comes from impressive earnings reports and the ongoing AI boom .
(03:25):
These top 10 stocks now make up a whopping 25 percent of the total U.S.
market capitalization , a concentration we haven't seen since the 1960s .
However , on August 13th , we did see some signs of cooling in the chip sector , with major players like Nvidia , AMD , Broadcom , Dell , Microsoft , and Oracle all experiencing declines .
(03:49):
From a macroeconomic standpoint , inflation continues to be a key story .
The Consumer Price Index for July 2025 increased by 0.2 percent on a seasonally adjusted basis , bringing the annual inflation rate to 2.7 percent , which is consistent with the previous month .
(04:09):
Core CPI , which excludes food and energy , rose 0.3 percent in July and 3.1 percent over the past 12 months , a slight increase from June .
Today , August 14th , we're awaiting the Producer Price Index , another inflation indicator , which is expected to show a 0.2 percent monthovermonth increase .
(04:33):
Hopes for the first Federal Reserve interest rate cut of 2025 are exceptionally high .
The market is fully pricing in a quarterpoint Fed cut in its upcoming September Federal Open Market Committee meeting , with the CME FedWatch Tool showing a 100 percent probability for a 25 basis point reduction .
(04:54):
Some are even hoping for a 50basispoint cut , bolstered by comments from Treasury Secretary Scott Bessent .
The current Fed funds rate is between 4.25 and 4.5 percent .
On the economic growth front , Real Gross Domestic Product , or GDP , rebounded significantly in the second quarter of 2025 , expanding at an annual rate of 3.0 percent .
(05:20):
This is a nice bounce back from a 0.5 percent contraction in the first quarter and was primarily driven by a decrease in imports and stronger consumer spending , which rose at an annual rate of 1.4 percent in Q2 .
The GDP price index , another inflation gauge , rose 2.0 percent in Q2 , down from 3.8 percent in Q1 , indicating easing inflationary pressures .
(05:47):
The Atlanta Fed's GDPNow model estimates third quarter GDP growth at 2.5 percent as of August 7th .
The labor market is also playing a role .
We've seen significantly weak job additions over the last three consecutive months , which has contributed to the increased expectations for a Federal Reserve rate cut .
(06:09):
We'll get more insight today as data on initial jobless claims for the week ending August 9th is released .
Finally , on trade , U.S.
tariffs implemented in 2025 are impacting consumer costs , with prices 2.7 percent higher in July compared to a year ago .
These tariffs are also estimated to lower U.S.
(06:32):
real GDP growth by half a percentage point annually in both 2025 and 2026.As for recent news and company events , traders are keeping a close eye on the upcoming TrumpPutin meeting scheduled for August 15th , which could certainly have implications for global markets .
(06:53):
The secondquarter earnings season is wrapping up , and results have generally been strong , with close to 83 percent of companies reporting so far beating estimates by an average of 800 basis points , showing corporate resilience .
However , there were some notable individual company movements yesterday , August 13th .
Elbit Systems Ltd.
(07:14):
, or ESLT , reported adjusted earnings of 3.23 per share , surpassing analyst estimates .
Brinker International , EAT , the owner of Chili's , gained 1.6 percent after expressing expectations for continued earnings momentum .
On the flip side , Cava Group , CAVA , plummeted 17 percent after reducing its annual sales outlook due to a sharp deceleration in the second quarter .
(07:43):
CoreWeave slumped 21 percent following a disappointing earnings outlook , citing margin pressures from rapid AI data center expansion .
Cisco Systems , CSCO , slipped after hours despite a narrow Q4 beat .
Ibotta plunged 23 percent after missing earnings targets , and Coherent , COHR , fell 18 percent despite beating estimates , attributing the decline to the sale of its defense division .
(08:11):
Today , August 14th , we're expecting earnings from Deere , DE , Tapestry , TPR , and JD.com , JD .
Notably , Deere's shares dropped over 6 percent in premarket trading after providing weakerthanexpected fullyear guidance .
So , what does all this mean for your portfolio ?
Given the current market environment characterized by record highs , optimism around rate cuts , easing inflation , and strong corporate earnings , here are some recommendations .
(08:42):
First , maintain broad market exposure with a cyclical tilt .
While tech has driven recent gains , the visible ' sector churn ' towards cyclical stocks suggests diversifying beyond just growth .
For your core exposure , continue to hold broad market ETFs like the SPDR S&P 500 ETF Trust , SPY , iShares CORE S&P 500 ETF , IVV , or the Vanguard S&P 500 ETF , VOO .
(09:13):
To capitalize on that cyclical shift , consider adding ETFs like the Materials Select Sector SPDR , XLB , Health Care Select Sector SPDR , XLV , Consumer Discretionary Select Sector SPDR , XLY , and Energy Select Sector SPDR , XLE.Second , monitor technology and AI for selective opportunities .
(09:38):
The ' Magnificent Seven ' continue to show strong fundamentals and drive the market , but there are signs of rotation and profittaking in the broader semiconductor and tech space .
For investors with a highrisk tolerance and conviction in the longterm AI trend , the Invesco QQQ Trust , QQQ , offers concentrated exposure to the Nasdaq100 , which is heavily weighted towards technology .
(10:05):
However , be mindful of potential volatility , as seen with companies like CoreWeave and some chipmakers recently .
For specific stock plays , consider established AI beneficiaries like Microsoft , MSFT , or Amazon , AMZN , rather than very speculative plays that have recently pulled back , unless you have strong research backing them .
(10:28):
Third , factor in interest rate sensitivities .
The strong likelihood of a September rate cut could benefit certain sectors and asset classes .
If interest rates fall , companies with higher debt burdens or those that are typically sensitive to borrowing costs , like real estate , could see benefits .
The Vanguard Real Estate ETF , VNQ , invests in REITs , offering exposure to commercial real estate .
(10:57):
Additionally , fixedincome ETFs like the iShares Core U.S.
Aggregate Bond ETF , AGG , or the Vanguard Total Bond Market ETF , BND , could become more attractive as bond yields potentially decline following Fed rate cuts , offering stability and income .
Fourth , consider value and dividend stocks .
(11:19):
In a market where growth has been highly concentrated , highquality value and dividendpaying stocks might offer more balanced returns and resilience .
Honeywell International , HON , a Dow Jones component , has been highlighted as a potential buy due to strong guidance , its resilience against tariffs , and an upcoming spinoff that could unlock value .
(11:42):
It's also a reliable dividend payer .
Finally , a word on risk management .
Given the high market concentration in a few largecap tech stocks , broad diversification through ETFs like the Vanguard Total Stock Market ETF , VTI , which covers the entire U.S.
market , is crucial to mitigate idiosyncratic risks .
(12:05):
The CBOE Volatility Index , or VIX , was down yesterday , suggesting relatively low fear , but rapid market shifts remain possible given geopolitical uncertainties like the TrumpPutin meeting and ongoing tariff impacts .
While overall earnings have been strong , individual company performances can be highly volatile , as demonstrated by the significant drops in Cava Group , CoreWeave , Ibotta , Coherent , and Deere following their reports .
(12:35):
Investors should carefully analyze individual company fundamentals rather than relying solely on broader market sentiment .
In conclusion , the U.S.
stock market is in a bullish phase , driven by hopes of monetary easing and solid corporate performance .
While largecap tech remains dominant , we are observing a rotational shift into cyclical sectors .
(12:59):
Investors should consider a diversified approach , blending broad market and tactical sectorspecific ETFs , while carefully evaluating individual stock opportunities and always managing risks associated with market concentration and geopolitical developments .
That's all for this morning's Spy Trader .
I'm Sparky Stocks , and I'll catch you next time !
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