Markets Rally on a Mirage? Powell Holds His Fire

The economy posted 3% growth last quarter on paper. Dig a little deeper, and it’s mostly vanishing imports dressed as demand.

Markets liked the headline. The Fed played statue. And once again, Big Tech did the heavy lifting while the rest of the market phoned it in.

Meanwhile, central bankers dusted off their “downside risks” mantra. It’s like watching inflation in a necktie; calm on the surface, sweating underneath.

Tomorrow’s jobs report might shake that calm. Read the data, not the drama.

I post a new poll everyday to get your pulse on what's happening. Find it below.

Let’s cut through the noise. Here come your Morning Bullets.

– Truly yours, Fred Frost

📈 Yesterday's Market Recap

Markets shrugged off Fed Chair Powell's hawkish hold on rates at 4.25%, with S&P 500 futures climbing nearly 1% premarket as investors bet on stability despite labor concerns. European and Asian indices mostly rose, though China's manufacturing dip dragged its benchmark down. Bitcoin held firm above $118,000, signaling crypto's resilience amid policy noise.

• Fed Stays Put, Hints at Rate Cut Risks: Powell mentioned 'downside risks' to employment six times, keeping rates steady but opening door for September move if data weakens. → inkl


• Global Markets Up, China Bucks Trend: S&P 500 futures +1%, STOXX Europe 600 +0.14%, Nikkei +1.02%; CSI 300 down 1.82% on manufacturing contraction. → Fortune


• Trump Accuses Pelosi of Insider Trading: Former President calls for probe into Pelosi's stock gains, supporting bill to ban congressional trading. → Benzinga


• UnitedHealth's $330B Market Cap Wipeout: Healthcare giant faces DOJ probe and leadership shakeup after Q2 earnings miss, forecasting flat profits. → Yahoo!

📈 Daily Performance Snapshot

🔭 What to Watch Today

With Powell's labor warnings fresh, today's jobs report could dictate the Fed's next move—weak numbers might force an earlier rate cut, impacting everything from stocks to your mortgage. Keep an eye on Big Tech earnings too, as AI hype meets reality in a tariff-tinged economy.

💡 Opportunity Watch

Amid Fed caution and tariff uncertainties, savvy investors spot edges in resilient sectors like renewables and defense tech. These plays leverage policy shifts without relying on government handouts—true free-market winners.

• Amprius Technologies (AMPX) - Battery Innovator: Hyper-growth in silicon anode batteries eyes 50% upside to $15 amid EV and AI power needs. → MarketBeat
• Nextracker (NXT) - Solar Tracker Leader: Upgraded guidance and debt-free balance sheet position it for growth in AI-driven energy demand, despite market pullback. → Seeking Alpha
• Red Cat Holdings (RCAT) - Drone Tech Surge: Army contract for 5,880 drones forecasts $80-120M revenue; short squeeze potential at current discount. → MarketBeat

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🔥 The Big Bullet

GDP Pops, Powell Pauses—and Fed Unity Cracks

What happened: The U.S. economy surprised forecasters with a revised Q2 GDP growth rate of 3.0%, though most of the gain came from falling imports rather than surging demand. Meanwhile, the Fed held rates steady at 4.25–4.50% and struck a tone of "watchful patience." But buried in the fine print: two sitting governors—Michelle Bowman and Christopher Waller—broke ranks and voted for a 25bp cut, marking the first dual dissent in decades. That rare fracture came amid mounting political pressure and a market eager for easing. All this as Big Tech kept the rally afloat: Meta and Microsoft blew past earnings expectations, helping the Nasdaq stay green even as broader indices softened. → Reuters, Investors

Why it matters: Markets love a strong GDP print, until they peek under the hood. This "growth" is more accounting trick than economic firepower, complicating the Fed’s calculus. The added wrinkle? Internal dissent. When Fed governors start voting against the chair, the optics shift from unity to fragility. It’s not just about policy, it’s about credibility. The Powell Fed is still steering the ship, but the rudder may be looser than it looks. Megacap earnings continue to mask softness elsewhere, and while recession chatter is quieter, the structural risks remain unresolved.

What’s next: All eyes turn to inflation and labor prints—, sticky PCE or hot payrolls will keep the Fed cautious. Meanwhile, watch for signs of more internal dissent or shifts in Powell’s messaging. If cracks widen, market volatility could spike as the “higher for longer” regime battles political and institutional noise. Tech may keep floating the market short-term, but the rally lacks breadth. Expect rotations, yield volatility, and more tariff drama to test investor resolve.

• Stocks Mixed After Fed Holds Steady, Earnings Roll In – AP News
• Meta, Microsoft Top Forecasts as AI Bets Pay Off – CNBC
• Trump Tariff Surprise Adds New Trade Risk – The Guardian

🧭 Policy & Market Ripples

• Bipartisan Housing Bill Advances: Scott-Warren Act clears Senate committee to boost supply and cut regulations, a rare win for free-market housing solutions. → Benzinga
• AI Fraud Already Raging: Cyber expert warns billions stolen via deepfakes; time to empower individuals with better defenses over government bailouts. → Fortune
• CFOs Eye Crypto Future: 99% expect business use long-term; volatility concerns linger, but stablecoins could streamline without central bank overreach. → Deloitte
• China's Manufacturing Slumps: PMI at 49.3 for fourth month; tariffs shift orders elsewhere, exposing overreliance on state-driven growth. → CNBC

📉 What do you think?

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