A September Slump Or Fall Fury?... And Options Strategy Ahead Of Earnings 8/29/25

0:01Happy Friday live from the NASDAQ market site in the heart of New York City's Times Square This is Fast Money. Is it a fizzle to the summer sizzle? Stocks hit to end the week. Does this set the stage for a September swoon? Plus, the results roll on. Another big slate of earnings on deck next week. How options traders are setting up ahead of all of it, like Broadcom, Salesforce, Lululemon, and more. Plus, crypto's rough week. Placing your bets ahead of sports betting's biggest season. and maybe, just maybe, the most important charts right now. Your traders lay out what they're watching. And on your desk tonight, ahead of the three-day holiday weekend, literally on your desk tonight, to my right is Stephen Grasso.

0:48We got Mike Coe and Julie Beal with us as well. We'll take it. All right. Welcome, everybody. Let us start with your action today, or maybe lack of buyer action, because stocks did fall. They down the S &P down a little bit, but the NASDAQ dropped over 1%. The red-hot chip stocks, they got cooled off, dragging down the index. The SMH semiconductor ETF had its worst day since April. That's in part because Marvell technology plunging nearly 19 % after last night's earnings. NVIDIA and Broadcom also lower, kind of a sympathy trade, but that made NVIDIA post a negative month. But let's be optimistic.

1:30It's Friday, heading into a holiday weekend. Despite the down day, the major averages all firmly in the green for the month of August. In fact, the S &P 500 and Dow each seeing a fourth straight month of gains. The Nasdaq, meantime, continues to outperform. It is on a five-month win streak. Oh, and by the way, Steve Grasso, small caps putting in their best month in nearly a year. You don't hear that often. No, you don't. And while we haven't heard it a lot the last couple of years. So how do you see the setup as we head now into the back half, but the waning months of the year? Right. So didn't we just have a record high yesterday?

2:11What was it yesterday? The day before? That's why we're not making too much of this decline. No, no, I'm just saying, but let's put it in perspective. That's what I do. I pull the lens back and I say, look at where we've come from. Look at that sell-off that we had in April. Look at how fast that we regained that sell off. It was the fastest in history that we bounced back out of all the markets in historic fashion. We bounced back quicker than any of them. The show is called Fast Money. It is. It is. So so when you really look at how these things collapse on each other, you have bull, you have bear markets that collapse on each other.

2:46They cycle through really quickly. I think we're going to have a little bit of temporary weakness in September, maybe for about two weeks or so. And then depending on how those pan out, do we get the rate cut? Big for me and big for the market, whether or not we get that rate cut. And I think people are starting to hedge their bets. They were leaning towards that 50 basis point. Maybe they're going to get 25 basis points of a cut. They're getting a cut, in my opinion. And then I think we get back on the horse late October. Okay. Julie Beal, you've been hot on the small cap stocks for a long time.

3:21We've got new record highs on every major average except the Russell 2000. It is not quite back to where it was last November. Do you remain optimistic? And if so, why? Yeah, absolutely. It's been on a pretty persistent losing streak, but it's justified. You know, the earnings growth for the Russell just really hasn't been there. It hasn't materialized. You can find great small cap companies that have had great earnings, but the index overall is still 40 % non-earners. So it doesn't surprise me that it's been a persistent underperformer. This rotation is interesting though. It's clearly based off of value and people chasing a lot of the more cyclical value stocks, feeling less worried that we're gonna see a lot of tariff fallout.

4:07And I think that's fine and probably a fairly reasonable position to take. But this is an area where people have been playing mostly passive. And I think that that outflow happens very, very quickly, just as quickly as the inflow happened in August. Yeah, you know, Mike Coe, listen, historically, September, if we go back to Guy Domi's birth year of 1928, he's not here to defend himself. If we go all the way back, you notice that the S &P 500 has fallen about 1.1 percent in the month of September. Then generally we get some kind of a little rally heading in to the new year. So we've got a rough historical setup.

4:46We've got a VIX that's at 14, implying almost no fear or options volatility. And yet we've got a fight over the Fed, which we'll get to in just a second. And we've got a tariff situation that is still cloudy. How does Mike Coe see the setup going into the next couple of months? Yeah, I mean, the first thing I would say just about today's weakness. I mean, we're coming in. It's a fairly thin day. You know, we're going into a three-day weekend. I'm really much more interested in what's going to be going on after Labor Day than in the 24 hours that precede it. You know, it is interesting as we look at the VIX where it is, that's basically the S &P options markets forecast for volatility over the coming 30 days.

5:31And you know, 15, a little bit higher than where we were earlier this week, but certainly not very woolly. Now, one thing I would point out, September is a slightly above average month in terms of volatility, October even more so, and interestingly, November as well. But an important thing to remember, and this applies both to your statistic with respect to the returns and my statistic with respect to volatility, and that is that pullbacks in the market and also increases in volatility tend to have a disproportionate effect on the average because they tend to swing a lot. You know, if the VIX is typically 15, 16, and suddenly it goes to 40, you know, that has an outsized effect on the average.

6:13Similarly, when you get some kind of a pullback, and September and October unfortunately happened to have been the months when a couple big pullbacks took place, it throws the average a little bit. You know, over 30 days, the average return for the S &P is probably in the neighborhood of 60 basis points over the long term, and more recently, significantly higher than that, of course. And right now, I still think the setup is pretty good. But like Steve, though, I think everybody's eyes are going to be on the FOMC in September. And if they get disappointed, that could see that uptick in volatility and the pullback that you just referenced.

6:44Yeah, I just wonder why, you know, why anybody would do a whole, take a big new position between now and then. We'll get to more on that in just one second. We'll come back to it. But right now, we've got to get to a very different topic. That is the fate of Lisa Cook on the Federal Reserve. Her fate really still in question. And today's court hearing ended without a ruling on President Trump's attempt to fire her. Eamon Javers, but on the story all day long. Eamon, we appreciate it. It's been a long day. Where do we stand right now? Well, Brian, there's some real question marks as we go into the weekend now.

7:14This hearing ended without any kind of preliminary injunction or temporary restraining order from the judge to stop President Trump's effort to fire Lisa Cook from the Fed. So that raises the question of what's going to happen next week. We don't know. The judge said she wants to see some more filings. She wants some more information. She wants to consider what she called a novel issue. The hearing today was basically two hours of really metaphysical debate over what the idea, what the meaning of for cause is in the statute. Because the statute itself that created the Fed doesn't define what causes the president can fire someone for and what causes he can't.

7:50So the question here is, how do we define this? The government arguing for President Trump here said it's a very broad authority. The president has got an enormous amount of discretion here. He can largely fire as long as he has cause. He can largely fire for just about any cause under the sun. Lisa Cook's attorneys argued, wait a second, if it's anything the president says it is, then that doesn't really mean anything. And therefore, this idea of for cause doesn't exist. So the government ended up on this, Brian. They said cause is more than it has to be more than a policy disagreement. So you can't fire someone because you don't like their stance on rates.

8:25It has to bear on the official's ability to do the job. So something about their professionalism. And then added in this idea that it also should be something that wasn't known at the time that the person was confirmed by the Senate. And that last concession by the government was something that Abby Lowell, Lisa Cook's attorney, jumped on at the end and said, hey, wait a second, if the definition of cause is, you know, if it was known at the time of the confirmation, it can't be considered now. Well, Lisa Cook turned over all of her mortgage and banking information to the Senate at the time of her confirmation.

8:56And so, therefore, this was something that the Senate committee would have had the ability to look at. And so, therefore, it's not eligible to be considered as for cause. So that's where it ended. All this debate is going to continue next week. And we'll see if the judge does decide to issue any kind of temporary injunction to stop the president from taking any action while this court case plays out, which could be weeks or months. And you referenced Abby Lowell. This is a heavy hitter, maybe the heaviest hitter in law right now. Abby Lowell, the name sounds familiar to a lot of our listeners and viewers.

9:28It's because this was Hunter Biden's attorney as well, was it not? I mean, Abby Lowell is the defense attorney to have in D.C., if not America. Brian, you know, just reflecting on this, I've been in Washington for 30 years covering this stuff. Abby Lowell has done just about every major political scandal in my time in Washington. I mean, he is as plugged in and wired as it gets. And he's doing a number of these Trump firing cases now. So he's got all the information, all the arguments that he needs. The question is, does he have the facts on his side? I mean, the government would say it really doesn't matter what what Abby Lowell argues because the president has this authority.

10:08period. And she has not, again, we talked about it earlier very quickly. She has not come out and said, I did not do this. There was sort of a, I didn't do it in the filing, in the legal filing. It said, I think you said, if I did it, which I did not. But she herself has not made any kind of a statement. We have not seen her or heard from her. Yeah. And that's the question. So there's always, in any kind of scandal, Brian, there's what the lawyers want you to do. And then there's the public relations fight around it. The public relations people would tell you, you've got to get out there and defend yourself.

10:41You've got to get your proxies out there defending you. You've got to make an argument for the public to buy. She hasn't really been doing that. And obviously, as a Fed official, she's not really used to this idea of fighting in a political sphere where public relations really matters. Eamon Javers on the story all day, my friend, and we appreciate it, Eamon. Thank you very much. Yeah, have a good one, Brian. All right, you too. So let's talk about that. Let's talk about inflation. Let's talk about the Fed, not including Lisa Cook, and more with Ben Emmons. He is founder and chief investment officer at FedWatch Advisors.

11:13Ben, really appreciate you coming in on a Friday. Thank you very much. You're welcome. I'm not going to ask you to adjudicate this or get into the politics of it, but does the outcome of this case, the independence of the Fed, whatever it is, does it matter to how we should look at the Fed as a rate making and policy institution? It does matter, obviously, because if it gets really influenced by outside forces, then yeah, it could be. We have currently the rate cut price in. You see a lot of people within the Fed shifting towards rate cuts. And you could debate about whether that is politically influenced, yes or no.

11:50Ultimately, the markets, I think, really care about what's the Fed going to do here. Are you going to cut or not and by how much? And the influence in itself will then maybe be accounted for if it's the wrong timing. If they're cutting and it turns out to be the economy was much stronger and didn't need any cuts. So I think that's what the market will tell you. OK, I'm going to. Steve Grasso, I want you to jump in on this, too. I'm going to say something. We got Julie Beal. We got Mike Coe. I'm going to say something a little bit crazy because why not? It's Friday. Sure. What I do, which is let's say you're leaning toward a Fed cut.

12:18You remember the Fed, right? You know, the president wants the Fed to cut rates. We know that Jerome Powell is sparred with the Fed with the president. rather. So I wonder, is there any part of Ben Emmons that thinks, well, guess what? Now you're coming after one of our own, Lisa Cook. We're not going to give you the rate cut because they know that's kind of a gift to the president, even if they think that that's what we need to do. Like it's cut. That sounds political to me. Yeah. That sounds like they're politicizing the Fed as well. So it's a two way street. So but I'll let Ben answer that question.

12:50There's probably no way to tell. But yeah, it would be really interesting dynamic if that's the case. But I think, Brian, it comes down to what happens next week with payrolls. Let's say that number is really strong, right? That will give them the reason to say, guess what? It wasn't as weak as we thought. We can maybe hold off here. And you get that political dynamic. But ultimately, they will use the data to say, we're going to cut or not cut, I think. So when you look at the last couple of inflation numbers that we've seen, Ben, when you take out housing and shelter costs, because that's the big thing.

13:23And CPI, it's a third of CPI is housing and shelter costs. So that skews it because mortgage rates don't seem to come down. But when you look at the last one that we had, that was the core or the super core. That tells a different story. But I would say that next week is probably the most important week as far as data, because we're going to find out in that dual mandate, has the jobs number, has full employment taken precedent over stable pricing. Yeah, that's right, Steve, because it's so much tied into that labor data now. That's the argument to make this rate cut. You know, that's what Waller and Bowman started.

14:03And that's what Powell now signaled at Jackson Hole, even now Williams has come to that point, too. And in the meantime, we have this inflation data that does look stickier. It does look a little harder at the top, at least. And it's super cool, as you mentioned. It's actually went from about 0.6 or 0.06 in April when the tariffs were announced to 0.39 percent today. So that kind of acceleration. So, you know, this labor data really matters, I think, next week. As I said, if it is really strong, it could give the Fed a reason to not cut. So that's not in the markets right now. So do you think the Fed is going to cut?

14:37What are they going to do September 17th? We want to know. Your firm is called FedWatch. Exactly. Exactly. So it is 85 percent. And I think it's price, the market thinks it's going to cut, it's going to happen. So I'm meaning like this payroll report would have to be three, 400 ,000 type of arranged job report with provisions being positive for this Fed perhaps to change their mind. But the market will change its mind then too, right? So it's price, I think they will do it. But then from there, it depends a bit on how this data comes out. If strong data, good data, October comes in doubt, right?

15:11And that could add volatility to the markets. So just to get a little bit deeper on this, the Fed balance sheet is what not too many people focus on. I know you do as well. Thirty five billion of mortgage backed securities still allowed to roll off each month. That has an upward bias to the 10 year, which has an upward bias to mortgage rates. When are we going to see them cut that back? They cut back Treasury roll off, but they haven't cut the MBS back. Yeah, I think this meeting will be the decision to basically phase that out. Because if you start cutting rates and you do QT still on top and it is a mortgage issue, then I think that's the decision it will make.

15:51So they will phase out QT in this meeting. You're talking about quantitative tightening. Quantitative tightening, yeah. Yes. And is that in some ways, Ben, I know we're going to go, is that some ways more important than the Fed funds target or no? Well, it's a passive tightening, as we say, meaning that it's in the background. It's sort of happening. But it had probably kept mortgage rates higher than maybe where they should have been. So, yeah, it does matter. Ben Emmons, FedWatch advisors. Thank you. Thank you very much. All right. Like I said, we've got Julie Beal. We've got Mike Coe still with us as well.

16:24Julie Beal, comment on what you heard. Do you agree with Ben about where you see the Federal Reserve and what you see them doing on September 17th? Yeah, I agree. I think that unless we have a very, very hot employment number, it was really clear from J-PAL's comments at Jackson Hole that we are now moving to an employment focus rather than an inflation focus. But I do agree that at the margin, if you look at the CPI data, particularly in durable goods, you're seeing real pricing pressure. And we still have many companies saying, we're going to take it on the chin. We're going to take most of these tariffs and let it come out of our margins.

16:57But they're not going to do that indefinitely, right? They were at record high margins to begin with. So they had the space and the breathing room to do that. But many of them are talking quietly about being able to raise prices in the places that they can. So I don't think that we're really looking at the true measure of inflation as it pertains to tariffs. And I also think that because our labor supply has been curtailed as a result of immigration policies, you're going to see wage pressure as well. And I don't think anyone's really talking about that part. I know. And we're in my co. Listen, I kind of talked about the other part of it.

17:32And I'm just going to give my opinion a little bit because it's Friday and why not? We could say the Fed is completely politically independent. That's bogus. I mean, every human being has a natural bias one way or the other. Jerome Powell is a is a human being. Right. We know that he is prone to dislike the president. All right. That's pretty, pretty clear at this point, do you think they get impacted at all in what they do because of what's happening with Lisa Cook? If I was a member of the Fed, I would be ticked off at what's happening to my colleague and probably friend Lisa Cook. And it might, even if I didn't want to admit it, it might entice me to act a different way.

18:15I just admitted personal weakness. So be it. Well, we all have personal weaknesses. I'd like to think that those who are making decisions at the Fed will be able to recognize those weaknesses and will focus principally on policy. Now, where Lisa Cook is concerned, it's kind of interesting because, of course, it's not like she's notable as being a hawk necessarily. And she has, in her professional history, repeatedly spoken about the Fed's dual mandate, which means that she would be focusing on the labor markets. And that actually is probably more closely aligned with her own scholarly work in economics over the course of her professional life.

18:52So I don't know necessarily that the whole Lisa Cook debate is about monetary policy where she is concerned. And the other thing, and this was Steve's point, I believe, which is that when people think about rates and how difficult that's making certain sectors of the economy, the housing market, for example, that isn't anchored by the Fed funds target rate. That's going to be anchored by the 10-year, which, as Steve rightfully pointed out, is going to be more closely influenced by what the Fed does with its balance sheet. And, of course, they have actually slowed the pace of the tapering in recent months anyway.

19:27But, you know, that's really the area that you're going to have to focus on if you're hoping that you're going to reinvigorate the housing market. So, OK, Mike, thank you. Steve, quickly before we go to break, comment on that because is there a chance, because a lot of potential homebuyers watching Fast Money right now are thinking they're going to cut rates and mortgage rates are come down. There is a chance the Fed cuts rates in September and the 10-year bond, which controls mortgage rates, doesn't move, isn't there? There is a chance, but I don't think we're in that world anymore because we've seen that price action happen.

19:54And the bigger problem we have is that 80 percent of the people who hold mortgages have a mortgage rate below 6 percent or so or even less. So those rates have to come down precipitously to get that housing market going again. That's why Besant, Treasury Secretary Besant, is keying in on a large amount of cuts, not just one. All right. Well said. Good discussion, guys, there. We're not done, though. coming up here on Fast Money, Affirm affirming its place among today's top winners, the how and the why ahead. Plus, wrapping up a bit of a bummer week for Bitcoin, what is next for the space? The Fed gears up for that big-time rate decision on September 17th.

20:35We'll give you the answer to that right after this.

20:44All right, welcome back to Fast Money. Shares of Affirm Topping the tape today, the stock jumping more than 10 % after it beat earnings and revenue estimates. Instead, it is posting strong guidance as well. This even comes as competition in e-commerce, Steve, continues to grow. Your take on Affirm. Yeah, when you look at it, I'll start with the negative. When you go back a year ago quarter, they were actually unprofitable. They had a loss of$451 million. This quarter, they had a net income of$69 million. So they've had a great, everything that they reported, they beat on. Transaction volume looks great.

21:21Active consumers, active merchants, all of them are up 24%. Both of them, I should say, of those are up 24%. The active card, up 97%. So there is a need for this, and they are filling a niche. But if you look back on a five-year chart on this stock, that chart that we're showing right now looks very bullish to me. If you look back on a five-year chart, it's just making up all the ground that it lost in the last four years, basically. But that because that's in the chart, by the way, a firm is a buy now, pay later and a payments company, folks. And the chart that we're looking at here, that was COVID.

21:57When people were home, they were buying everything because they had nothing else to do, right? So they're kind of how much does that fall into your thinking when you look at a chart and go, well, that was a lockdown and pandemic when that was all there was to do in many areas. Yeah, I get what you're saying. This was the year after COVID, basically. And I guess my point is there's a lot of wood to chop. There's a lot of upside to come. But I don't know if you can, to your point, get back to that bullish scenario when we were coming out of COVID and people were still at home in lockdown, basically.

22:33Can you really make up all of that ground? So how much green is left ahead? I would probably scale out of some on this profit on these on these pops that you see. Scale out of some. All right. In the meantime, we're going to switch gears dramatically. Caterpillar, obviously a very different company and a very different stock today, heading in the other direction, down nearly four percent. Caterpillar warning of a bigger tariff hit than previously talked about, costing it as much as one point eight billion dollars this year. Julie, up from$1.5 billion this year. Investors did not like that news today.

23:06Absolutely. I think, you know, along with the automakers, we are seeing more and more evidence on the industrial side of companies that are having a hard time managing through these tariffs, right? I think they were able to front load their supply chains. They were clever. And now for the ones for whom this is really challenging, they're really seeing the impacts in their business. So I think this is kind of the first of probably many. What's important to know is many investors seem to be willing to look through some of the tariff pressure. This is kind of the first time investors are stopping and saying, you know what, actually, this is a problem.