What To Expect From Jackson Hole… And CME Partners With Fanduel 8/21/25

0:00Live from the Nasdaq market side, the heart of New York City's Times Square. This is Fast Money. Here's what's on the show tonight. We are right on the eve of Jackson Hole and hopes for a Fed rate cut at their meeting next month. Are they quickly fading? We'll talk about it all, what it means for you, your market, and your money. And also, what could we expect from Jay Powell's speech tomorrow? Will he hint to more rate cuts ahead or dash our dreams? Plus, Walmart woes. The retailer's share is dropping after its first profit miss in more than three years. how tariffs might be the story, and how one former executive, by the way, sees things playing out.

0:38Plus, healthy gains for the pharma sector, how a logo change is sending shares of one restaurant company sharply lower. Can you guess who that is? And CME CEO Terry Duffy is here on his company's new partnership with FanDuel. They are bringing new prediction markets to their platforms. I am Brian Sullivan in for Melissa Lee, who is off again tonight, coming to you live from Studio B at the NASDAQ. And on your desk tonight, Tim Seymour, Karen Feinemann, Dan Nathan and Guy Adami. Welcome, Brian. Thank you very much. We'll get to everybody in one minute. We're going to start with this. The slow drip lower in stocks.

1:19The S &P notching its fifth straight losing day. Doesn't sound like much, but it's actually its longest losing streak since January 2nd. The benchmark index hitting a record just on Friday, but since it is down a lot, about 1.7%, but down five days in a row. The Dow and the Nasdaq also both lower today and now also for the week. The Nasdaq negative for the month of August. Meantime, Treasury rates ticking a little bit higher. Yield on both the two-year, hitting its highest level since the start of the month. Tenure up a little bit as well. Investors focusing their attention on this year's big Fed confab in Jackson Hole, Wyoming.

2:01The market's going to be watching Jay Powell's speech tomorrow for any hint of what the central bank might do at its meeting next month. Odds of a rate cut coming down a little bit in recent days. They were basically 100 percent now, I think, around the high 80s. Also on the radar, any new developments in the future of Fed Governor Lisa Cook? The Department of Justice today says is it opening an investigation after the FHFA chair accused her of committing mortgage fraud. We'll get more on all of this from Steve Leisman. He is in Wyoming tonight. Steve, let's start with Jay Powell. That speech tomorrow.

2:43What do we know? What can we expect? Yeah, you got it right there, Brian. Doubts are rising ahead of Fed Chair Powell's big speech here coming in Jackson Hole about just how dovish he's going to be. And I'm sorry to correct you, Brian, but you might have blinked because futures markets now showing not 80, but a 70 percent chance of a rate cut in September and a 30 percent probability of no change. That's a high for this contract. And it's been happening throughout the day. The change follows some hawkish comments from Fed officials out here today. We had Jeff Smith, the Kansas City Fed president, telling us he remains concerned about inflation.

3:18End quote. We really have to have very definitive data to be moving that policy right now. And then we had Beth Hammock, Cleveland Fed president, talking to Yahoo, said, With the data I have right now, if the meeting was tomorrow, I would not see a case for reducing interest rates. Not good for that Fed probability of a cut. With two Fed governors, the president and markets, pushing for rate cuts, Powell could finesse the problem by letting the data do the talking, allowing market expectations to adjust the two big data points, inflation and employment that come in before the Fed's September meeting.

3:50He could suggest tomorrow a cut is possible, but not necessarily promised. Maintaining the 2 % inflation target and the goal of hitting it is now near 3%, but say the Fed is still restrictive and would still be fighting inflation even after a 25 basis point cut. The likely result? No one ends up quite satisfied tomorrow with a speech that doesn't deliver as definitive a rate cut outlook as the doves want, but will not firmly place the Fed chair among the hawks either. Brian? Okay, so what happened? Steve, you are exactly right. I'm looking at some of the probabilities. Don't blink. I did blink because I swear this morning it was like 87 % or last night.

4:29Now it's 73%. So before we get to Lisa Cook, what happened? Well, we did the interview with Schmidt. He was on the hawkish side. He'd been on the hawkish side. I think there's been some reporting that maybe said, you know what, folks, it may not be the dumbest idea to hedge a little bit your bet on that rate cut. Because, look, the Fed still has a 2 % inflation target. And I don't know if you followed our Fed survey earlier this week, Brian, but the outlook for inflation this year is 3%. The outlook for next year is 2.8%. Really hard for a Fed chair to step up to the plate and say, I am cutting rates even while I'm not hitting my target and not expected to hit my target even while the market's pricing it in.

5:12So the Fed chair has a really tough time to make it to kind of finesse this issue. He's got a split on his committee, a really definitive split here out in public in terms of people saying they don't want to cut and those saying they do. And I could count, Brian, I think he has the votes right now for no rate cut if he wants it. Wow. On a totally different note, obviously, there's been a lot of drama around Lisa Cook allegations. And there are only allegations of mortgage fraud. She basically denied it, saying that she's going to submit documents when she has to. Do we expect to hear anything about Lisa Cook at Jackson Hole tomorrow?

5:54I mean, not not necessarily on as part of the program. We'll have Beth Hammock on as well tomorrow after the Fed chair speech. We'll ask her about it. We'll have two former Fed presidents. We'll have Roger Ferguson, former Fed vice chair, and Patrick Harker on tomorrow morning on Squawk. We'll ask them about it. But mostly, look, they're saying let's wait to see what Lisa Cook has to say. They see the attack as political as part of this broad administration campaign to get them to cut rates. And, look, the administration is playing for keeps. They're playing hardball. whether or not they have the goods on Lisa Cook and whether or not there's an interesting thing that's been brought up today, which is, first of all, the Washington attorney general told Powell he should remove Cook from from her seat.

6:40But Powell doesn't have that authority. Only the president does. The president can only remove her for cause. But the question is, with these mortgages done before she was a Fed governor, does he have cause to remove her from what she has done as a Fed governor, which the mortgages were done beforehand? So tricky situation. I think people are trying to say, let's take a breath here and let's see what Lisa Cook has to say and let the judicial process or the legal process work itself out. But what but what you quickly but what you said is very important that Jerome Powell, even if he wanted to, and I'm not saying he does, I'm just it could have been anything, does not have the power to remove Lisa Cook or any Fed governor.

7:19No. And Lisa Cook was rather defiant in her own statement saying she won't be bullied out of office from a tweet. And she said she's going to take a look at the documents that I guess five year old or four year old documents that you hear about on air, Brian, whether or not you could reach those or find those right away to make sure that what Bill Pulte is saying is correct and to see what happened back then. There might be a story. There might not be a story. She may have gotten this wrong. She may have messed up, may have done something illegal. And then I guess the chips will fall where they may.

7:52But let's all get the facts before we jump to conclusions, I'd say. All right, well said. Steve Leishman, Jackson Hole, I'm having a huge, huge day tomorrow. We're really glad that you're there, Steve. Thank you very much. Guy Adami. Yes, sir. So it was, I hate being wrong sitting here, 87 % chance last night, now down to 73%. Does the stock, not bond, does the stock market care about a rate cut? I think so. You know, there was this time last year when the S &P was about 1 ,000 points lower than we are now. The market was pricing in six rate cuts in 2025. Here we are now 1 ,000 points higher. We're talking about two, maybe three.

8:29So I would say all of that good news in terms of just rate cuts are priced in. So the short answer is absolutely. The market will be disappointed if they get anything less than. I think the market really cares about a dovish Jerome Powell more than anything. I think even if they cut, don't cut, whatever, I think dovish Powell is very good for the market. I don't think that's what we'll get. What's the Powell you think we have? I think not dovish, closer to hawkish. I'm just saying what would the market like? Dovish Powell, I think he'll be neutral. Tim, what's the Powell we deserve? Deserving got nothing to do with it.

9:04The Powell we deserve, Dan may have been somewhat tongue in cheek, but the Powell we deserve is consistent with the Powell we've had. The Fed we've had so far should not be cutting in September based upon the heat of that PPI number. The four week job average on the jobless claims we just got this morning show that even during that payroll, even with some of the tick up during the August payrolls, that there's no material weakening in the labor market. OK, inflation is better than where they have been. And this is a Fed that's been data dependent. So back to the Powell I want. I want the Powell that's following the script that Powell has had.

9:37And I think what we have going into this is I think probabilities are higher based for the market on the on the on the cut based upon the politics. But that's OK. I mean, ultimately politics. Well, there's no disputing that I won't get into the politics. I don't want to use the P word. I'll talk about the fact that in the last month, since at least some of the heat has been more on the Fed, you've seen a homebuilders rally 16 percent. You've seen retail rally almost five percent. You've seen interest rate sensitive parts of the market have an outsized move. There's no question the market has been moving on some sense that we are getting into a dovish environment.

10:14OK, so what I heard the Fed minutes, Dan, we normally we do them. I don't pay that much attention to them. Yesterday I did because the Fed minutes revealed they are worried about inflation. They're worried about tariffs. That would signal no rate cut. I mean, it could even signal a rate hike. But at the same time, they said they're worried about the job market and how AIs can impact jobs. So if you're worried about jobs, that's a rate cut. If you're worried about inflation, that's not. How do they balance out? All this worry here. I mean, come on. I mean, they also said they're worried a little bit about asset prices.

10:46I don't know if you caught that one. I thought that was kind of interesting also. But, you know. What does that tell you? We talk about all that worry. And I think what Tim's saying is the market's been climbing a little bit of wall worry. I know that's a line that Guy likes to use pretty often. And if you look at the options market, it's pricing about a 3 % move between now and the Fed meeting. So what do we have between now and the Fed meeting? We have tomorrow. We have the jobs report on September 5th. We have CPI. We have PPI. Maybe the Fed's most favored inflation. Yeah, that's it. And that seems very complacent to me.

11:15So if you're looking at the markets right here and you want to get long and you want long exposure, it's 1.5 % between now and September. So what if we get a hawkish Jerome Powell, a defiant, maybe not political, but a defiant and hawkish Jerome Powell tomorrow? I don't think he's going to be defiant. I mean, I think he's learned how to talk to the market. I think he's learned how to talk to the media. So defiant is not a word I would use. But I do think hawkish is an absolute possibility with everything that's going on. And, you know, I'll say it again for the umpteenth time. They can do whatever they want tomorrow.

11:47I mean, take a look at what's going on in Europe, and we're going to talk about this a little bit more. Rates are going up across the world right now, except where in Switzerland, where they're collapsing. Why is that? Because their debt is about 37 percent of their GDP. So countries that are laden with debt are being punished in the form of their yields going higher. We are one of those countries. All right. Let's broaden out the conversation, talk a little more about what Jerome Powell's comments could mean for the markets, really the currency markets. Bring in Jens Nordvig. He is CEO and founder of Exante Data.

12:19Jens, good to have you on the program. Thank you. You know what else has happened? No, what? Besides your Swiss yields, the dollar has collapsed against the euro. It's been one of the most rapid moves of the U.S. dollar in months. What is that telling you? So this year has been extraordinary. My company specializes in tracking capital flows, and that's where the big signals have been, like a big asset allocation shift. From what to what? away from dollars in international portfolios. Like, you can see how European equities have performed, right? Big outperformance. That's because people are allocating more to European equities.

13:00So we saw that very aggressively from March to June. And now it's less clear, right? So in the last two months, right, it's looking a bit more normal from a first half that was extremely unusual. And I think you're right to focus on the Fed now, because I think after this big sort of highly unusual asset allocation shift, we're going back to think about the Fed again. And the next leg for the dollar is going to be defined by what the Fed is doing. And, yeah, we just talked about it. Is it unemployment they're looking at or inflation? Right. It's a very tricky balancing act here. But Jens, so curious to hear more, though, about the fund flows and the asset allocation that you said was really more of a phenomenon, maybe of 2Q, not necessarily 3Q.

13:52The dollar has been sideways since April. I mean, let's be clear. We got to$115 euro in April. And back to the central bank differentials that you're saying will define the next move in the dollar. You know, at this point, I think it's somewhat unknown. My question really, though, is do you think that these fund flows to European equities and out-of-dollar-based products are coming from the rest of the world? Do you think this is U.S. investors that are overweight here thinking about the rest of the world more for the first time? I think you can see some very clear patterns in the data, right?

14:23Europe was early in this because they also had the big German fiscal push in March, right? That got the euro moving. And then actually, if you look around the world, Asia kind of was a second chapter. They moved really later in the year, right? So June was when they really peaked out, right? So the euro hasn't moved that much since, you know, early Q2, as you point out, right? The Asian currencies moved later. But overall, the dollar has now stabilized for the last six weeks. And we're looking at the data. Is the labor market going to force them to cut? I think it's down to that. The inflation picture is not clear.

15:01Let's answer your own semi-question. I think the inflation picture is highly problematic. Like, everybody looks at every single inflation report, right? And then after the last wing, one, there was like sort of a lot of people wanted to run a victory lap saying, oh, we don't have that much inflation. But don't forget, tariffs actually came down a little bit after being super high in April, right? So when we look ahead, we're going to have another tariff shock where actually tariffs are going up again. So by October, that's when that is going to be really feeding in. So does the Fed want to be super aggressive?

15:36I think what is most likely is that they do, you know, a pretty hawkish cut in September, a little bit of insurance cut, but they are not going to be committed to be on a multi-cut path because the inflation picture is just too tricky for them. Let's go back to the dollar real quick because this administration, the Treasury Secretary, saying the quiet part out loud, they want the dollar to be weaker. Make no mistake about it. I mean, this is a policy thing. And be careful what you wish for. My question, though, at what point does it matter to the equity markets? Yes, I've been connected with Scott Besson for many years.

16:11He was one of my first clients when I launched Exante Data, right? And he certainly has views on the dollar. But how does the U.S. really influence the dollar, right? The U.S. doesn't have reserves like China has reserves where they literally set where the dollar is. So it's kind of more down to verbal interventions, not that they can just say, OK, we want the dollar to go there and when we spend another trillion dollars to get it. So it's going to be more tactical, I think, how they impact the dollar with their verbal rhetoric. And eventually it's going to be up to the cycle. Like, what is the cyclical state of the U.S.

16:45relative to the rest of the world? And it would be very odd if it's not the case that this big tariff push is going to be paid for mostly by consumers. And therefore, consumption is going to shift down a gear when we look towards the end of this year. Jens Nordvik, Exante Data. Great stuff. Jens, appreciate you coming in. Thank you very much. Thank you very much. All right. We've got a lot more to do. And coming up, another retail giant reporting. And this time it is Walmart feeling the pressure. Not a terrible quarter, but the stock down about 5 % today. Plus, today's fast movers include Paramount Skydance, Cracker Barrel, and pharmaceutical names all catching our eyes.

17:26We're going to talk more about pops and drops and biscuits and gravy in two minutes.

17:38All right, let's talk about Walmart. Retail Walmart stock tumbling almost 5 % today, despite raising guidance for the year. The big box retailer did acknowledge tariff costs are starting to rise. By the way, first EPS meet, beat, meet, miss, he said, in three years. I just threw them all in. One of them is going to be right. One of them is right. Let's bring in now former Walmart U.S. CEO Bill Simon for Reaction. He's now on the board of Darden Restaurants. He is the chairman of Haynes Brands. Bill, glad to have you on. It was a myth. First myth in three years. You have the tariffs out there as well.

18:12And the weirdest thing about the quarter, and maybe you could address this, was these huge insurance costs for disability and other claims. How do we read the quarter? It was about as good a quarter as any retailer could have in any environment, never mind. The market didn't think so. environment. Yeah. Look, if you liked them yesterday, I don't know why you don't love them today. Top line's growing. They're expanding their margin. Look, they felt good enough about their business to buy back another$1.6 billion on top of the$4 billion they bought back last quarter. They are really hitting it on all cylinders.

18:52I don't get the decline in the market today at all. How do we read the tariff issue and how do we read this one-time insurance claim issue. I know it sounds a bit wonky called WBI wonky, but important. We talked about it on Power Lunch today. It wasn't immaterial. It's a big deal for Walmart. Everything at Walmart's a big number. And periodically they go through and reassess the, you know, the insurance rates and the accruals that they have to make. And it sounds like it was one of those type of adjustments. It's a big number, but it's a one-time adjustment. It's not a systemic issue. It'll be adjusted and they'll be reporting that.

19:31And the fact that they raised their guidance for the year or held their, actually, they think they raised their guidance for the year, they're not concerned about it at all. As far as the tariffs go, there's no tariff impact in that business. Inflation is 1%. There's price increases and there'll be item level price increases as items get tariffed. But about two thirds of what they sell is domestic anyway. A lot of it's food and that's the high velocity stuff where the tariffs are going to bleed into the business. I think it gets absorbed either by the manufacturer. Walmart's clearly got room to absorb some.

20:05They were up 26 basis points in the U.S. in margin this quarter on top of 40 last quarter. So they built some in for the year. They're not worried about it or they wouldn't have held their guidance. Bill, it's Karen. Thanks for being on. I agree with you. I thought the quarter was great. I thought the call was great. I'm long the stock. I think it was just expensive going in. But Listening to the call, I thought that call was pretty bad for Target. It seems like they are the donor of market share. And I wondered what your take is on Target. Well, Target's the reciprocal of Walmart. Walmart's got 70 % of their product because of a real heavy food mix.

20:4370 % of their products are domestic and then not subjected to tariff. And if you look at Target's report, you know, their margin was down 100 basis points where Walmart's was up. And so Target has the impact of tariffs on their business, and they don't have the food business and the velocity to be able to offset that. They got a pretty steep challenge ahead of them in this environment. Bill, what did you make of the Target announcement bringing an insider as the next CEO? I don't think that Sox sold off on the back of the quarter as much as it sold off on the fact that you're just bringing somebody in internally to probably do exactly what's been done over the last few years.

21:26Thoughts on that? Yeah, I think that's probably the fear. I don't know him well, but, you know, his reputation is quite a good operator. The fact that Brian's going to stay, I think he's staying as executive chair or he's going to keep his role on the board. I think, you know, people who don't love Target would probably not see a ton of change coming. It's awful hard to change direction when you were probably the guy that helped get you down that road in the first place. And the architect of it's the chair of the company. Bill, Tim, the gross margin was the one part of this Walmart number that I thought people at least were able to lean into.

22:01And I think it was going into the number part of a big focus because they were going to use kind of retail inventory accounting and blah, blah, blah. The whole story, though, for Walmart over the last two years or three years of re-rating has been about margin, has been about where tech and digital and DTC, well, e-commerce has been a big driver of margin. Just thoughts on this. And again, is this an opportunity? Because the gross margin profile and trend is quite good. You can't really underestimate. I can't really even overstate. I don't even know the way to communicate it. The benefit to the P &L that sales volume, same store sales volume delivers in operating margin leverage for for Walmart.

22:43You know, the fixed cost base that they have is enormous. But when you start jamming through four and four and a half percent same store sales through that operating model, the supply chain efficiencies, the retail operating efficiencies just sheds money. if they can keep those top lines going and that's their forecast, they're going to be just a bear of a company. Bill Simon, always a pleasure to get your views. Bill, appreciate it. Thank you very much. Thanks, guys. Yeah, you're welcome. You know what he said, Karen, said a lot of interesting things. Number one, that so much of stuff is groceries.

23:16It's untarripped. Not everything else, by the way, is tariffed. But you do wonder, if Target continues down this path, how much share gain, profit gain, is Walmart and Costco going to take? Yeah, I mean, concerned because I also, Walmart talked about having that higher end consumer than they've traditionally had. So that's got to be someone who could have been at Target. And some of the mix of Walmart sales were in those areas that are some higher margin, not as much as we would like, of course, but still very good. And that's also where Target is losing out. I think donating share to Walmart.

23:54You know, it's interesting. Over the last few days, we had this volatility in the market led by some of the biggest stocks in the market, all AI related. And you saw a bit of rotation. You saw it into pharma stocks. You saw it into some staples. You saw it into energy and the like. And, you know, I think that, you know, Costco and Walmart are kind of staples right here. And they don't act particularly well. They never confirmed the S &P highs that we saw for the better part of the last month or so. So it's interesting to me that they weren't a beneficiary in the last few days, and they've been underperforming relative to the S &P over the last month or so.