Why Is Wall Street So Volatile This Week Fed Powell Speaks

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Find out what happening right now and get all the pieces of the puzzle on important data activity before the major news sources break the story and see what are the trends
 

•  12 Oct 2025
 

•   AMD  
   
  +0.77%
•   ASML  
   
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•   AXP  
   
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•   BLK  
   
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•   C  
   
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Wall Street is entering one of its most uncertain weeks in recent memory, and investors are scrambling for answers. The federal government shutdown has now stretched into its second week, creating what market analysts are calling an "economic blackout" that leaves the Federal Reserve flying blind on critical policy decisions. Without access to essential inflation data, employment reports, or retail sales figures from the Bureau of Labor Statistics, both investors and policymakers find themselves navigating treacherous waters just as major banks prepare to report their quarterly earnings.

If you're wondering why stock markets have been so volatile lately, last week's trading session tells the story. The SPX plummeted 2.7%, the DJI lost 1.9%, and the technology-heavy NASDAQ crashed 3.5%. Meanwhile, ten-year Treasury yields held steady around 4.05%, a level that reflects both hopes for interest rate cuts and growing fears about economic slowdown. For investors trying to position their portfolios right now, these conflicting signals create a particularly challenging environment.

What triggered last week's market selloff? The answer came from an unexpected direction. Less than six hours after President Trump celebrated what many considered a diplomatic victory with the Israel-Hamas ceasefire agreement, he reignited trade tensions with China in dramatic fashion. His social media response to Chinese threats about halting rare earth metal exports included warnings of 100% tariffs on Chinese imports and new restrictions on exporting critical software services. Trump himself highlighted the timing, noting that China chose to escalate "on the day peace was achieved in the Middle East after three thousand years of fighting."

How did markets react to this trade war escalation? The response was immediate and severe. Technology stocks took the hardest hit, Treasury yields jumped higher, and the VIX volatility index, widely known as Wall Street's fear gauge, spiked to levels not witnessed since summer. Many market observers believe this sharp reaction reflects investors' recognition that Trump, emboldened by his Middle East diplomatic success, now feels free to turn his attention back to confronting Beijing. The timing couldn't be worse, coming precisely when economic data is already scarce and investor confidence remains fragile.

Why does the government shutdown matter so much for markets? The answer goes far beyond typical Washington political theater. Without functioning government agencies publishing their regular economic reports, the Federal Reserve faces an unprecedented challenge in setting monetary policy. When policymakers lack reliable data on consumer prices, job creation, and spending patterns, they must make critical interest rate decisions essentially in the dark. As one senior market strategist explains, the situation resembles "groping around in complete darkness," with the shutdown creating an economic blackout that makes sound policy formulation dangerous. Where investors previously waited for hard macroeconomic data to inform their investment thesis and market pricing, now every statement from any official becomes its own pricing factor.

What do we know about the economy right now? The economic data released before the shutdown began painted a picture of relative stability, though with some concerning cracks appearing. Third quarter GDP growth came in at a solid 3.8%, private consumption remained strong, and inflation dropped to 2.4%, comfortably below the Fed's upper target range. However, the labor market is showing clear warning signs of cooling. The most recent ADP employment report revealed a troubling loss of 32,000 private sector jobs, while the annual pace of new job creation has noticeably weakened. These mixed signals suggest the US economy remains in what analysts call a "soft landing" scenario, but momentum is slowing and the margin for policy error is narrowing.

What dilemma does the Federal Reserve face? The central bank finds itself trapped between two competing risks. Being too cautious could delay necessary rate cuts and potentially push the economy into recession, while cutting rates too aggressively might reignite inflationary pressures just as they're finally moderating. Any misstep in either direction could transform the coming quarter into a genuine stress test for the American economy. With the data blackout making real-time economic conditions harder to gauge, Fed Chair Jerome Powell's upcoming speech takes on exceptional importance as one of the few reliable signals investors will receive this week.

Which companies are reporting earnings this week? Earnings season opens with intense focus on the banking sector, which will provide crucial insights into credit conditions and consumer financial health in the absence of government economic reports. Tuesday brings third quarter results from JPMorgan Chase $JPM, Goldman Sachs $GS, Citigroup $C and Wells Fargo $WFC, the four largest American banks whose performance serves as a vital indicator of lending activity and consumer spending patterns. Also reporting Tuesday are BlackRock $BLK, Johnson & Johnson $JNJ and Domino's Pizza $DPZ, offering a diverse view across different economic sectors.

Wednesday features Netherlands-based ASML $ASML, the semiconductor equipment manufacturer that sets the tone for European technology stocks, alongside United Airlines $UAL and Progressive $PGR. Thursday brings reports from Taiwan Semiconductor Manufacturing Company $TSM, Charles Schwab $SCHW, Infosys $INFY, and Travelers $TRV. The week concludes Friday with American Express $AXP and several regional banking institutions completing the financial sector reporting cycle.

What are analysts expecting from bank earnings? Most forecasts point to modest earnings declines, primarily driven by reduced net interest income as bond yields have fallen throughout the quarter. However, positive surprises could emerge from increased mortgage refinancing activity. More critically for market sentiment, any evidence of stabilization in consumer lending and reduced loan loss provisions could dramatically shift investor attitudes. As one market strategist emphasizes, such developments could completely change the tone across equity markets. Given how desperately investors need reliable economic indicators right now, bank executives' commentary about what they're observing in credit markets, consumer behavior, and business lending will carry extraordinary weight.

What should investors watch in the semiconductor sector? All attention turns to $TSM and $ASML, which are expected to answer the critical question of whether artificial intelligence-related demand continues growing at the explosive pace witnessed earlier this year or if momentum is starting to moderate. With chip sector valuations remaining elevated, analysts warn that even minor disappointments relative to expectations could trigger swift market corrections. The AI narrative has been a primary driver of technology stock valuations throughout the year, and any indication that the investment cycle might be peaking could send ripples across the broader market.

What economic data is scheduled for release this week? The economic calendar presents its own unique set of challenges. Monday sees US banks closed for a federal holiday, but activity ramps up starting Tuesday when Fed Chair Powell delivers highly anticipated remarks at 7:20 PM Israel time. This speech represents the week's most critical event, with investors desperate for clear guidance about the pace of future interest rate cuts. Bond markets currently price in near certainty of a quarter-point rate reduction at the October Federal Reserve meeting, with over 80% probability of another cut in December. Powell's language regarding the economic outlook, inflation trajectory, and labor market conditions will be intensely scrutinized for any hint of shifting Fed policy stance.

Thursday's calendar includes September Producer Price Index data, both headline and core readings, alongside Retail Sales figures and weekly unemployment insurance claims. Consensus forecasts predict a 0.3% increase in producer prices following a 0.1% decline in August, and a 0.4% gain in retail sales compared to 0.6% growth the previous month. However, here's the critical caveat that every investor needs to understand. Due to the ongoing government shutdown, these data releases could be delayed, substantially revised, or potentially canceled entirely depending on the budgetary situation and government agencies' ability to resume normal data publication schedules.

How does missing economic data affect markets? This data delay itself creates additional market volatility because investors must price inflation trends and consumption patterns without official government figures. Every rumor or unofficial estimate transforms into a de facto data point, creating an environment where market noise far exceeds reliable signal. The information vacuum forces market participants to grab onto any scrap of information, whether from corporate earnings calls, regional Federal Reserve surveys, or alternative data sources, potentially overreacting to individual data points that would normally be understood within the context of comprehensive official statistics.

What's happening with alternative investments? While the dollar weakens amid expectations for rate cuts, $BTC continues smashing through new record highs. Sylvia Jablonski, Chief Investment Officer at Defiance ETFs, attributes the current momentum to a powerful combination of institutional investor inflows, dollar weakness, and anticipation of lower interest rates ahead. She estimates that if current trends continue, the next price target sits around 150,000 dollars per Bitcoin. However, she also cautions that the cryptocurrency market faces significant technical resistance levels, and any unexpected regulatory announcement could trigger sharp near-term price corrections. Bitcoin's surge highlights how investors are actively seeking alternative assets amid traditional market uncertainty.

How significant is the AI investment boom? Jablonski also addressed the massive strategic partnership between OpenAI and Advanced Micro Devices $AMD, characterizing it as clear evidence of artificial intelligence's revolutionary depth. She argues this represents genuine structural economic change rather than a speculative financial bubble, though she acknowledges the crucial question facing investors is whether companies can demonstrate revenues that justify current sky-high valuations over the next twelve months. The ongoing tension between AI's transformative potential and whether stock prices have raced too far ahead of actual business fundamentals remains one of the market's most debated topics.

What's the consensus view on the economy? Despite the government shutdown, mixed economic data, and escalating trade war fears, many professional investors still believe in a soft landing scenario for the American economy. Long-term Treasury yields have edged modestly lower, interest rate futures contracts price in imminent Fed cuts, and defensive sector stocks are returning to investor favor. However, market analysts emphasize this represents a period of heightened sensitivity where any major speech, economic report, or official government announcement could instantly reverse market direction. The market's internal contradictions accurately reflect genuine uncertainty about whether the economy can maintain its current growth trajectory or whether something fundamental must eventually break.

What's the key takeaway for investors? The bottom line is straightforward yet challenging. Wall Street enters a week where uncertainty itself becomes the most important data point. This is a unique period when words matter more than numbers in driving market movements. Every Federal Reserve statement or White House policy declaration carries the potential to completely reshape the investment landscape within a single trading day. Investors accustomed to analyzing concrete economic data must instead learn to interpret subtle hints, read between bureaucratic lines, and position their portfolios for multiple potential scenarios simultaneously. In this unusual environment, the major bank earnings reports and Powell's carefully worded speech become even more critical as rare sources of solid information in an otherwise opaque market landscape.

Why is this week so important? The convergence of the government shutdown, escalating US-China trade tensions, and the beginning of corporate earnings season creates an uncommonly volatile combination of factors. Financial markets fundamentally hate uncertainty more than almost any other condition, and right now uncertainty is the only commodity in abundant supply. Whether this week brings much-needed clarity or further compounds existing confusion will depend heavily on how major bank executives characterize current economic conditions and what signals Powell sends about the Federal Reserve's future policy path. For the moment, investors find themselves navigating by instinct and experience rather than by reliable instruments, making this one of the more challenging periods for professional portfolio management in recent years.

What should you watch most closely? Keep your attention focused on three critical areas. First, listen carefully to what $JPM, $GS, $C, and $WFC executives say about consumer credit quality and business lending conditions when they report Tuesday. Second, parse every word of Jerome Powell's speech for hints about Fed thinking on the economic outlook and rate cut timing. Third, watch how $TSM and $ASML address questions about AI-related semiconductor demand sustainability. These three information sources will provide your best guidance for understanding where markets might head in the coming weeks and months.

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