Another week of weekly gains albeit modest, continues to build momentum and cushion for Sowell’s trend-following and fundamental signals. Our tactical models remain steady and fully invested.
After a grueling five-day losing streak, the U.S. equity market finally found its footing, with the S&P 500 posting a modest weekly gain of 0.30%. While the headline figure may suggest a week of consolidation, a closer examination of the internals reveals a significant shift beneath the surface. For every one stock that fell, four advanced, a remarkable show of market breadth that saw the S&P 500 Equal-Weighted Index surge by 1.97%, handily outperforming its cap-weighted counterpart by 1.67%. This divergence suggests a collective exhaling across the market as the rally, once confined to a few dominant players, began to spread.
The week's narrative was largely dominated by the impending address of Federal Reserve Chair Jerome Powell at the Jackson Hole Economic Symposium. With markets hanging on every word, anticipation ran high for a hint of a September rate cut, a notion fueled by continued signals of economic softening. The palpable market interest and the expected political pressure on the Fed to act were mirrored in the bond market, where the 10-year Treasury yield fell by 7 basis points to 4.26%. This decline signaled that fixed-income investors were betting on a less restrictive monetary policy outlook, a belief that provided a much-needed tailwind for risk assets.
Yet, not all segments of the market shared in the bounty. The so-called “Magnificent 7”—excluding Alphabet and Tesla—posted a weekly loss, a rare stumble for the titans that have fueled the market's ascent for much of the year. This shift was reflected in the broader performance metrics, as growth stocks, a category often defined by these mega-cap names, returned −0.43% for the week. In a powerful rotation, value stocks, powered by gains in Financial Services, Industrials, and Basic Materials, emerged as the victors with a robust +1.15% gain. This was a classic case of the old guard getting its day in the sun, a long-awaited moment for portfolio managers starved of diversification outside of the tech Mega cap space.
While names like NVIDIA (NVDA), Microsoft (MSFT), and Meta (META) have delivered a breathtaking year-to-date performance—32%, 21%, and 29% respectively—the true dark horse of the year remains, perhaps surprisingly, the Utilities sector. Often seen as a bastion of safety and yield, this unglamorous sector continues to prove that sometimes, the most mundane investments can be the most rewarding.
On the economic front, the data provided a mixed, though largely cautionary, picture. The housing market, a critical bellwether, continued to flash warning signs. The National Association of Home Builders (NAHB) Housing Market Index (HMI) declined to 32, hitting its lowest level of 2025 and falling below both consensus and the prior month's reading. While existing home sales did tick up by 2%, the surge in inventory to 1.55 million homes—the highest level since May 2020—suggests that supply is now significantly outpacing demand. In the labor market, initial jobless claims rose by 11,000 to 235,000, the highest since June, while continuing claims also increased by 30,000. These figures, while not yet alarming, add to the narrative of a slowing economy. This sentiment was further reinforced by the monthly CB Leading Economic Index, which recorded its eighth consecutive monthly decline, a persistent signal that future economic activity may face headwinds.
As we barrel toward the mid-September FOMC meeting, the market's collective gaze is fixed on Jerome Powell's next move—a sort of economic high-wire act with no safety net. The old Wall Street adage that "bad news is good news" has become the mantra, as every lackluster jobs report or soft economic indicator fuels the hope that the Fed will finally hit the brakes on interest rates. This week, we'll review durable goods, GDP, and jobless claims, looking for any signs of weakness that might justify a rate cut. Meanwhile, all eyes turn to NVIDIA's earnings report. In this AI-fueled frenzy, it's not just a company; it's a barometer of the entire technological zeitgeist.
“Our policy rate is now 100 basis points closer to neutral than it was a year ago, and the stability of the unemployment rate and other labor market measures allows us to proceed carefully as we consider changes to our policy stance. Nonetheless, with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance.”
– Fed Chair Jerome Powell, Jackson Hole Symposium -Monetary Policy and the Fed’s Framework Review, August 22, 2025
Target Beats Earnings, But Misses the Point
A penny beat on profits can’t hide sliding sales, shaken leadership, and a blurring bullseye.
Both Walmart and Target reported earnings this week, but the split in results—and market reaction—couldn’t be starker. Target’s announcement was worse than hearing “clean up on aisle 5.”
Adjusted EPS landed at $2.05, a penny above expectations. Digital sales grew 4.3%, offsetting some of the pressure from declining in-store traffic. Revenue of $25.2 billion beat forecasts, and full-year guidance held steady.
But the headline numbers masked a weaker story. Comparable sales slipped 1.9%, operating income fell nearly 20% year-over-year, and store traffic dropped more than 3%. The bigger shock came from leadership: CEO Brian Cornell announced he will step down in February 2026, with COO Michael Fiddelke set to succeed him. Investors didn’t cheer—shares fell 7% on the news, extending a slide that has already dragged Target stock from $140 to below $100 year-to-date. Right through the bullseye—while both Walmart and TJX are firmly higher on the year.
The Retail Paradox
Target’s struggles stand in sharp contrast to its peers. Walmart reported U.S. comparable sales up 4% this quarter, powered by strong grocery and e-commerce growth. Investors rewarded the consistency—Walmart stock is up double digits year-to-date. TJX Companies, parent of TJ Maxx and Marshalls, posted quarterly EPS of $0.96, handily beating estimates of $0.89, with comp sales up 5% as bargain-hunting turns into a national pastime.
Both chains are even drawing more affluent shoppers—a demographic once cornered by “Tarzhay.” Costco, meanwhile, continues to post steady mid-single-digit sales growth despite a tighter spending environment.
Target, by comparison, looks stuck. Once the “cheap chic” retailer—a destination for style at affordable prices and clean aisles—it now risks being too expensive for budget-conscious shoppers and too mass-market for aspirational ones. That middle ground is shrinking fast.
Brand Drift and Consumer Trust
Target’s recent retreat from Diversity, Equity, and Inclusion initiatives has only deepened the challenge. What once set the brand apart culturally has become a source of backlash, fueling boycotts and eroding trust. In trying to straddle affordability, cultural relevance, and design-forward branding, Target may have lost the clarity its rivals execute with conviction.
Leadership at a Crossroads
That makes the succession plan all the more pivotal. By elevating insider Michael Fiddelke, the board is signaling continuity. But continuity is not what shareholders are demanding. The risk is that Target becomes a brand consumers quietly outgrow.
We’ve seen this movie before. Cracker Barrel tried to modernize its look and messaging—only to alienate its loyal base without winning new fans. Instead of fresh relevance, it delivered confusion, and the backlash was swift. Target faces a similar danger: misjudging the balance between tradition and reinvention, and it risks pleasing no one.
The Stakes
Target still has scale, a loyal base, and a strong balance sheet. But retail has little patience for drift. Walmart and TJX are proving that clarity of purpose resonates, even in a challenging economy.
And we’ve seen this movie before. Sears drifted, JCPenney misfired, Cracker Barrel confused its core—and each paid the price. Target doesn’t have to share its fate, but unless new leadership sharpens the bullseye, it risks joining that list. The bullseye is already blurring. Oops, where are my Target readers?
Disclosure: This material is for informational purposes only and should not be considered investment advice. The opinions contained herein are subject to change without notice. Chart source from Bloomberg, Morningstar and Yahoo Finance.
Advisory services offered through Sowell Management, a Registered Investment Advisor. The views expressed represent the opinion of Sowell Management. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and non-proprietary sources that have not been independently verified for accuracy or completeness. While Sowell Management believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and Sowell Management’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Past performance is not indicative of future results.
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WEEK AHEAD
August 25-29, 2025
Market Breadth Broadens as the Rally Fades
After a grueling five-day losing streak, the U.S. equity market finally found its footing, with the S&P 500 posting a modest weekly gain of 0.30%. While the headline figure may suggest a week of consolidation, a closer examination of the internals reveals a significant shift beneath the surface. For every one stock that fell, four advanced, a remarkable show of market breadth that saw the S&P 500 Equal-Weighted Index surge by 1.97%, handily outperforming its cap-weighted counterpart by 1.67%. This divergence suggests a collective exhaling across the market as the rally, once confined to a few dominant players, began to spread.
The week's narrative was largely dominated by the impending address of Federal Reserve Chair Jerome Powell at the Jackson Hole Economic Symposium. With markets hanging on every word, anticipation ran high for a hint of a September rate cut, a notion fueled by continued signals of economic softening. The palpable market interest and the expected political pressure on the Fed to act were mirrored in the bond market, where the 10-year Treasury yield fell by 7 basis points to 4.26%. This decline signaled that fixed-income investors were betting on a less restrictive monetary policy outlook, a belief that provided a much-needed tailwind for risk assets.
Yet, not all segments of the market shared in the bounty. The so-called “Magnificent 7”—excluding Alphabet and Tesla—posted a weekly loss, a rare stumble for the titans that have fueled the market's ascent for much of the year. This shift was reflected in the broader performance metrics, as growth stocks, a category often defined by these mega-cap names, returned −0.43% for the week. In a powerful rotation, value stocks, powered by gains in Financial Services, Industrials, and Basic Materials, emerged as the victors with a robust +1.15% gain. This was a classic case of the old guard getting its day in the sun, a long-awaited moment for portfolio managers starved of diversification outside of the tech Mega cap space.
While names like NVIDIA (NVDA), Microsoft (MSFT), and Meta (META) have delivered a breathtaking year-to-date performance—32%, 21%, and 29% respectively—the true dark horse of the year remains, perhaps surprisingly, the Utilities sector. Often seen as a bastion of safety and yield, this unglamorous sector continues to prove that sometimes, the most mundane investments can be the most rewarding.
On the economic front, the data provided a mixed, though largely cautionary, picture. The housing market, a critical bellwether, continued to flash warning signs. The National Association of Home Builders (NAHB) Housing Market Index (HMI) declined to 32, hitting its lowest level of 2025 and falling below both consensus and the prior month's reading. While existing home sales did tick up by 2%, the surge in inventory to 1.55 million homes—the highest level since May 2020—suggests that supply is now significantly outpacing demand. In the labor market, initial jobless claims rose by 11,000 to 235,000, the highest since June, while continuing claims also increased by 30,000. These figures, while not yet alarming, add to the narrative of a slowing economy. This sentiment was further reinforced by the monthly CB Leading Economic Index, which recorded its eighth consecutive monthly decline, a persistent signal that future economic activity may face headwinds.
As we barrel toward the mid-September FOMC meeting, the market's collective gaze is fixed on Jerome Powell's next move—a sort of economic high-wire act with no safety net. The old Wall Street adage that "bad news is good news" has become the mantra, as every lackluster jobs report or soft economic indicator fuels the hope that the Fed will finally hit the brakes on interest rates. This week, we'll review durable goods, GDP, and jobless claims, looking for any signs of weakness that might justify a rate cut. Meanwhile, all eyes turn to NVIDIA's earnings report. In this AI-fueled frenzy, it's not just a company; it's a barometer of the entire technological zeitgeist.
Target Beats Earnings, But Misses the Point
A penny beat on profits can’t hide sliding sales, shaken leadership, and a blurring bullseye.
Both Walmart and Target reported earnings this week, but the split in results—and market reaction—couldn’t be starker. Target’s announcement was worse than hearing “clean up on aisle 5.”
The Retail Paradox
Brand Drift and Consumer Trust
Leadership at a Crossroads
The Stakes
Advisory services offered through Sowell Management, a Registered Investment Advisor. The views expressed represent the opinion of Sowell Management. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and non-proprietary sources that have not been independently verified for accuracy or completeness. While Sowell Management believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and Sowell Management’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Past performance is not indicative of future results.