Main Street's pain, Wall Street's gain. That will likely be the prevailing market maxim over the final few months of 2025, but it isn't a dynamic that can last.

Many are now fretting about their jobs, as well as the cost of filling their shopping baskets. The number of people who filed for first-time unemployment benefits spiked to a four-year high of 263,000 last week, and inflation is now running almost a full percentage point above the Federal Reserve's 2% target.

The weak jobs data boosted markets. The three major U.S. stock indexes clinched new records, bonds gained across the board, and cryptos and small-caps rallied.

The logic is that the jobless claims data strengthen the case for more interest-rate cuts in the months ahead. A quarter-point reduction was already widely expected at next week's policy meeting, but Morgan Stanley economists now forecast further cuts in October, December, and January.

The joy may be short-lived. Sweeping U.S. tariffs are starting to lift the price of goods, and that's a trend that could accelerate next year. Furniture seller RH became the latest company to warn about tariffs on Thursday, as a cut to its sales outlook sent its shares tumbling in the after market.

If the labor market continues to weaken, then stagflation -- a toxic cocktail of stubborn inflation and sluggish growth -- could hit the U.S. economy. That would be a rough scenario for stocks because corporate earnings could slide, and the Fed may have to hold rates steady to clamp down on price pressures.

Investors should be careful what they wish for. Bad news is good news for the market right now, but it won't be forever.

-- George Glover

***

Latest Inflation Data Unlikely to Derail Expected Rate Cut

Inflation continued to tick up in August, though not enough to thwart markets' expectations that the Federal Reserve will lower interest rates next week in response to a weakening job market. Overall core goods prices ticked up 0.3% in August, an acceleration from the 0.2% pace in July.

   -- Annual growth in the consumer price index is now nearly a full percentage 
      point higher than the Fed's 2% target, even as payroll growth is hitting 
      stall speed. That combination -- it amounts to mild stagflation -- is a 
      huge challenge for Fed officials. 
 
   -- A spike in initial claims for unemployment benefits, smaller gains in 
      nonfarm payrolls, and anecdotal remarks on continued hiring freezes point 
      to a weakening labor market as a bigger immediate issue for the Fed than 
      slowly accelerating inflation. That all but guarantees the Fed will cut 
      rates next week. 
 
   -- Still, given the persistent upward trend in inflation, it will likely 
      only be a quarter-point cut. There is some justification for the Fed to 
      take that cautious approach. Only about one-third of the likely boost to 
      core goods prices generated from higher tariffs has filtered through, 
      says Pantheon Macro's Sam Tombs. 
 
   -- The CPI reading did reveal that higher tariffs are slowly starting to 
      lift the cost of goods. Food costs, for example, shot up in August, 
      lifted by higher prices for produce such as tomatoes and apples. Prices 
      for both new and used cars have also steadily risen. 

What's Next: Prices for airfares, hotel rates, and even vehicle maintenance and repair services saw big advances in August. Some of those price gains may settle down, but higher costs for auto repairs are likely being driven, in part, by tariff hikes that boost the cost of parts. They could become more persistent.

-- Megan Leonhardt

***

Trump Pushes to Remove Fed's Cook Before Next Meeting

The Trump administration is racing to sideline Federal Reserve Gov. Lisa Cook before next week's policy meeting, asking a federal appeals court to pause a lower-court order that restored her to the central bank's board.

   -- In an emergency motion filed late Thursday, Justice Department lawyers 
      urged the U.S. Court of Appeals for the D.C. Circuit to issue a stay by 
      Monday, just one day before the Federal Open Market Committee meets to 
      decide whether to cut interest rates. A quarter-point reduction is widely 
      expected. 
 
   -- The motion argued the decision to remove a Fed governor for cause falls 
      within the president's discretion and should not be second-guessed by the 
      courts. It claimed President Donald Trump had "clear cause" to remove 
      Cook, pointing to alleged misrepresentations on mortgage documents 
      predating her time in office. 
 
   -- Cook's attorneys on Thursday evening pushed back against the government's 
      request for an emergency stay, calling it "wholly unwarranted" and 
      disruptive to the status quo. 

What's Next: Unless the court intervenes, Cook is expected to remain a voting member of the Fed's Board of Governors and take part in the meeting on Sept. 16-17.

-- Nicole Goodkind and Megan Leonhardt

***

Paramount Skydance Looking at Warner Bros. Discovery Bid

After announcing plans to split into two companies -- one for streaming and studios and the other for cable -- Warner Bros. Discovery now might end up part of Paramount Skydance. The newly merged Paramount is considering a majority cash bid for all of Warner Bros. Discovery, The Wall Street Journal reported.

   -- The news sent Warner Bros. shares 29% higher in their biggest daily gain 
      ever. Paramount Skydance has a market capitalization of $17.79 billion, 
      less than half of Warner Bros.' $39.4 billion. Warner Bros. and Paramount 
      didn't respond to requests for comment. 
 
   -- Seaport analyst David Joyce said a potential acquisition highlights the 
      value of Warner Bros. intellectual property generation. It has had a 
      string of hit movies this year, including Sinners, Superman, and F1: the 
      Movie. And its HBO Max streaming platform has global growth 
      opportunities. 
 
   -- Both media companies are going through big changes. The Federal 
      Communications Commission approved a merger between Paramount and David 
      Ellison's Skydance in July, after Paramount agreed to pay $16 million to 
      settle a lawsuit Donald Trump filed against its CBS unit in 2024. 
 
   -- Paramount Skydance could be timing the bid before Warner's planned split 
      to outrun any rival bidding for the company that would house Warner's 
      studio and streaming business, the Journal reported. Potential bidders 
      for that include technology companies such as Amazon.com and Apple, it 
      reported. 

What's Next: A potential deal would also likely draw antitrust scrutiny. Warner Bros. is home to Harry Potter movies, television shows such as White Lotus, and channels including CNN and TNT while Paramount has CBS, Nickelodeon, MTV, Comedy Central, and its own studio.

-- Angela Palumbo and Liz Moyer

***

Gemini Set to Begin Trading Today After Pricing IPO

Gemini Space Station, the crypto brokerage firm run by billionaire twin brothers Cameron and Tyler Winklevoss, will begin trading today after pricing its initial public offering at $28 a share, above the intended range, for a valuation of roughly $3.3 billion.

   -- Investors are optimistic about crypto thanks to a surge in Bitcoin and 
      other digital currencies. Many attribute the price gains to the more 
      favorable view by regulators, particularly the Securities and Exchange 
      Commission under Chair Paul Atkins, who was appointed by crypto investor 
      President Donald Trump. 
 
   -- Gemini will have to overcome a couple of obstacles. Competition is fierce, 
      with Coinbase, Robinhood, Galaxy Digital, Binance, Kraken, Interactive 
      Brokers, and eToro all fighting it out for market share in the digital 
      brokerage space. 
 
   -- The fundamentals for Gemini are mixed, too. Revenue soared 45% last year 
      to $142.2 million, but it also posted a net loss of $158.5 million. And 
      in the first six months of this year, revenue actually fell nearly 8% 
      from a year ago while net losses ballooned to $282.5 million. 
 
   -- Separately, Figure Technology Solutions stock surged more than 24% in its 
      market debut on Thursday, valuing the company at nearly $6.6 billion. It 
      is also crypto related, using blockchain technology to help generate home 
      equity lines of credit. 

What's Next: Gemini is getting attention for another reason: Nasdaq is taking a $50 million stake in it. A Nasdaq spokesperson told Barron's earlier this week that the investment was part of a broader strategy to offer crypto-related services to institutional clients.

-- Paul R. La Monica

***

Adobe Beats Expectations as AI Demand Grows

Creative software maker Adobe beat expectations and raised its full-year profit and sales targets, benefiting from its investments in artificial intelligence features. CEO Shantanu Narayen said AI-first annual recurring revenue is already exceeding the company's $250 million year-end target.

   -- Adobe reported fiscal third-quarter adjusted earnings of $5.31 a share on 
      revenue of $5.99 billion, which was up 11% from a year ago. AI features 
      in products such as Photoshop are boosting growth. Digital media 
      annualized recurring revenue rose 11.7%, while AI-influenced recurring 
      revenue surpassed $5 billion. 
 
   -- Narayen said AI represents a "tectonic technology shift" and the biggest 
      opportunity for Adobe in decades. It recently added Google's Gemini Flash 
      2.5 as a feature like Google's Veo and Imagen, according to the company. 
      It also uses models from OpenAI, Black Forest Labs, Runway, Pika, and 
      Ideogram. 
 
   -- Adobe now expects fiscal 2025 adjusted earnings to be between $20.80 a 
      share to $20.85 a share, and revenue for the year is now estimated to be 
      between $23.65 billion to $23.70 billion. Like other software makers, 

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September 12, 2025 06:45 ET (10:45 GMT)

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