If I were sure what really happened to Powerhouse's wife, you'd be the first one I'd tell. I'm not sure that the author, Eudora Welty, really wants us to know. Rather, she has written an impressionistic piece: not a regular narrative with a clear-cut beginning, middle, and end, but a collage of images and sounds that give us a feeling for a particular time, place, and set of characters.
Powerhouse tells his musicians that he has received a telegram informing him that his wife is dead. Later, he says that she jumped out of a window, leaving "her brains all over the world." Near the end of the story, it seems that Powerhouse suspects that his wife has run off with the man who signed the telegram, Uranus Knockwood.
None of this gives the reader much clarity about what has happened to Mrs. Powerhouse. It does, however, accomplish its purpose of giving us an impression of the scene that Powerhouse and his buddies live in: a scene that is raucous, violent, passionate, and confused.