Last Week
The stock market inched up, with the S&P 500 reaching a record high on Thursday before retreating on Friday during the holiday-shortened week. Sentiment was mixed as the weakness in the labor market bolstered the case for more aggressive Fed easing but also renewed recessionary concerns.
Trading got off to a rocky start on Tuesday as investors tried to process the implications of the court of appeals ruling that many of Trump’s tariffs were illegal. On the one hand, the tariffs have generally been viewed as disruptive and inflationary, yet the spending programs of the “Big Beautiful Bill” require tariff revenues as a major funding source. The tariffs will remain in place at least for next month as the White House has requested the Supreme Court to rule on the issue.
A favorable ruling in the Google antitrust case sent shares of its parent company, Alphabet, up sharply on Wednesday. That gain accounted for most of the week’s advance in the S&P 500.
On Friday, the August jobs report showed an increase of only 22,000 in overall employment last month, while revisions showed that the June number was actually negative. In response, the market rallied initially as it solidified the case for a September Fed rate cut of 25 bps; however, creeping recessionary concerns compressed that bounce.
For the week, the S&P 500 finished + 0.3%, the Nasdaq Composite rallied 1.1%, and the Russell 2000 gained 1.0%. Advancing issues outnumbered declining issues by a factor of 3-2. Crude Oil and Oil and Gas stocks sank over 3%, with the Tech and Consumer sectors faring the best.
The bond market embraced the soft numbers, as the yield on the 10-year Treasury fell more than 15 basis points to a 5-month low of 4.07%. The bond market is clearly signaling a slower economy than the stock market strength suggests.
Gold gained 4% to reach another record high. In addition to benefiting from the lower interest rates, gold also provides a good hedge against the concerns over a weakening dollar, as foreign governments attempt to reduce their dollar holdings.
On the Chicago Sports Scene, the Bears have their season opener against the Vikings on Monday night football. Bear down! North Star CIO Eric Kuby journeyed to Las Vegas and suffered another Sky loss to the Aces in WNBA action. The Cubs are closing in on the top wild-card spot in the NL, while the White Sox have recently been playing much better.
This Week
Inflation will be back in focus, as August’s Producer and Consumer Price Index will be released on Wednesday and Thursday, respectively. The previous month’s PPI reading came in hot, so these numbers are essential to determine if inflationary pressures remain in check.
The University of Michigan releases its preliminary measure of September consumer sentiment on Friday. Any material decline in sentiment would create a headwind for the equity markets.
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