Last Week
Corporate earnings reports were solid, but the news flow on tariffs, the jobs market, and the Fed soured the mood on Wall Street, leading to a down week for stocks. The S&P 500 shed 2.4%, the Nasdaq Composite slipped 2.2%, and the Russell 2000 slid 4.2%. Small caps have been increasingly correlated with the tariff, monetary policy, and economic data dynamics. The bond market rallied on the soft economic data, with the yield on the 10-year Treasury dropping 17 basis points to 4.22%. Gold and the Dollar both advanced fractionally, while Crude Oil bounced 3% off its recent lows. Every industry sector except Utilities finished in the red, and declining issues doubled advancing issues.
The highlight of the corporate earnings reports came from Microsoft, Meta Platforms, and Apple, which combined to drive the overall growth rate to 10.3% for the quarter, up from 6.5% the week earlier. Additionally, the estimates for the third quarter slightly increased, suggesting that these earnings beats were not simply pulling forward future earnings.
The tariff pendulum swung to the negative axis as President Trump issued a series of prohibitively high pronouncements on various industries and countries. Once again, “there’s too much confusion, we can’t get no relief” (the reader can decide who the joker and the thief are in this Bob Dylan reference). Speaking of no relief, on Wednesday, the Fed left interest rates unchanged again, citing the uncertain impact on inflation from the uncertain tariffs. The economic data on the following two days put Chairman Powell and his merry band of Fed Governors in a most difficult pickle, with a slightly hot PCE report on Thursday and a disastrous jobs report on Friday from the Bureau of Labor Statistics. President Trump ordered the firing of the commissioner of the BLS later in the day. We think the data is finally catching up with the reality of a softening jobs market. Moreover, from our conversations with the management teams from the companies in our portfolios, we forecast that trend to become even clearer over the next few months.
On the Chicago Sports Scene, the Brewers have overtaken the Cubs in the NL Central division. The White Sox are playing better but still have the worst record in the American League. The Sky has the second-worst record in the WNBA. Hope springs eternal for Bears fans, as the Monsters of the Midway kick off the 2025-2026 campaign with a preseason game at Soldier Field next Sunday.
This Week
The pressure on the Fed will be in focus following the surprisingly poor jobs report. If they are smart, Fed speakers will jawbone upcoming rate cuts in response to the new set of data.
Earnings season will reach its latter innings, with 122 S&P 500 companies, including major names such as theme park and entertainment giant Walt Disney, expected to announce their reports.
The economic calendar is light with no market-moving releases on deck.
The stocks mentioned above may be holdings in our mutual funds. For more information, please visit www.nsinvest.com.