Weekend Update #244
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Stocks ended the week lower even as the Fed signaled it may begin cutting rates in September. With earnings season nearing its close, NVIDIA’s second-quarter results were in focus as the company posted strong growth but slightly missed data center revenue expectations amid reduced China-bound H20 chip sales. Still, optimism around AI infrastructure demand remains intact, supported by robust Q3 guidance and continued hyperscaler investment. Trade uncertainties, however, continue to weigh on sentiment, keeping investor enthusiasm in check.
In economic news, the U.S. GDP’s second-quarter growth was revised upward to a 3.3% annualized rate from the initially reported 3.0%, largely driven by stronger-than-expected business investment and higher consumer spending. Economists cautioned, however, that this gain was partly skewed by a sharp drop in imports and may prove difficult to sustain amid ongoing tariff pressures and uneven underlying demand.
On the consumer side, signals were mixed. Confidence slipped to 97.4 in August, above expectations but still reflecting a divergence between weakening present conditions and more resilient future expectations. Inflation expectations rose to 5.1% from 4.7% in July, while labor market sentiment softened further as the labor differential fell to its lowest since early 2021. Yet spending proved resilient, with inflation-adjusted consumption rising 0.3% in July—the strongest gain in four months—driven by income growth and durable goods purchases such as cars, furniture, and sporting equipment. Inflation pressures persisted, however, as the Fed’s preferred core PCE gauge climbed 0.3% on the month and accelerated to 2.9% year over year, with services costs leading the increase.
Consumer sentiment painted a weaker picture, slipping to 58.2 from 61.7 in July as future expectations deteriorated further. Softer inflation expectations failed to lift the index, suggesting households see broader economic headwinds beyond price pressures. The decline was widespread across age, income, and wealth groups, underscoring the uneven backdrop for household confidence.
As September approaches, a historically weak month for U.S. equities, investors are bracing for seasonal headwinds as institutional rebalancing, lighter retail flows, and heightened volatility weigh on markets.
Friday’s Close (Weekly Performance)
S&P 500 6,460.25 (-0.10%)
Nasdaq 21,455.55 (-0.19%)
Dow Jones 45,544.88 (-0.20%)
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