Weekend Update #248
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U.S. stocks hit record highs early in the week on optimism around a $100 billion Nvidia–OpenAI deal, but momentum faded as the Dow, S&P 500, and Nasdaq fell for three straight sessions, weighed by weakness in tech and AI-linked names. Markets steadied Friday after inflation and spending data came in on target, though Treasury yields climbed as investors viewed the Fed’s rate cut as largely priced in and its tone hawkish. The cryptocurrency market also entered a corrective phase, experiencing roughly $1.7 billion in liquidations on Monday, mostly from long positions.
In economic news this week, US consumer spending rose 0.4% in August, the third straight monthly gain, underscoring resilience even as inflation stays elevated and the labor market cools. Core PCE, the Fed’s preferred inflation gauge, rose 0.2% from July and 2.9% year-over-year, while the savings rate fell to its lowest level this year. Economists warn momentum may be hard to sustain amid slower hiring, weaker wage growth, and lingering tariff pressures. Meanwhile, consumer sentiment dropped to 55.1 in September, the lowest since May, with concerns over high prices weighing on most households, though wealthier stockholders remained more optimistic.
Reigniting trade war discussion, President Donald Trump on Thursday announced new tariffs on pharmaceuticals, heavy trucks, kitchen cabinets, and upholstered furniture, set to take effect Oct. 1. In a Truth Social post, he said branded or patented pharmaceutical imports will face a 100% levy, though companies building drug manufacturing plants in the U.S. will be exempt. He also announced heavy trucks will be subject to a 25% tariff, while kitchen cabinets and upholstered furniture will face rates of 50% and 30%, respectively.
Senators return to Washington Monday and if they can’t pass a funding agreement by the end of Tuesday, the shutdown takes hold, plunging the federal government and economy into uncertainty and both parties into the most direct confrontation of President Donald Trump’s second term. Democrats view the deadline as leverage to reverse Trump-era health-care cuts and extend ACA subsidies, while Republicans push for a short-term funding fix and accuse Democrats of overreaching. Senate Democrats hold the deciding votes, as House Republicans have stepped back from negotiations. The White House has raised the stakes by threatening to use a shutdown to permanently dismiss federal workers in programs it opposes. The standoff carries major economic risks, including potential layoffs, delayed data releases, and pressure on an already weakening labor market.
Friday’s Close (Weekly Performance)
S&P 500 6,643.70 (-0.31%)
Nasdaq 22,484.07 (-0.65%)
Dow Jones 46,247.29 (-0.15%)
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