Weekly Wrap

The stock market posted modest gains this week as investors weighed a mix of corporate news, economic data, and increasingly cemented expectations for a September rate cut. The S&P 500 rose 0.3%, while the Nasdaq Composite outperformed with a 1.1% gain, buoyed by strong performances in mega-cap technology names. The Dow Jones Industrial Average lagged slightly, finishing 0.3% lower, while smaller-cap indices led broader participation, with the Russell 2000 up 1.0% and the S&P MidCap 400 advancing 1.3%.

At its peak on Friday morning, the S&P 500 established an all-time high of 6,532.65, while the Nasdaq Composite set a record high around the same time at 21,878.81.

Mega-cap leadership remained pivotal. Alphabet’s  antitrust ruling, which allows the company to retain its Chrome browser, provided a catalyst for gains in the communication services sector, helping it rise 5.1% on the week. Tech-heavy Nasdaq components also benefited from favorable earnings and the ongoing narrative of Fed policy support, driving the Information Technology sector slightly higher (+0.2%).

Defensive sectors offered mixed results amid the broader risk-on sentiment. The health care (+0.4%) and consumer staples (+0.3%) sectors posted modest gains,  while the utilities sector (-1.1%) lagged. 

The energy sector (-3.5%) finished lower while the fiinancials sector (-1.7%) also lagged a s sfoter labor data propmted concerns over future loan demands.

Meanwhile, the consumer discretionary sector advanced 1.6%, supported by strong performances in Amazon and Tesla.

Economic data reinforced expectations for easing. Softer-than-expected August nonfarm payrolls (22K; Briefing.com consensus 78K) and private payrolls (+38K; Briefing.com consensus 90K), coupled with modest wage growth, supported the probability of a September rate cut, which has now reached 100% in the CME FedWatch Tool. At the same time, ISM services, ADP employment, and productivity data reflected a mixed labor and services backdrop, adding nuance to market sentiment.

Smaller-cap and sector-specific ETFs mirrored these trends. The Vanguard Mega Cap Growth ETF (+0.8%) benefited from the tech-led advance, while the SPDR S&P Retail ETF ( +3.75%) surged on strong retailer earnings. The PHLX Semiconductor Index ( +1.6%) outperformed despite volatility in NVIDIA.

Overall, the week highlighted mega-cap dominance alongside broad-based participation, with smaller-cap outperformance confirming investor confidence in the Fed’s forthcoming policy actions while navigating mixed corporate and macroeconomic signals.

• S&P Midcap 400: +1.3% WTD
• Nasdaq Composite: +1.1% WTD
• Russell 2000: +1.0% WTD
• S&P 500: +0.3% WTD
• DJIA: -0.3% WTD

Tuesday:

The S&P 500 (-0.7%), Nasdaq Composite (-0.8%), and Dow Jones Industrial Average (-0.6%) closed lower in the first session of September as investors grappled with elevated valuations, seasonal concerns, and the fallout from a U.S. Court of Appeals ruling that most of President Trump’s enacted tariffs are illegal.

All current levies will remain in place until October 14 pending a potential Supreme Court appeal, with President Trump seeking an expedited ruling from the Supreme Court, according to CNBC.

Stocks largely retreated, with all eleven S&P 500 sectors spending time in negative territory, though some modest late-session buying interest saw equities improve before the close.

Eight S&P 500 sectors would finish with losses, with advancers outpacing decliners by a greater than 2-to-1 ratio on the NYSE and Nasdaq.

The real estate (-1.7%), industrials (-1.1%), information technology (-1.0%), consumer discretionary (-1.0%), and financials (-0.7%) closed with the widest losses.

Mega-cap weakness played a pivotal role in today's early retreat, but late "buy the dip" interest saw the market's largest names lead the modest bounce off of session lows.

NVIDIA (NVDA 170.74, -3.44, -1.97%) had a particularly volatile session, trading with losses wider than 3.0% at session lows before closing just below its 50-day moving average (171.06). Semiconductor stocks as a cohort were relatively weak, though much improved from early levels, with the PHLX Semiconductor Index ultimately finishing with a 1.1% loss.

The Vanguard Mega Cap Growth ETF (-1.0%) halved its earlier losses after being down as much as 2.0% today.

The S&P 500 Equal Weighted Index (-0.9%) still slightly underperformed the market-weighted S&P 500 (-0.1%), but only by a slight margin.

Smaller-cap stocks performed slightly better than their larger counterparts, as the S&P Mid Cap 400 (-0.5%) and Russell 2000 (-0.6%) finished with more modest losses.

As for today's winners, an outperformance in defensive sectors reflected today's risk-off sentiment.

The health care sector (+0.1%) benefitted from a strong showing in biotech names that boosted the iShares Biotechnology ETF 1.6%, while the consumer staples sector (+0.1%) captured a similar gain despite several names trading sharply lower in response to headlines.

Kraft Heinz (KHC 26.02, -1.95, -6.97%) traded lower after the company announced it will split into two independently traded names, and Constellation Brands (STZ 151.26, -10.68, -6.60%) slipped after the company lowered its FY26 EPS guidance, citing dampened consumer demand and more volatile consumer purchasing behavior.

Elsewhere, the energy sector (+0.2%) closed as the top-performing S&P 500 sector, benefitting from crude oil futures settling today's session $1.59 higher (+2.5%) at $65.60 per barrel.

The CBOE Volatility Index jumped 14.0% to 17.51, underscoring heightened investor anxiety as September’s historically weak start lives up to expectations. With little in the way of consequential economic data or earnings releases tomorrow, it appears the market will be left to its own devices to determine if today's retreat will compound or if the late-session resilience will culminate in another record-setting rally.

U.S. Treasuries began the Labor Day-shortened week with losses across the curve, though intraday action saw all tenors rise off their opening lows. The 2-year note yield settled up four basis points to 3.66%, and the 10-year note yield settled up five basis points to 4.28%.

Reviewing today's data:

• August ISM Manufacturing Index 48.7% (Briefing.com consensus 48.6%); Prior 48.0%
  
  • The key takeaway from the report is that the new orders index bounced back into expansion territory following six straight months of contraction; however, the overall activity for the manufacturing sector remains in a disappointing mode of contraction.
• July Construction Spending -0.1% (Briefing.com consensus 0.2%); Prior -0.4%
  
  • The key takeaway from the report is that the softness in July was led by private nonresidential spending, although private residential spending (+0.1%) wasn't exactly strong either.
• August S&P Global U.S. Manufacturing PMI -Final 53.0; Prior 53.3Wednesday: 

Wednesday:

The stock market opened to substantial gains across its mega-cap components after a federal judge ruled that Alphabet (GOOG 231.10, +19.11, +9.01%) can retain its Chrome browser, though the broader market lagged behind, limiting index-level growth and keeping the major averages mixed.

The tech-heavy Nasdaq Composite (+1.0%) led the way, while the S&P 500 (+0.5%) secured a modest gain after slipping to its flatline, and the DJIA (-0.1%) spent the entirety of the session in negative territory.

Only three S&P 500 sectors finished (or spent any material amount of time) in positive territory, though the gains were concentrated enough in the market's largest names to carry the major averages.

Alphabet's rally pushed the communication services sector (+3.8%) to a record high level, while Apple (AAPL 238.47, +8.75, +3.81%) and the information technology sector (+0.5%) also benefited, as the ruling will allow Google to remain the default search engine on Apple's iPhone.

The consumer discretionary sector (+0.5%) benefitted from strong mega-cap leadership of its own, as Tesla (TSLA 334.09, +4.73, +1.44%) captured a nice gain.

The Vanguard Mega Cap Growth ETF finished the day with a 0.9% gain, and the market-weighted S&P 500 (+0.4%) decidedly outperformed the S&P 500 Equal Weighted Index (-0.4%), demonstrating the influence that the mega-cap cohort has over the broader market.

Outside of the mega-cap space, the consumer discretionary sector also benefited from relatively strong performances among retailer names. Though not a component of the sector, Macy's (M 16.28, +2.79, +20.68%) traded sharply higher after an impressive earnings beat today, though Dollar Tree (DLTR 102.03, -9.32, -8.37%) traded lower despite EPS and revenue beats of its own, with investors startled by flat Q3 guidance amid continued tariff volatility.

The SPDR S&P Retail ETF closed with a 0.5% gain for the day.

Seven other S&P 500 sectors closed lower, while some late-session buying activity saw the consumer staples sector finish flat. Though the majority of names sat out today's mega-cap-fueled rally, losses were relatively modest.

Only the energy sector (-2.3%) finished with a loss wider than 0.6%, with the sector facing pressure as crude oil settled today's session $1.60 lower, or -2.1%, to $64.00 per barrel. Reuters reported that OPEC+ may discuss an output increase at Sunday's meeting, which will include representatives from eight member nations.

Looking beyond the S&P 500, smaller cap names retreated, with the Russell 2000 finishing 0.2% lower and the S&P Mid Cap 400 finishing 0.4% lower.

Though Alphabet's antitrust ruling was the main catalyst behind today's actions, corporate headlines were relatively slim today. Monetary policy, however, received plenty of coverage as the market was inundated with headlines surrounding the FOMC.

Fed Governor Christopher Waller (FOMC voting member) told CNBC he supports a September rate cut, pointing to labor softness. Mr. Waller acknowledged the potential for a near-term inflation uptick but said he expects it to fall back to the 2.0% target within six to seven months.

A weaker-than-expected July JOLTS report added to evidence of a cooling labor market, strengthening expectations for policy easing.

St. Louis Fed President Alberto Musalem (FOMC voting member) also noted weakening labor conditions, though he cautioned that tariff-driven inflation could be more persistent than current forecasts suggest.

Atlanta Fed President Raphael Bostic (FOMC non-voting member) stated he could support a September cut if the job market deteriorates more than anticipated.

Beyond the policy debate, Fed independence was in the spotlight. Fed Governor Waller emphasized the central bank's independence when asked generally about governance, though he avoided direct comment on the mortgage fraud allegations facing Fed Governor Lisa Cook (FOMC voting member).

CNBC also reported that Senator Thom Tillis (R-NC) will not consider any replacement nominee for Cook until her case is resolved in court.

Rate expectations firmed further, with the CME FedWatch Tool now assigning a 95.6% probability to a 25-basis-point cut in September, up from 92.7% yesterday.

Ultimately, Tuesday's action underscored how heavily the market leans on its largest names for support. While Fed commentary and soft labor data strengthened conviction in a September rate cut, the broader market remains cautious, leaving mega-cap momentum as the primary driver of index-level gains.

U.S. Treasuries ended Wednesday with solid gains across the curve that wiped out the market's losses from the start of the week. The 2-year note yield settled down five basis points to 3.61%, and the 10-year note yield settled down seven basis points to 4.21%.

Reviewing today's data:

• Weekly MBA Mortgage Applications Index -1.2%; Prior -0.5%
• July Factory Orders -1.3% (Briefing.com consensus -1.4%); Prior -4.8%
  
  • The key takeaway from the report is that the weakness in factory orders in July was concentrated in the transportation space, so the weakness was not as acute as the headline might suggest. New orders for primary metals (+1.6%), machinery (+1.9%), computers and electronic products (+1.2%), and electrical equipment, appliances, and components (+1.9%) were all up in a good sign for factory order activity.
• July JOLTS - Job Openings 7.181 mln; Prior was revised to 7.357 mln from 7.437 mln
• The Fed's Beige Book had some stagflation undertones, as eleven Districts described little or no net change in overall employment levels, while one District described a modest decline. Half of the Districts described modest growth in wages, while most of the others reported moderate growth. Two Districts noted little or no change in wages.
  Most Districts reported that their firms were expecting price increases to continue in the months ahead, with three of those Districts noting that the pace of price increases was expected to rise further..

Thursday:

The stock market quickly shook off an early-session slide, with broad-based strength and firming rate cut expectations lifting the major averages through the session.

The S&P 500 (+0.8%), Nasdaq Composite (+1.0%), and DJIA (+0.8%) traded in tandem, unlike yesterday's action that saw the tech-heavy Nasdaq Composite distance itself from its counterparts. Today's gains saw the S&P 500 establish a new record closing high of 6,502.08.

Further solidification of a September rate cut saw smaller-cap indices participate in today's rally as well, with the S&P Mid Cap 400 advancing 1.5% and the Russell 2000 advancing 1.3%.

A sizable batch of economic data kept monetary policy at the forefront of the market's attention today.

The ADP Employment Change report showed below-consensus job growth in August (54,000; Briefing.com consensus 69,000) while the ISM Services report for August (52.0%; Briefing.com consensus 50.5%) showed an acceleration in activity, but the Employment Index (46.5) remained in contraction for the third month in a row, all of which combined to reflect some weakness in the labor market.

New York Fed President John Williams (FOMC voting member) stated in a speech today that he anticipates interest rates moving toward more neutral levels, citing a gradual cooling in the labor market. The comments, in conjunction with today's data, combined to bolster rate cut expectations, with the CME FedWatch tool assigning a 97.4% probability to a 25-basis point rate cut at the September FOMC meeting.

The market also benefitted from some buy-the-dip action following yesterday's mega-cap-fueled trade that saw only three S&P 500 sectors finish with gains.

Mega-caps still played a key role among several of the best-performing sectors today, and the Vanguard Mega Cap Growth ETF advanced 0.9%. However, the market-weighted S&P 500 (+0.8%) only modestly outperformed the S&P 500 Equal Weighted Index (+0.7%).

In total, ten S&P 500 sectors finished higher, with only the thinly traded utilities sector (-0.2%) finishing with a loss.

The consumer discretionary sector (+2.3%) advanced the furthest today, supported by strong leadership in its top component, Amazon (AMZN 235.68, +9.69, +4.29%).

Though not a component of the sector or the S&P 500, American Eagle (AEO 18.79, +5.17, +37.96%) traded sharply higher in response to its robust earnings beat, with the positive sentiment rippling across other names. The SPDR S&P Retail ETF advanced 2.6%

Homebuilders also displayed strength in response to the prospect of a friendlier interest rate environment, with the iShares U.S. Home Construction ETF gaining 3.0% today.

Elsewhere, the communication services sector (+1.1%) widened its week-to-date gain to 4.5% as Meta Platforms (META 748.65, +11.60, +1.57%) and Netflix (NFLX 1257.48, +31.30, +2.55%) traded higher, while Alphabet (GOOG 232.66, +1.56, +0.68%) closed with a more modest gain after yesterday's rally.

While today's gains put the S&P 500 and Nasdaq Composite on the precipice of new record highs, the action came on lighter than average volume, which suggests some caution is tempering conviction behind the advance.

U.S. Treasuries edged higher on Thursday, adding to their solid gains from yesterday's session. The 2-year note yield settled down two basis points to 3.59% and the 10-year note yield settled down four basis points to 4.18%.

Reviewing today's data:

• August ADP Employment Change 54K (Briefing.com consensus 69K); Prior was revised to 106K from 104K
• July Trade Balance -$78.3 bln (Briefing.com consensus -$64.2 bln); Prior was revised to -$59.1 bln from -$60.2 bln
  
  • The key takeaway from the report is that the surge in imports reflects an easing of some of the tariff pressures that had been applied by the announcement of higher reciprocal rates. The downside, however, is that the net export component will be a negative component in the calculation of Q3 GDP.
• Q2 Productivity-Rev. 3.3% (Briefing.com consensus 2.4%); Prior 2.4%, Q2 Unit Labor Costs - Rev 1.0% (Briefing.com consensus 1.6%); Prior 1.6%
  
  • The key takeaway from the report is that it hit a sweet spot of signalling stronger productivity growth and a modest increase in unit labor costs.
• Weekly Initial Claims 237K (Briefing.com consensus 232K); Prior 229K, Weekly Continuing Claims 1.940 mln; Prior was revised to 1.944 mln from 1.954 mln
  
  • The key takeaway from the report is that there still isn't a strong weakening message being delivered by initial jobless claims, which were up from the prior week but still remain relatively low on a historical basis.
• August S&P Global U.S. Services PMI - Final 54.5; Prior 55.4
• August ISM Services 52.0% (Briefing.com consensus 50.5%); Prior 50.1%
  
  • The key takeaway from the report is that it is a mixed bag for policymakers, featuring faster growth overall but an ongoing contraction in employment and a continuation of price pressures for services organizations.

Friday:

The stock market retreated after an opening rally propelled the S&P 500 (-0.3%) and Nasdaq Composite (flat) to new record highs, with investors weighing a softer employment report against firmed rate cut expectations.

At its peak, the S&P 500 established an all-time high of 6,532.65, while the Nasdaq Composite set a record high around the same time at 21,878.81. Neither index would capture a record closing high, and the DJIA (-0.5%) trailed its counterparts for most of the session. 

Smaller-cap indices such as the Russell 2000 (+0.5%) and S&P Mid Cap 400 (+0.5%) outperformed the broader market, benefitting from the cemented rate cut expectations.

Today's Employment Situation Report added nuance to the market's outlook. August payrolls came in softer than expected, with nonfarm payrolls rising just 22,000 (Briefing.com consensus: 78,000), while private payrolls increased by just 38,000 (Briefing.com consensus: 90,000). The unemployment rate ticked just slightly up to 4.3%, and average hourly earnings grew 0.3%.

While the data signaled a cooling labor market, it reinforced expectations for rate cuts. The CME FedWatch Tool now assigns a 100% probability of a 25-basis-point cut at September's FOMC meeting, with a 10% chance of a 50-point move. Expectations for further 25-basis-point cuts remain strong, with a nearly 80% probability in October and a 70% probability in December.

Though today's data was the main mover of rate cut expectations, it is worth noting that the probability of a 50-basis point cut at the September FOMC meeting and October and December expectations did move modestly lower following some hawkish commentary from Chicago Fed President Austan Goolsbee (FOMC voter). Mr. Goolsbee stated in a Bloomberg interview that he has not made up his mind about a September rate cut, citing a need to control inflation before turning focus entirely to the labor market. 

While the opening advance was substantial, the broader market retreated sharply after an opening rally as investors engaged in some "sell the news" activity following the bolstered rate-cut outlook. Modest buying activity throughout the afternoon saw the major averages finish considerably above their session lows.

Six S&P 500 sectors ended the session lower, signaling that while monetary policy is supportive, concerns linger about the durability of economic growth and corporate earnings in a cooling environment.

Among the laggards, the financials sector (-1.8%) underperformed, as investors weighed the potential for weaker loan demand and tighter margins should economic conditions soften further.

The energy sector (-2.1%) was the top laggard, as crude oil futures settled today's session $1.59 lower (-2.5%) at $61.87 per barrel.

The real estate sector (+1.0%) finished as the best-performing sector, making up some losses from earlier in the week. 

Elsewhere, none of the other eight S&P 500 sectors closed with a gain or loss wider than 0.6%. 

On the earnings front, Broadcom (AVGO 334.89, +28.79, +9.41%) traded sharply higher after an impressive Q3 report, though the company's disclosure of an additional large AI partner (speculated to be OpenAI) weighed on competitors NVIDIA (NVDA 167.02, -4.64, -2.70%) and Advanced Micro Devices (AMD 151.14, -10.65, -6.58%). The PHLX Semiconductor Index finished with a 1.7% gain, while the broader technology sector retreated 0.2%. 

U.S. Treasuries finished the week on a strong note in the wake of today's employment data. The 2-year note yield settled down eight basis points to 3.51% (its lowest close in three years), and the 10-year note yield settled down nine basis points to 4.09%. 

Reviewing today's data:

• August Nonfarm Payrolls 22K (Briefing.com consensus 78K); Prior was revised to 79K from 73K, August Nonfarm Private Payrolls 38K (Briefing.com consensus 90K); Prior was revised to 77K from 83K, August Unemployment Rate 4.3% (Briefing.com consensus 4.3%); Prior 4.2%, August Avg. Hourly Earnings 0.3% (Briefing.com consensus 0.3%); Prior 0.3%, August Average Workweek 34.2 (Briefing.com consensus 34.3); Prior was revised to 34.2 from 34.3
  • The key takeaway is that the overall report leaned to the softer side of things, which isn't great economically speaking, yet, because it leaned that way, it also fortified the market's belief that there will be a rate cut at the September FOMC meeting and its hope that there will be additional rate cuts at the October and December FOMC meetings—a view that is supportive for a market pining for rate cut