Weekly Wrap

U.S. equities had a choppy week marked by alternating record highs and pullbacks, as enthusiasm over tech and AI headlines early on gave way to valuation concerns, Fed commentary, and stronger-than-expected economic data. The S&P 500 and Nasdaq hit fresh records Monday, led by NVIDIA, Apple, and Oracle on AI- and TikTok-related news, but mega-cap weakness drove three straight midweek declines.

Investor doubts over NVIDIA's OpenAI partnership and resilient labor/economic data briefly dampened expectations for further Fed cuts, weighing on sentiment. Materials and consumer-related names saw notable pressure midweek, while energy was a standout gainer on rising crude prices. Friday brought a rebound as strong income and spending data supported growth hopes, helping most sectors finish higher and ending the week with only modest losses for the S&P 500 and Nasdaq.

Overall, markets remain near record highs but are grappling with stretched valuations, shifting Fed expectations, and policy risks including tariffs and a possible government shutdown

• Nasdaq Composite -0.7% WTD
• Russell 2000 -0.6% WTD
• S&P Midcap 400 -0.5% WTD
• S&P 500 -0.3% WTD
• Dow Jones Industrial Average -0.2% WTD

Monday:

The S&P 500 (+0.4%), Nasdaq Composite (+0.7%), and DJIA (+0.1%) continued their record-setting streak today as a batch of favorable corporate tech headlines outweighed a lack of economic data and macro developments.

The market opened to broad-based but modest losses amid a quiet pre-market news flow, though investors promptly took advantage of the buy-the-dip opportunity, which coincided with several news catalysts in the top-performing information technology sector (+1.7%).

White House Press Secretary Karoline Leavitt stated President Trump will finalize the previously discussed TikTok deal later this week. TikTok's algorithm will be secured, retrained, and operated in the U.S. outside of ByteDance's control, with Oracle (ORCL 328.15, +19.49, +6.31%) to serve as TikTok's security provider.

NVIDIA (NVDA 183.61, +7.01, +3.97%) made a sharp move out of negative territory after announcing a letter of intent for a landmark strategic partnership to deploy at least 10 gigawatts of systems for OpenAI's next-generation AI infrastructure. 

The advance contributed to a 1.6% gain in the PHLX Semiconductor Index.

Elsewhere in the sector, Apple (AAPL 256.08, +10.58, +4.31%) posted a strong performance as its new iPhone 17 is met with strong global demand. 

Outside of the technology sector, strength was relatively variable throughout the session. The utilities (+0.9%), industrials (+0.4%), and real estate (+0.3%) sectors round out the four S&P 500 sectors that maintained their gains through the close. The materials and health care sectors finished flat. 

Losses in the remaining five sectors were modest, as only the consumer staples (-0.9%) and communication services (-0.9%) sectors retreated more than 0.4%.

The consumer staples sector was affected by Kenvue (KVUE 16.96, -1.38, -7.50%) finishing as the worst-performing S&P 500 stock today, trading lower ahead of President Trump's speech this evening, which is expected to link the prenatal use of acetaminophen (the active ingredient in Tylenol) to autism.

Meanwhile, the communication services sector faced losses in both of its mega-cap components, Meta Platforms (META 765.16, -12.70, -1.63%) and Alphabet (GOOG 252.88, -2.36, -0.92%), which limited further gains in the Vanguard Mega Cap Growth ETF (+0.8%).

Mega-caps still ultimately played a key role in today's index level advance as the market-weighted S&P 500 (+0.4%) outperformed the S&P 500 Equal Weighted Index (+0.1%). 

The small-cap Russell 2000 got off to an even slower start than the major averages, but solid afternoon buying activity led to a nice 0.6% gain. The S&P Mid Cap 400, however, never shook off its Monday sluggishness and finished flat for the day. 

On the policy front, investors heard from several Fed officials in the wake of last week's 25-basis point rate cut. St. Louis Fed President Alberto Musalem (FOMC voting member) said policy is now appropriately balanced between modestly restrictive and neutral, with Atlanta Fed President Raphael Bostic (FOMC nonvoting member) supporting just one additional rate cut this year instead of two.

Fed Governor Stephen Miran (FOMC voting member) sees the current policy as too restrictive, advocating for a fed funds rate that is almost two percentage points lower than the current policy.

U.S. Treasuries were unable to hold onto their modest overnight gains, as safe-haven interest faded away with the stock market overcoming opening losses and rallying to new record highs yet again. The 2-year note yield settled up two basis points to 3.60%, and the 10-year note yield settled unchanged at 4.14%. 

There was no economic data of note today. 

Tuesday: 

Despite some earlier resilience in the broader market, the S&P 500 (-0.6%), Nasdaq Composite (-1.0%), and DJIA (-0.2%) closed with losses today as mega-cap names faced mounting pressure throughout the session.

It is worth noting that the S&P 500 and DJIA did notch new record intraday levels this morning before retreating, with the S&P 500 coming within 0.5 points of the 6,700 mark. 

The market's largest names faced pressure on the heels of yesterday's record-setting rally that was bolstered by NVIDIA's (NVDA 178.43, -5.18, -2.82%) announcement of up to a $100 billion investment in OpenAI as part of a strategy to deploy at least 10 gigawatts of NVIDIA systems.

That same announcement faced scrutiny today, with CNBC reporting that several senior investors have raised concerns to clients that the deal resembles a vendor financing arrangement. A separate CNBC report raised doubts around the feasibility of meeting the energy demands for 10 gigawatts, citing political and economic constraints. 

Oracle (ORCL 314.05, -14.10, -4.30%) also gave back the majority of yesterday's advance, contributing to the information technology sector's 1.1% loss. 

The consumer discretionary sector (-1.4%) was the worst-performing S&P 500 sector, facing pressure in its mega-cap components, Amazon (AMZN 220.71, -6.92, -3.04%) and Tesla (TSLA 425.85, -8.36, -1.93%).

The Vanguard Mega Cap Growth ETF retreated 1.1% today, and the S&P 500 Equal Weighted Index (+0.1%) outperformed the market-weighted S&P 500 (-0.6%). 

Smaller cap indices such as the Russell 2000 (-0.3%) and S&P Mid Cap 400 (-0.1%) fared better than their larger counterparts, though they ceded their early gains as the broader market retreated this afternoon.

Gains were modest for the most part across the five advancing S&P 500 sectors, too modest to offset the damage done by the mega-cap's retreat.

Only the energy sector (+1.7%) closed with a gain wider than 1.0%, supported by crude oil futures settling today's session $1.19 higher (+1.9%) at $63.44 per barrel.

The market heard from several FOMC members today, including Fed Chair Jerome Powell (FOMC voting member). While Mr. Powell's speech largely echoed his sentiments from last week's FOMC meeting, the market paid particular focus to his acknowledgment that "by many measures, for example, equity prices are fairly highly valued."

Today's pullback after fresh record highs could reflect market participants giving credence to valuation concerns amid a historic run, particularly in the mega-cap space, though investors have repeatedly shown a willingness to buy dips throughout this rally.

U.S. Treasuries finished with modest gains across the curve that pushed yields slightly lower from Monday's settlement, as today's 2-year note auction was met with okay (not great) demand. The 2-year note yield settled down one basis point to 3.59%, and the 10-year note yield settled down two basis points to 4.12%. 

• Nasdaq Composite: +16.9% YTD
• S&P 500: +13.2% YTD
• Russell 2000: +10.2% YTD
• DJIA: +8.8% YTD
• S&P Mid Cap 400: +5.1% YTD

• Q2 Current Account Balance -$251.3 bln (Briefing.com consensus -$302.1 bln); Prior was revised to -$439.8 bln from -$450.2 bln
• September S&P Global U.S. Manufacturing PMI - Prelim 52.0; Prior 53.0
• September S&P Global U.S. Services PMI - Prelim 53.9; Prior 54.5

Wednesday:

There were no record-setting performances today among the S&P 500 (-0.3%), Nasdaq Composite (-0.3%), or DJIA (-0.4%), as persistent mega-cap weakness eventually prompted selling activity across the broader market.

While today's price action never reflected a "buy the dip" play, equities hung tough in the morning hours, with broader market strength almost negating mega-cap losses at the index level. 

That would change just before midday as a sell-off ensued, turning breadth figures negative and dragging several S&P 500 sectors beneath their flatlines. 

Decliners would go on to outpace advancers by a roughly 8-to-5 ratio on the NYSE and a roughly 4-to-3 clip on the Nasdaq.

Seven S&P 500 sectors closed in negative territory, with the materials sector (-1.6%) retreating the furthest after Freeport-McMoRan (FCX 37.67, -7.69, -16.95%) sold off on news it had cut Q3 sales guidance following a fatal mud rush incident at an Indonesian mine, according to Yahoo! Finance.

Meanwhile, the communication services (-0.8%) and information technology (-0.5%) sectors faced the brunt of today's mega-cap weakness.

Within the technology sector, Micron (MU 161.71, -4.70, -2.82%) traded lower after an impressive beat and raise earnings report, and Oracle (ORCL 308.44, -5.39, -1.72%) faced a loss despite announcing five new U.S. AI data center sites under the Stargate Project—an ambitious AI infrastructure initiative that includes OpenAI and Softbank (SFTBY 63.27, +1.65, +2.68%).

The technology sector and PHLX Semiconductor Index (-0.2%) would still finish well off their session lows, supported by a late afternoon report from Bloomberg that Intel (INTC 31.22, +1.88, +6.41%) is pursuing an investment from Apple (AAPL 252.31, -2.12, -0.83%). 

Nonetheless, the market's overall subdued reaction to a batch of AI-related headlines is striking considering similar news catalysts sparked a record-setting rally on Monday. With Fed Chair Powell's remarks that stocks are "fairly highly valued" fresh in the minds of investors, it is not all that surprising that market's largest names faced a pullback.

Ultimately the pullback was modest in the scope of recent gains, with the Vanguard Mega Cap Growth ETF (-0.4%) retreating less than half of a percentage point. 

Additionally, there were some pockets of strength in the market (and even across the mega-cap cohort) that prevented further losses at the index level.

Tesla's (TSLA 442.80, +16.95, +3.98%) strong showing prompted a 0.7% gain in the consumer discretionary sector. The sector saw early strength among homebuilder names after a surprisingly strong August New Home Sales report (800,000; Briefing.com consensus 650,000), though the iShares U.S. Home Construction ETF (+0.1%) would cede nearly all of its gain.

Elsewhere, the energy sector (+1.2%) led all sectors today as crude oil futures settled $1.56 higher at $65.00 per barrel, an increase of 2.5%.

The defensive utilities (+0.7%) and consumer staples (+0.1%) sectors also closed with gains.

The market heard from Chicago Fed President Austan Goolsbee (voting FOMC member), who told The Financial Times that he does not expect a recession and might not be in favor of a series of additional rate cuts.

Rate cut expectations for the October and December FOMC meetings have held steady this week. With expectations for further monetary policy easing a driving force behind the market's recent record highs, investors will look to Friday's PCE Price Index as a potential catalyst for the next directional move.

U.S. Treasuries retreated on Wednesday, lifting the 5-year yield to its highest level in three weeks while yields on longer tenors returned toward their highs from Monday.

The 2-year note yield settled up one basis point to 3.60%, the 5-year note yield settled up three basis points to 3.71%, and the 10-year note yield settled up three basis points to 4.15%. 

• Nasdaq Composite: +16.5% YTD
• S&P 500: +12.9% YTD
• Russell 2000: +9.2% YTD
• DJIA: +8.4% YTD
• S&P Mid Cap 400: +4.3% YTD

Reviewing today's data:

• Weekly MBA Mortgage Applications Index 0.6%; Prior 29.7%
• August New Home Sales 800K (Briefing.com consensus 650K); Prior was revised to 664K from 652K
  • The key takeaway from the report is that the surge in new home sales occurred ahead of the larger drop in mortgage rates seen in September. Notably, there was a big uptick in the percentage of new homes sold over $800,000. That helps explain the large jump in average selling prices, and it may also be reflective of the large jump in stock prices lending some confidence to buying interest in the upper price brackets.

Thursday: 

For the third consecutive day, the stock market ended lower at the index level, with the S&P 500 (-0.5%), Nasdaq Composite (-0.5%), and DJIA (-0.4%) experiencing early pressure as mega-caps continued to underperform, and stronger-than-expected economic data dampened the market's expectations for additional rate cuts this year.

In particular, a strong initial jobless claims report (218,000; Briefing.com consensus: 238,000) reinforced signs of labor market strength, weighing on what has been a driver behind the case for further easing.

According to the CME FedWatch tool, the probability of a 25 basis point cut in October slipped to 85.5% from 91.9% yesterday, while the odds of another cut in December fell to 60.5% from 73.3% yesterday.

Fed commentary further complicated expectations, with Kansas City Fed President Jeffrey Schmid (voting FOMC member) describing policy as “slightly restrictive" and "where it needs to be,” while Fed Governor Stephen Miran (voting FOMC member) reiterated support for a series of cuts in a Bloomberg interview.

The stock market's ensuing retreat broadened past the mega-cap space, with advancers outpacing decliners by a roughly 3-to-1 ratio on the NYSE and Nasdaq. 

Mega-caps still faced pressure (the Vanguard Mega Cap Growth ETF finished 0.5% lower), but broader market weakness saw the market-weighted S&P 500 (-0.5%) outperform the S&P 500 Equal Weighted Index (-0.9%). 

The energy sector (+0.9%) was the only S&P 500 sector that closed with a gain, buoyed by bargain hunting after lagging much of the month. Refiners Valero Energy (VLO 174.46, +3.64, +2.13%) and Marathon Petroleum (MPC 196.48, +3.38, +1.75%) climbed to their best levels since April 2024. Despite a 3.7% week-to-date gain, the sector still trails the broader market for the month.

While the information technology sector finished flat, its reversal from a much wider loss played a pivotal role in lifting the major averages from early session lows.

NVIDIA (NVDA 177.68, +0.72, +0.40%) and Apple (AAPL 256.87, +4.56, +1.81%) both finished in positive territory, while Intel (INTC 33.99, +2.77, +8.87%) captured the widest gain across S&P 500 names as it saw momentum from a potential investment by Apple. 

Despite President Trump finalizing the much-anticipated TikTok deal in which Oracle (ORCL 291.24, -17.22, -5.58%) will be a prominent investor, the stock still succumbed to recent selling pressure.

Meanwhile, the health care (-1.7%), consumer discretionary (-1.5%), and materials (-1.2%) sectors closed with the widest losses. 

Smaller-cap indices such as the Russell 2000 (-1.0%) and S&P Mid Cap 400 (-0.6%) also underperformed today amid fluctuating rate cut expectations.

On the earnings front, KB Home (KBH 62.03, -0.35, -0.56%) finished lower after an earnings beat, with broader weakness across homebuilder names pushing the iShares U.S. Home Construction ETF 1.5% lower.

Accenture (ACN 232.59, -6.49, -2.71%) and Jabil (JBL 210.01, -15.27, -6.78%) also retreated despite earnings beats, while CarMax's (KMX 45.60, -11.45, -20.06%) $0.40 EPS miss saw it finish as the worst-performing S&P 500 name. 

On the heels of today's retreat, tomorrow's release of the PCE Price Index will be closely watched, as another firm inflation reading could further dampen expectations for additional rate cuts.

U.S. Treasuries retreated on Thursday with shorter tenors pacing a continuation of post-FOMC selling while the long bond outperformed, finishing modestly higher.

The 2-year note yield settled up six basis points to 3.77%, and the 10-year note yield settled up three basis points to 4.17%.

Reviewing today's data:

• The third estimate for Q2 GDP was revised up to 3.8% (Briefing.com consensus: 3.3%) from the second estimate of 3.3%, spurred on by an upward revision to consumer spending. The GDP Price Deflator was revised up to 2.1% (Briefing.com consensus: 2.0%) from the second estimate of 2.0%.
  • The key takeaway from the report is that the consumer and the economy in aggregate were still operating in a solid state in Q2. Real final sales to private domestic purchasers were up 2.9% versus 1.9% in the second estimate.
• Weekly initial jobless claims for the week ending September 20 decreased by 14,000 to 218,000 (Briefing.com consensus: 238,000), while continuing jobless claims for the week ending September 13 decreased by 2,000 to 1.926 million.
  • The key takeaway from the report is the recognition that initial jobless claims—a leading indicator—are running at levels more consistent with a strong labor market than a weak one. If nothing else, there certainly wasn't a lot of firing activity in the week ending September 20.
• Durable goods orders increased 2.9% month-over-month in August (Briefing.com consensus: -0.5%) following an upwardly revised 2.7% decline (from -2.8%) in July. Excluding transportation, durable goods orders rose 0.4% month-over-month (Briefing.com consensus: -0.1%) following a downwardly revised 1.0% increase (from 1.1%) in July.
  • The key takeaway from the report is the nondefense capital good orders, excluding aircraft—a proxy for business spending—jumped 0.6% on the heels of a 0.8% increase in July.
• The Advance International Trade in Goods deficit narrowed to $85.5 billion from an upwardly revised $102.8 billion (from -$103.6 billion) in July. Advance Retail Inventories were flat following a downwardly revised 0.1% increase (from 0.2%) in July, and Advance Wholesale Inventories were down 0.2% following a downwardly revised unchanged reading (from 0.2%) in July.
  • The key takeaway from the report is that it had tariff policies written on it, evidenced by the fact that imports were $19.6 billion less than July imports, while exports were $2.3 billion less than July exports.
• Existing home sales dipped 0.2% month-over-month in August to a seasonally adjusted annual rate of 4.00 million (Briefing.com consensus 3.99 million) from an unrevised 4.01 million in July. Sales were up 1.8% on a year-over-year basis.
  • The key takeaway from the report is that home sales in August were still constrained by high prices, higher mortgage rates, and limited supply. The biggest month-over-month increase in sales was in the Midwest, which is also the region with the lowest median price (by a lot).

Friday:

The stock market ended the week on an upbeat note, as the major averages snapped their three-day skid, helping the Dow (+0.7%) return to little changed for the week (-0.2%). The S&P 500 (+0.6%) and Nasdaq (+0.4%) lost a respective 0.3% and 0.7% for the week.

The higher finish did not come without a fight as continuation of recent weakness in mega cap names provided some early pressure that countered general strength in the broader market. That strength persisted into the afternoon while many of the early laggards like NVIDIA (NVDA 178.19, +0.50, +0.28%) and Microsoft (MSFT 511.46, +4.43, +0.87%) overcame their initial weakness.

Investors received a solid Personal Income/Spending report for August this morning, but expectations for two more rate cuts by the end of the year inched higher, nonetheless.

Ten sectors finished the day in positive territory with seven rising more than 0.8%. The heavily-weighted consumer discretionary sector (+1.5%) ended up among the leaders with help from a daylong rally in the shares of Tesla (TSLA 440.41, +17.02, +4.02%).

Utilities (+1.6%), materials (+1.1%), and real estate (+1.0%) also finished among the leaders while energy (+1.0%) met some late profit taking after this week's show of strength. Still, the sector gained 4.7% alongside a $3.28, or 5.3%, rise in the price of WTI crude.

The communication services sector (+0.1%) finished among the laggards, almost entirely due to weakness in its top component—Meta Platforms (META 743.75, -5.16, -0.69%). The stock fell to a three-week low, masking gains in nearly all other members of the sector. Video game publishers Electronic Arts (EA 193.35, +25.03, +14.87%) and Take-Two (TTWO 256.12, +11.01, +4.49%) both soared to fresh records in late trade after The Wall Street Journal reported that Electronic Arts is nearing a $50 billion deal to be taken private.

Top-weighted technology (+0.2%) also lagged throughout the day due to relative weakness in its largest components. Still, more than half of the sector's components finished in the green with Intel (INTC 35.50, +1.51, +4.44%) extending its recent run to a level not seen since mid-July 2024.

The consumer staples sector (-0.1%) was the lone decliner, and it too was dragged down by the weight of one of its top components. Costco (COST 915.95, -27.36, -2.90%) fell to its lowest level since early April despite a Q4 EPS beat while only seven other sector members finished in the red.

Longer-dated Treasuries recorded slim losses (10-yr yield +2 bps to 4.19%) while the short end edged higher (2-yr yield -1 bp to 3.65%), showing little concern over next week's likely government shutdown or newly announced tariffs that will be coming into effect on October 1. Imported branded and generic pharmaceuticals will be hit with a 100% tariff if the producer is not building a domestic presence, heavy truck imports will face a 25% tariff while kitchen cabinets, bathroom vanities, and associated products will be hit with a 50% tariff. Upholstered furniture will come with a 30% tariff.

Reviewing today's data:

• Personal income increased 0.4% month-over-month in August (Briefing.com consensus: 0.3%) following a 0.4% increase in July. Personal spending jumped 0.6% month-over-month (Briefing.com consensus: 0.4%) following a 0.5% increase in July. The PCE Price Index was up 0.3% month-over-month, as expected, and the core PCE Price Index, which excludes food and energy, was up 0.2%, also as expected. On a year-over-year basis, the PCE Price Index was up 2.7%, versus 2.6% in July, and the core PCE Price Index was up 2.9%, unchanged from July.
  • The key takeaway from the report is the lack of headline surprise for the inflation prints. That helped calm some of the market's angst about tariff pass-through being more demonstrable; therefore, it was better than feared, which qualifies in a relative sense as being good. The solid income and spending results were a bonus, befitting an economy that is still on a growth trajectory.
• The final University of Michigan Consumer Sentiment reading for September checked in at 55.1 (Briefing.com consensus: 55.4) versus the preliminary reading of 55.4. The final reading for August was 58.2. In the same period a year ago, the index stood at 70.1.
  • The key takeaway from the report is that expectations for the macroeconomy, including the labor market and business conditions, and personal finances receded. Monday's data slate will be limited to the 10:00 ET release of August Pending Home Sales (Briefing.com consensus 0.4%; prior -0.4%).

• Nasdaq Composite +16.4 YTD
• S&P 500 +13.0% YTD
• Russell 2000 +9.2% YTD
• Dow Jones Industrial Average +8.7% YTD
• S&P Midcap 400 +4.7% YTD