US Stocks Wrap Up a Choppy Week
US markets closed on a positive note this past Friday, marking the end of a somewhat turbulent week. It also represented the third consecutive week of gains for the market.
The S&P 500 climbed by 0.8%, just shy of the record established last week, while also recovering from recent losses. The Dow Jones industrial average increased by 0.5%, and the Nasdaq composite gained 1%, reaching another all-time high.
Technology stocks played a significant role in driving market growth. Notably, Nvidia rose by 1.1%, and Apple saw a sizable jump of 4.2%.
Gilead Sciences posted an impressive increase of 8.3%, exceeding analyst predictions and boosting annual revenue forecasts. Expedia Group also released positive financial results, up 4.1%.
This was one of the last sizable batches of companies in the S&P 500 to report second-quarter results, with many showing strong earnings. However, some analysts caution that ongoing tariffs could impact future profits.
The financial sector also contributed to market gains, with Bank of America rising by 2.4% and MasterCard increasing by 2.3%.
In other market news, entertainment company Paramount Skydance saw a significant drop of 10.5% after its $8 billion merger was finalized. Additionally, shares of rival Warner Bros. Discovery fell by 8%.
The week’s focus largely centered on President Trump’s trade tariffs and their potential effects on the US economy and the Federal Reserve’s interest rate policies. On Thursday, Trump initiated higher import taxes on numerous countries.
Despite the tariff escalation, the market seemed relatively unfazed. As Daniel Skelly from Morgan Stanley noted, “This week’s S&P 500 rebound may reveal how the market is reacting to tariff news.”
The uncertain economic outlook stemming from unpredictable tariff policies was a key factor in the Fed’s decision to keep interest rates steady. Nevertheless, Fed Chairman Jerome Powell is facing mounting pressure from Trump to consider rate cuts.
It’s worth mentioning that the Federal Open Market Committee, not just the chair, votes on interest rate changes. Following the recent vacancy, Trump might have more influence over the Fed, with his economic advisor likely to support lower interest rates.
The Fed’s last decision to maintain interest rates involved two votes aimed at potential cuts. Their next meeting is scheduled for September, and Wall Street largely anticipates a quarter-point reduction.
Treasury yields edged up, with the 10-year yield rising to 4.28% while the two-year yield increased to 3.76%.
Speculations about interest rate cuts could potentially concern the economy, especially given recent signals such as rising inflation rates in June and a slowdown in US hiring in July.
These developments are crucial for the Fed, which aims to curb inflation to a target of 2% while fulfilling its mandate for “full employment.”
Lower interest rates can boost economic activity and investment values, but they may also exacerbate inflation. There are apprehensions that inflation might heat up while the job market cools down.
Next week, both Wall Street and the Fed will gain more clarity on inflation trends, as updates will be released regarding consumer and wholesale inflation, along with retail sales reports.
Ulrike Hoffmann-Burchardi of UBS Global Wealth Management remarked, “We believe equities are supported by strong fundamentals, but new developments next week could challenge the sentiment of investors sensitive to tariffs and economic risks.”
The S&P 500 finished at 6,389.45, up by 49.45 points. The Dow increased by 206.97 points, closing at 44,175.61, while the Nasdaq rose by 207.32 points, finishing at 21,450.02.
Asian markets remained largely stagnant, aside from a slight increase in Tokyo after Japan’s trade envoy indicated a resolution regarding tariffs on exports to the US. The European markets exhibited mixed performance.
