The US equity markets experienced significant volatility last week, with recent events revealing mixed signals—strong corporate performance amid emerging economic weaknesses. The S&P 500, Dow Jones and Nasdaq all declined around 2 to 3%, marking their worst weekly performance in recent months. Despite these declines, the S&P 500 had achieved its 15th record close of 2025 earlier in the week, highlighting the market's turbulent nature. Treasury bonds yields were 10-25bps lower in the week, after its largest single-day decline in a year on Friday, as market increased chances of rate cuts in 2025, to around 60bps.
Most notably disappointing factor was the weak payroll data, with fewer jobs added than expected and big downward revisions to previous months' figures. The employment report raised renewed concerns about an economic slowdown. Trump's announcement of new tariffs on imports from 92 countries and Powell’s comments about no rate cuts in September, amid internal disagreements, further contributed to volatility. Trump drew heavy criticism for controversially firing the Bureau of Labor Statistics chief following the jobs data, as he also prepares to announce a new Federal Reserve governor soon.
Corporate earnings provided a resilient picture, with the S&P 500 delivering so far around 8% year-over-year profit growth in the second quarter, way above initial projections. Tech companies showed particular strength, with six of the "Magnificent Seven" tech stocks reporting 22% profit growth driven by AI infrastructure investments and cloud services demand. However, Amazon's disappointing cloud growth guidance caused its shares to tumble 9%, while companies like Microsoft, Apple, and Alphabet posted solid results.
The upcoming week features US economic data releases and more quarterly earnings reports. As the US Senate enters its August recess, Trump's tariffs on imports are also set to take effect.
