The end of the trading week saw an uplift in U.S. stocks on Friday, marking the third week of gain from the past four, dating a new landmark. Despite turbulence throughout the week, the S&P 500 experienced a hike of 0.8% and almost reached the record high from the previous week. All losses were offset from a dip experienced in the past week. Meanwhile, the Dow Jones Industrial Average traversed by 0.5%, accompanied by a 1% hike in the Nasdaq composite. The latter’s surge solidified its all-time high achieved just the day before.
Industry leaders contributed immensely to the market’s uptick, with tech companies, known for their considerable stock values, doing the lion’s share of the work. Nvidia saw a 1.1% rise, and Apple recorded a significant 4.2% gain. Bio-pharmaceutical company Gilead Sciences, leapt by 8.3%, tallying one of the more significant gains in the market. Gilead exceeded analysts’ expectations by reporting impressive financial results and heightened their year-end earning forecast.
Online travel company, Expedia Group, also reported positive financial results leading to a 4.1% escalation in their stocks. Both Gilead Sciences and Expedia Group are part of the final array of big-league S&P 500 companies to report largely advantageous Q2 financial results. However, the majority warned of potential profit drawbacks in the face of current tariffs.
Another major contributor to the market rally was the financial sector, notably Bank of America and Mastercard, gaining 2.4% and 2.3% respectively. In more volatile moves in the market, the entertainment powerhouse, Paramount Skydance, witnessed a 10.5% downward swing. This was recorded a day post the completion of the Skydance and Paramount merger amounting to $8 billion.
Meanwhile, stocks in Warner Bros. Discovery, a competitor, plummeted by 8%. Dominating market discussions this week were the potential ramifications of President Trump’s trade war on the American economy. Concurrently, the Federal Reserve’s stance on interest rates was also subject to speculation. However, the escalating tariff situation didn’t seem to hinder the market trend, mainly overlooked by investors.
Morgan Stanley’s Wealth Management Market Research & Strategy Team lead, Daniel Skelly, opined that the S&P 500’s resurgence this week perhaps underscores the market’s growing apathy towards tariff-related headlines. Amidst this backdrop of an unpredictable tariff policy, the uncertainty surrounding the economy’s trajectory has been identified as the core reason for the Federal Reserve’s decision to maintain its benchmark interest.
Federal Reserve Chair Jerome Powell finds himself under increased scrutiny from President Trump to enact cuts on interest rates. However, the power to dictate policy doesn’t reside exclusively with the Chair of the Fed. All members of the Federal Open Market Committee collectively decide on interest rate alterations.
Following his nomination of Stephen Miran to fill a vacant slot on the Fed’s board of governors, President Trump could potentially impact the Fed’s operation. As a firm believer in reduced interest rates and currently serving as a key economic advisor to Trump, Miran’s nomination hints towards an assertive push for lower rates aligning with Trump’s wishes.
Recorded in the Federal Reserve’s last decision to maintain steady interest rates were two votes in favor of slashing these rates. The Federal Reserve’s next congregation is slated for September, with a dominant inclination among Wall Street investors towards an interest rate cut by a quarter percentage point.
Signifying increased economic activity, Treasury yields saw a minor rise. The yield on the 10-year Treasury peaked at 4.28% from 4.25% witnessed last Thursday. The yield on investment in two-year Treasury bills – which closely echo expectations of the Federal Reserve’s actions – elevated from 3.73% to 3.76%.
The prediction for a reduction in interest rates can be traced back to economic indicators suggesting a potential slowdown last week. Key indicators included a slight rise in inflation as of June and a significant slowdown in the July hiring rate by U.S. employers. As red flags for the Federal Reserve, these indicators provoke concerns on two fronts for the monetary policymaker: ensuring inflation doesn’t exceed its 2% target, and adhering to its full employment mandate.
Lowers rates have potential to reinvigorate the economy and investment prices, albeit the risks of fostering more inflation. However, fears of an overheating inflation might be eclipsed by concerns for the labor market’s deteriorating condition. Additional insights into inflation’s pace and the economic climate will come from government data releases next week, namely updates on wholesale and consumer inflation and the retail sales report.
Ulrike Hoffmann-Burchardi, the chief investment officer for the Americas and global head of equities at UBS Global Wealth Management, commented on the stock market’s trajectory. He maintained that despite uncertainties related to tariffs, economic shifts, and geopolitical risks, solid fundamentals should continue to cushion stocks. However, investor sentiment, he warned, remains susceptible to fresh headlines.
Concluding Friday’s trade, the S&P 500 escalated 49.45 points to pit at 6,389.45, the Dow Jones advanced 206.97 points landing at 44,175.61, and the Nasdaq augmented by 207.32 points to end at 21,450.02. On the global front, the majority of Asian markets closed on a low note barring Tokyo. The Nikkei in Tokyo saw a 1.9% surge following U.S. assurances to rectify issues related to tariffs that could impact Japanese exports.
In Europe, market performance varied. With an impressive performance from heavyweight companies and a positive outlook on the Federal Reserve’s actions, the stock market ended strong, despite undercurrents of geopolitical and economic uncertainty. There is anticipation for new data releases that may influence the market in the coming week.
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