Week In Review 

08.29.25 

• US Equities mixed: Recent rotation out of mega-cap growth and AI-related names continued. However, stocks notched 4^th straight month of gains.
• Tech in the headlines: NVIDIA reported solid results but came up short of very elevated expectations.
• Tariff concerns renewed: Caterpillar and Gap cut margin guidance citing higher tariff costs; White House planning new Section 232 levies.
• Dovish Fed: Governor Waller made case for 25 bp cut in September and additional easing over 3–6 months; market odds for a September cut still in 85-90% range.
• Economic data mixed: Core PCE +0.3% m/m, +2.9% y/y (in line); Q2 GDP revised up to 3.3%; consumer confidence and Chicago PMI weakened; housing data soft.

US equities ended the week lower as a rotation out of mega-cap growth and AI-related names persisted, while cyclical and value sectors fared better. Investor sentiment was pressured by underwhelming tech earnings, renewed tariff concerns, and mixed economic data, even as dovish commentary from the Federal Reserve supported expectations for a September rate cut. Headlines around geopolitical trade tensions and Fed leadership developments added to the uncertainty, while markets looked ahead to next week’s heavy macro calendar, including ISM data and the August jobs report.

Major U.S. equity benchmarks finished the week mixed: the Dow fell 0.33%, the S&P 500 dropped 0.20%, the Nasdaq slid 0.60%, while the Russell 2000 was up 0.08%. Leadership by style was mixed as Growth stocks outperformed value within Large Caps and Mid Caps but outperformed in Small Caps.

Tech names were mild underperformers. The group finished in the red by the slimmest of margins, but given the some high profile earnings reports and continued rotation into other parts of the market, the sector was a headline fixture. Semiconductors and software stocks weighed on performance. NVIDIA was down two percent despite a very solid earnings report. The stock was up 35% YTD prior to reporting and the Q2 beat-and-raise failed to satisfy very lofty expectations. On Friday, Marvell plunged 16.4% after a disappointing data center outlook, while Dell fell 8% despite beating on revenue and EPS, as margin concerns overshadowed AI server momentum. Conversely, Ambarella surged 19.3% on strong IoT-driven results, and Autodesk gained nearly 8% on robust billings and guidance.

Retail names were mixed: Gap beat expectations but cut its FY25 EPS outlook due to tariff headwinds, while Ulta Beauty slipped despite raising guidance. On the upside, Affirm rallied 11% on strong gross merchandise volume and guidance, and Petco jumped 22.6% on turnaround progress. Q2 earnings season wrapped up on a strong note overall, with blended growth near 12% and 82% of companies beating EPS estimates by an average margin of 8%, compared to the average of 6.3% over the last year, per FactSet data.

In fixed income, Treasury yields ended mixed with 2Yr-10Yr tenors falling slightly while the 30Yr rose 3bps, pushing the 2s/30s spread near multi-year highs. The move reflected dovish Fed commentary and inflation data largely in line with expectations. Fed Governor Waller reinforced expectations for a 25 bp cut in September, citing rising labor market risks and calling for additional easing over the next three to six months. Market-implied odds for a September cut firmed following his remarks, with futures pricing in a near-certainty of at least one cut by year-end.

Economic data painted a mixed picture. The second estimate of Q2 GDP was revised up to 3.3% from 3.0%, driven by stronger consumption and capex, while jobless claims ticked slightly lower, signaling resilience in labor markets. Core PCE (the Fed’s preferred inflation gauge) rose 0.3% m/m and 2.9% y/y in July, matching forecasts. Personal income and spending were also broadly in line. July durable goods orders fell 2.8% m/m, though ex-transportation orders rose 1.1%, the best reading since September 2024. Housing data remained soft, with pending home sales unexpectedly declining 0.4% and new home sales essentially flat at 652K. Consumer confidence slipped to 97.4 in August, with labor market perceptions deteriorating for an eighth straight month, and inflation expectations edging higher. The Chicago PMI plunged to 41.5, well below consensus, reflecting weakness in new orders and employment. Meanwhile, the trade deficit widened sharply to $103.6B, the largest since March.

On the policy front, tariff risks re-emerged as the White House signaled plans for new Section 232 levies on sectors including semiconductors, heavy trucks, and pharmaceuticals. Caterpillar and Gap both flagged higher tariff-related costs, cutting margin guidance for FY25. Reports also suggested potential U.S.-EU and U.S.-Mexico trade progress, though tensions with China lingered amid competitive concerns in AI hardware. Political headlines added drama as Fed Governor Cook faced mounting legal challenges, while speculation grew that Waller could be a leading candidate to replace Powell as Fed Chair next year.

What to Watch Next Week

FactSet estimates in parentheses unless otherwise noted.

Labor Day holiday Monday: US markets closed

Key economic data: US ISM Manufacturing PMI (49), US Construction Spending (m/m: 0.5%), US JOLTS Job Openings (7,375k), US Factory Orders (m/m: -1.4%), US ISM Services PMI (50.9), US Unit Labor Costs (q/q, annualized: 1.4%), US Productivity (q/q, annualized: 2.4%), US Non-Farm Payrolls (82.5k), US Unemployment Rate (4.3%), US Avg Hourly Earnings (m/m: 0.3%)

Fed Speakers: Multiple appearances, including Beige Book release midweek

Earnings Highlights: Signet Jewelers, Dollar Tree, Macy’s, Salesforce, HPE, Braodcom

Brokerage conferences: Heavy calendar across sectors, including Goldman Sachs Global Retailing and Citi Global TMT

Tariff and trade headlines: Watch for updates on Section 232 actions and US-China dynamics

Past performance does not guarantee future results, which may vary.
Source: FactSet, MidWestOne Private Wealth.
All returns presented are total returns, which include the reinvestment of income and dividends.
For style performance, Large, Mid, and Small for US Equity refer to the Russell 1000, Russell Midcap, and Russell 2000 indices, respectively. Value refers to companies with lower price-to-book ratios and lower expected growth values, and Growth refers to higher price-to-book ratios and higher forecasted growth values. Real Estate refers to the DJ Equity REIT Total Return Index. Commodities refer to the Bloomberg Commodity Index. US Dollar refers to the value of the United States dollar relative to a broad basket of trade-weighted foreign currencies. Developed: MSCI EAFE; Morgan Stanley Capital International Index that is designed to measure the performance of the developed stock markets of Europe, Australasia, and the Far East. Emerging: MSCI Emerging Markets; Morgan Stanley Capital International Index designed to measure the performance of the emerging stock index of China, Brazil, India, and other emerging market countries.
Diversification does not protect an investor from market risk and does not ensure profit.
This material is provided for educational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities. Views and opinions expressed are current as of the date of this publication and may be subject to change, they should not be construed as investment advice.