U.S. equities pulled back slightly on Friday, led by weakness in technology stocks, but the broader market remains on track to close another positive week. The pullback comes after a series of record highs earlier in the week, as investors balance optimism over potential Federal Reserve rate cuts with fresh concerns around inflation and economic momentum.
Market Recap
- S&P 500 slipped 0.2% after touching an all-time high a day earlier.
- Dow Jones Industrial Average added 93 points (+0.2%), nearing its December record.
- Nasdaq Composite declined 0.3%, weighed by tech weakness.
Despite Friday’s mixed session, the S&P 500 is on pace for its fourth winning week out of the last five, highlighting continued resilience in U.S. markets.
The Fed Factor: Rate Cuts in Focus
Expectations for a September interest rate cut remain the central driver of market sentiment. Lower borrowing costs typically support equities and economic activity, but they also risk fueling inflation.
Traders reduced their bets slightly after Thursday’s wholesale inflation report disappointed, though the probability of a rate cut remains high. Bond yields retreated during the week, reflecting investor conviction in monetary easing. On Friday, the 10-year Treasury yield stood at 4.33%, while the 2-year yield rose modestly to 3.76%.
Economic Signals: Mixed Picture
Friday brought a flurry of U.S. economic updates:
- Retail sales rose in line with forecasts, showing consumers remain engaged.
- New York manufacturing posted unexpected growth.
- National industrial production contracted, contrary to expectations of modest growth.
- Consumer sentiment fell, reflecting ongoing inflation concerns despite easing fears of a recession.
According to the University of Michigan’s consumer survey, households no longer expect the “worst-case” outcomes feared earlier this year, but inflation and unemployment expectations remain elevated.
Corporate Moves: Winners and Losers
- UnitedHealth Group surged nearly 14% after Warren Buffett’s Berkshire Hathaway disclosed a $1.57 billion investment. The insurer’s shares had halved earlier this year, making it an attractive value play for Buffett. Berkshire’s own shares edged 0.6% lower.
- Applied Materials dropped 13.9% despite strong quarterly results, as management guided to weaker near-term revenue amid policy and macro uncertainty, particularly tied to China.
- SanDisk fell 3.6%. While earnings beat expectations, forward guidance disappointed investors.
Global Market Trends
- China: Shanghai stocks rose 0.8%, while Hong Kong declined 1%. Data revealed slowing Chinese growth across retail sales, fixed asset investment, and industrial output — raising the prospect of policy intervention to stabilize momentum.
- Japan: The Nikkei 225 gained 1.7% following stronger-than-expected GDP growth.
- Europe: Indices were mixed as markets awaited the outcome of a high-profile meeting between U.S. President Donald Trump and Russian President Vladimir Putin, with geopolitical developments tied to Ukraine at the center.
Outlook
The U.S. stock market remains buoyed by strong expectations of monetary easing, though inflationary pressures and geopolitical uncertainties continue to cast shadows. Corporate earnings guidance is shaping near-term volatility, particularly in technology and semiconductor-linked industries.
Looking ahead, investor focus will stay locked on the Federal Reserve’s September meeting, consumer spending trends, and any policy shifts abroad — especially from China.
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IMAGE: Bloomberg
