Equities Mostly Lower Despite Positive Economic Data

Despite a rebound on Friday, stocks closed last week mostly lower. Each of the major market indexes, the S&P 500, the Dow and the NASDAQ, declined in value following a record-setting rally that lasted several weeks. Investors pondered the impact of new tariffs on certain imports announced by President Trump as well as mixed signals from the Federal Reserve as inflation remained somewhat elevated, although within expectations. On the plus side, gross domestic product (GDP) enjoyed a strong rebound in the second quarter, while jobless claims also fell, possibly suggesting a resilient labor market. Among the market sectors, big tech stocks saw some declines amid concerns that AI-fueled valuations might be too high. Shares within the health care sector slid as some pharmaceutical stocks in Asia and Europe fell in reaction to the new tariffs. Ten-year Treasury yields closed higher, rebounding from a five-month low from the previous week. Crude oil prices marked their largest weekly gain in over three months, driven higher by escalating geopolitical tensions.

GDP Growth Accelerates in Q2 Led by Consumer Spending and Decline in Imports

According to the third and final estimate, GDP increased at an annual rate of 3.8% in the second quarter. In the first quarter, GDP decreased 0.6%. The increase in GDP in the second quarter primarily reflected a decrease in imports (-29.3%), which are a subtraction in the calculation of GDP, and an increase in consumer spending (+2.5%). These movements were partly offset by decreases in investment (-13.8%) and exports (-1.8%).

Eye on the Week Ahead

Most of the attention this week will be focused on the September jobs report. Employment growth has notably stalled over the past several months and is not expected to accelerate any time soon.