Weekly Market Update – August 1, 2025

Quick Takes

• Friday was the worst day, and concluded the worst week, for Wall Street since late May, as investors sold stocks following a combination of trade developments and weak jobs data. The S&P 500 Index was down -2.5% and the small cap Russell 2000 Index fell -4.2%.  
• The poor week for stocks overshadowed some decent data on earnings and economic growth. The first look at Q2 GDP showed that the U.S. economy grew a faster-than-expected +3% and Q2 corporate earnings are on pace for a +10.3% growth rate.
• U.S. Treasury yields tumbled after the jobs report on Friday, with 10-year U.S. Treasury yield falling nearly -16 basis points for the day, and -17 basis points for the week, to end at 4.22%. U.S. bonds had their best week since the Liberation Day week of April 4, up +1.0%.

Source: Bloomberg. Data as of August 1, 2025.
Price Returns for Equity, Total Returns for Bonds.
* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.

Tariffs and a Terrible Jobs Report Send Stocks South

After coming off a nearly perfect week for the S&P 500 Index with five consecutive days of new all-time highs, the market had a high bar to clear last week. Monday extended the prior week’s win streak to six consecutive higher record closes, but that was essentially the high point of the week. Stocks saw modest losses Tuesday-Wednesday-Thursday and then got clobbered on Friday after a surprisingly weak July jobs report was released and the White House unexpectedly reset the tariff landscape with new, more punitive levies for those trading partners that had not struck new deals by President Donald Trump’s August 1 deadline. The S&P 500 dropped -1.6% on Friday alone, its worst one-day decline since May 21. For the week, the S&P was down -2.4%, its worst weekly performance since the week ending May 23.

The last couple of weeks saw trade agreements struck with Japan, the European Union, and South Korea. The template established by those deals includes a 15% baseline tariff for goods sold in the U.S. and commitments to make investments in the U.S. while also pledging to purchase substantial quantities of US energy. But on Thursday evening, President Trump signed an executive order that considerably increased tariffs starting August 7 on countries without new trade agreements. Countries from Switzerland to Canada face new tariff levels above 30%. Trump granted a 90-day extension to Mexico under existing tariff structures while negotiations continue, and is expected to do the same for China. Brazil has been hit with 50% tariffs, but aircraft, energy, and orange juice are exempted. India faces 25% tariffs and potential penalties linked to imports of Russian oil and military gear. Indian-made iPhones will be exempt from levies. 

Investors were already soured from that news lingering before the market’s open on Friday morning, and then came the release of July’s nonfarm payrolls report. The Bureau of Labor Statistics reported that job growth in July only amounted to 73,000 new jobs, which was much weaker than the 104,000 Wall Street was expecting. But it was the revisions to the prior two months of data that really pushed stocks lower. The May and June payrolls were collectively downwardly revised by a massive -258,000 or nearly 90% of the initial reports. Perhaps the silver lining of the poor jobs reports was that traders immediately increased bets that the Fed would cut rates in September after they left them unchanged last week. According to the CME FedWatch tool, market expectations for a rate cut in September jumped to over 80% in response to Friday’s report, after declining on Wednesday in the wake of the Fed rate decision and Fed Chairman Jerome Powell’s press conference. 

Small caps fared worse than the large cap S&P 500, with the Russell 2000 Index dropping -2% on Friday alone and -4.2% for the week. That was the worst week for small caps since the week of April 4 and the initial Liberation Day tariff turbulence. The technology-heavy Nasdaq Composite Index held up best, falling -2.2% for the week – essentially all from Friday’s -2.2% decline. Of course, overseas stocks suffered from the tariff developments too. The MSCI EAFE Index (developed market non-U.S. stocks) fell -3.1% for the week, and the MSCI Emerging Markets Index was down -2.5%. 

U.S. Treasury yields tumbled across most maturities after the jobs report on Friday, with the yield on the benchmark 10-year U.S. Treasury note falling nearly -16 basis points for the day, and -17 basis points for the week, to end at 4.22%. With yields declining and rate cut expectations jumping, U.S. bonds had their best week since the Liberation Day week of April 4 (bond prices and yields move in opposite directions). The total return for the Bloomberg U.S. Aggregate Bond Index was +1.0% for the week. The same couldn’t be said for non-U.S. bond returns though, as the Bloomberg Global Aggregate ex U.S. Bond Index fell -0.8% and is now down in three of the last four weeks. 

The sour ending to the week overshadowed some decent data on earnings and economic growth. A first look at Q2 U.S. Gross Domestic Product (GDP) showed that the economy grew a faster-than-expected +3% on a smaller-than forecast June trade deficit of $86 billion, more than -$10 billion lower than the month before. Meanwhile, the second quarter earnings season picked up significant steam. According to data from FactSet, more than two-thirds of S&P 500 companies have reported earnings; 82% have beaten consensus earnings estimates, with a blended earnings growth rate of 10.3%. That compares to a 5-year average beat rate of 78% and is above the 10-year average of 75%. If 82% is the final beat rate for Q2, it will be the largest percentage of S&P companies reporting a positive quarterly EPS surprise since Q3 2021 (also 82%). If 10.3% holds as the actual earnings growth rate for the quarter, it will mark the third consecutive quarter of double-digit earnings growth for the index.

Chart of the Week

The July Employment Situation Report showed a much slower labor market than expected as new Non-Farm Payrolls (NFP) totaled just 73,000, well short of Wall Street expectations for 104,000 new jobs. More surprising, and puzzling, was that the prior two months were revised sharply lower. June was revised from the previously reported 147,000 to just 14,000, and May was downwardly revised from 144,000 to just 19,000. The Unemployment Rate inched up to +4.2%, from +4.1% the prior month, in line with expectations. According to the Bureau of Labor Statistics (BLS) report, there were few signs of strength. Gains came primarily from Health Care, a sector that has continued to show strength in the post-COVID recovery, which easily led the way with +55,000 jobs added. Social Assistance also contributed +18,000 jobs. The two sectors combined for some 94% of the job growth in the month. Retail also added nearly +16,000 jobs, and the Financial sector was up 15,000. Declines were again led by losses in Federal Government employment, down -12,000 jobs. Professional and Business Services saw losses of -14,000. Wages grew at a faster rate than the prior month, with Average Hourly Earnings (AHE) up +0.3% from +0.2% the prior month, matching expectations. Year-over-year, AHE rose +3.9%, up from the prior month’s +3.8% (revised up from +3.7%), and above the expected +3.8% annual rate. The Fed would like to see wage growth slow to around +3% annually or less, a level it sees as consistent with low inflation. Average Weekly Hours Worked were steady at 34.3, up a tick from 34.2, where they were expected to remain. Labor-Force Participation was down a bit to 62.2% from 62.3% where it was expected to stay. June Private Sector Payrolls increased by 83,000, following 74,000 the prior month. The bottom line was that job growth fell sharply, and prior months saw massive downward revisions. Seasonal adjustments may have some impact on the revisions, but May-June-July now stands as the worst three months of jobs growth since COVID.

U.S. added just 73,000 jobs in July, prior two months were revised much lower

U.S. Monthly Job Creation, Jan. 2022 – July 2025

U.S. Bureau of Labor Statistics via FRED, CNBC.

The Week Ahead

After a deluge of economic reports last week, the calendar is light this week. The most, and really only, consequential reports are the Service sector Purchasing Managers Indexes (PMIs) for July on Tuesday from the Institute for Supply Management (ISM) and S&P Global. On Thursday, the Federal Reserve reports Consumer Credit data for June. 

Second quarter earnings season marches on with results from Advanced Micro Devices, Berkshire Hathaway, Palantir, McDonald’s, Under Armour, and Walt Disney among the highlights over the next week.  With about two-thirds of the constituents of the S&P 500 having reported for Q2, the blended earnings per share (which combines reported data with estimates for those that have yet to report) show that earnings rose around +10.3% compared with the same quarter last year, according to data from FactSet.

Did You Know?

EASIER CREDIT – The New York Fed’s tri-annual survey of credit access for June found that 14.6% of consumers who applied to refinance their mortgages over the prior 12 months received rejections. That’s nearly two-thirds less than the record high 41.8% rejection rate from the February survey. (Source: NY Fed)

MORE PREMIUMS, LESS COVERAGE – The average annual cost for family health insurance coverage increased 297% from $6,438 in 2000 to $25,570 in 2024. At an annualized increase of 5.92%, health insurance costs have increased at 2.3 times the rate of inflation. (Source: Kaiser Family Foundation)

CRYPTO SENTIMENT – While 14% of US adults currently own cryptocurrency, according to a recent Gallup survey, 60% said they have no interest in ever buying it, and 55% consider it “very risky.” When broken out by political ideology, 50% of “conservatives” said they’ll never buy crypto versus 73% of “liberals.” (Source: Gallup)

This Week in History

NYSE FORMED – On July 22, 1869, the New York Stock Exchange (NYSE) was formed from the merger of the New York Stock & Exchange Board with the Open Board and the Government Board, where Treasury bonds were traded. (Source: The Wall Street Journal)

Economic Review

• The U.S. economy grew at a better-than-expected rate in the second quarter as real Gross Domestic Product (GDP) increased at a +3.0% annual pace, according to the initial estimate. That was above the +2.6% annual rate Wall Street was expecting, and up sharply from the -0.5% annual contraction in the first quarter. The strong growth was driven by a sharp decrease in imports, which detracts from the GDP calculation, following the surge of imports ahead of the Trump administration’s tariffs in Q1. Indeed, Net Exports contributed +4.99 percentage points to Q2 GDP growth with Exports down -1.8% after increasing +0.4% in Q1, while Imports plummeted -30.3% after increasing +37.9% in Q1 (Imports detract from GDP). Also contributing to Q2 GDP was Government Spending, which increased +0.4% after falling -0.6% the prior quarter (adding +0.8 percentage points to the GDP calculation). Of concern, Private Investment sank -15.6% after a +23.8% increase the prior quarter (detracting 3.09 percentage points from growth), although that data has been distorted by Inventories fluctuating due to all the tariff activity. Another positive aspect beneath the headline GDP number was Personal Consumption, which rose +1.4% in Q2 versus +0.5% in Q1 (contributing +0.98 percentage points to the GDP calculation). The bottom line is that Q2 GDP surprised to the upside, although much of it was due to a steep drop in goods imports after businesses stockpiled ahead of the April tariffs.
• The Institute for Supply Management’s (ISM) Manufacturing PMI slid to 48.0 in July from an unrevised 49.0 the prior month, versus expectations for it to rise to 49.5%. This is the fifth consecutive month the Manufacturing PMI has been below the 50.0% dividing line between economic expansion (above 50%) and contraction (below 50%). Despite the overall decline, the index of New Orders, a sign of future demand, rose to 47.1% from 46.4% the prior month. Additionally, the Production barometer moved further into expansion, jumping to 51.4% from 50.3%. The Backlog of Orders index rose to 46.8% from 44.3%. However, the New Export Orders index dipped to 46.1% from 46.3% and Employment fell to 43.4% from 45.0%. The Prices index, a measure of inflation, dropped to 64.8% from 69.7%. The bottom line from the report is that nearly 80% of the manufacturing sector contracted in July, but the improvements in New Orders and Production may suggest a pickup is coming. 
• The S&P Global U.S. Manufacturing PMI fell to 49.8 from 52.9 in June and ends six successive months of growth. That was slightly better than the 49.7 forecasted by Wall Street, but was the first time this year below 50.0, into contraction territory. New Orders were up only fractionally and to the weakest degree of the year so far and New Export Orders were down for the first time in three months. Production softened since last month and sentiment related to Future Output also weakened, dropping to a three-month low. Employment numbers were down fractionally, the first time a net reduction has been recorded since April. There were, however, some positive developments on the supply front, as Average Lead Times for the delivery of inputs improved for the first time since September 2024 – and to the greatest degree in nearly a year-and-a-half. The Input Prices index fell sharply from June’s near three-year high, and the Output Prices index declined slightly as well, but both remain at elevated absolute levels.
• Personal Spending increased +0.3% in June, shy of expectations for a +0.4% rise, but up from a flat reading the prior month (after being revised higher from -0.1%). However, after adjusting for inflation, Real Personal Spending was +0.1% for the month, in line with expectations and up from -0.2% the prior month (revised up from -0.3%). The results show that Americans cut spending in May after buying lots of new cars and other goods earlier in the year to beat U.S. tariffs. Personal Income increased +0.3%, down from -0.4% the prior month (unrevised) and better than expectations for a +0.2% rise. Real Disposable Income was flat month-over-month but was up +1.7% year-over-year. The Personal Savings Rate was steady at +4.5%.
• The cost of goods and services rose in June, matching expectations at +0.3%, which is a higher rate than the prior month’s +0.2% (revised higher than +0.1%). For the year, the Personal Consumption Expenditure (PCE) Deflator (aka PCE Price Index) was up +2.6%, a tick higher than expectations for +2.5%, and up from the +2.4% annual rate the prior month (which was revised up from +2.3%). The Core PCE Price Index, which excludes food and energy and is the Fed’s preferred inflation gauge, was up +0.3% for the month, matching expectations, and up from the +0.2% rate the prior month (unrevised). Year-over-year, the Core-PCE Price Index was up +2.8%, above expectations for +2.7%, and matching the prior month after being revised higher from the originally reported +2.7%.
• The Employment Cost Index (ECI) edged up to a seasonally adjusted +0.9% in the second quarter. That was a tick higher than expectations for +0.8% and unchanged from the unrevised rate of the first quarter. The ECI is the Federal Reserve’s preferred measure of wage gains. Year-over-Year the index was steady at +3.6%. That is the slowest annual rate since the third quarter of 2021. Still, the Fed wants to see costs slow even further.  Wages and Salaries account for about 70% of compensation costs. Wages and Salaries rose an average of +2.7% a year in the three years prior to the pandemic. For the quarter the category was +1.0% and for the year it was up +3.6%.
• The Job Openings Labor Turnover Survey (JOLTS) showed that Job Openings fell in June after jumping in each of the prior two months, hovering at a level that indicates generally stable demand for workers. According to Bureau of Labor Statistics data, job openings decreased to 7.437 million from 7.712 million in May (revised down from 7.769 million). The median estimate in a Bloomberg survey of economists called for 7.5 million openings. The pullback in openings was broad, driven by accommodation and food services and health care, as well as finance and insurance. Job openings fell by -39,000 in the federal government, reflecting the Trump Administration’s efforts to reduce the size of the government. The ratio of Job Openings to Unemployed Workers was 1.06, down from 1.07 the prior month and down from a peak of 2.0 in July 2022 which is the prepandemic level the Fed wants to see it at. The Number of People Quitting Jobs was 3.142 million, down from 3.270 million the prior month. The record was 4.5 million job quitters in late 2021. The Quits Rate was unchanged at 2.0% after the prior month was revised down from 2.1%. People tend to quit less often when the economy softens and jobs become harder to find. The Layoffs Rate was unchanged at 1.0%, below the 1.4% annual average from 2010 to 2019. The Hiring Rate slipped a tick to 3.3%, the lowest level since November, down from 3.4% the prior month. The hiring rate typically ranges from 3.7% to 4.0% in a strong economy. The bottom line is that despite dropping in June, job openings remain above average levels seen prior to the pandemic, suggesting there is still a relatively healthy demand for workers.
• The Conference Board’s Consumer Confidence Index rebounded to 97.2 in July from an upwardly revised 95.2 in June (originally 93.0). That was above Wall Street expectations for an increase to 96.0. The Present Situation gauge fell to 131.5 from 133.0 the prior month after it was revised higher from the originally reported 129.1. The Expectations gauge — which reflects consumers’ six-month outlook — rose to 74.4 from 69.9 the prior month (revised higher from to 69.0). Sustained levels below 80 on the expectations index can signal a recession within the next year, while in good times the index can top 120 or more. Responses showed that consumers expected higher stock prices and easing inflation.
• The final reading of the June University of Michigan Consumer Sentiment Index dipped to 61.7 from the preliminary reading of 61.8 two weeks ago, versus expectations to improve to 62.0. That is up from 60.7 the prior month. In the same period a year ago, the index stood at 66.4. The Current Economic Conditions component rose to 68.0 from the preliminary reading of 66.8 and 58.1 prior month. The Consumer Expectations component was down to 57.7 from the initial estimate of 58.6 and from the prior month’s final reading of 58.1. One-year inflation expectations was edged up to 4.5% from the preliminary reading of +4.4%, but down from +5.0% from the previous month. The five-year inflation expectations declined to 3.4% from the 3.6% preliminary reading and 4.0% the prior month. The bottom line is that, while not strong, sentiment has improved over the last few months and inflation expectations have receded.
• The Texas Manufacturing Outlook Survey jumped +13.6 points in July, unexpectedly crossing into expansionary levels. The General Business Activity index rose to +0.9 from an unrevised -12.7 the prior month, signaling a stabilization in activity after five consecutive months of deterioration. That was far above expectations for a -9.0 reading, but still remains well below a three-year high of +14.1 in January. The Production index, a key measure of state manufacturing conditions, soared +20 points to +21.3, its highest reading in more than three years and its biggest monthly jump since March 2021. New Orders, Shipments, and Capacity Utilization all saw improvements month over month. Labor market measures also improved, Employment and Hours Worked both up. The Company Outlook index also improved to +4.7 from -8.9. On inflation, Prices Paid and Prices Received both eased. Indicators of conditions six months from now were largely improved as well. The Texas Service Sector Outlook Survey improved for the month too, rising to +2.0 from -4.4 the prior month (unrevised).
• The Chicago Purchasing Managers Index (PMI), a barometer for the Chicago region’s business and manufacturing conditions (also known as the Chicago Business Barometer), jumped to 47.1 in July from an unrevised 40.4 the prior month. That was well above Wall Street expectations for a 42.0 reading and the largest increase in 13 months. Readings below the 50 level indicate contraction, and it has been in contraction territory for 20 consecutive months now. Five of the seven sub-components fell and signal contraction, while just two rose and signal expansion. The increase was driven by a sharp rise in New Orders and Order Backlogs. However, Production, Employment, and Supplier Deliveries saw small decreases. Prices Paid reversed -8.3 points, fully unwinding June’s rise.   
• According to the Case-Shiller S&P CoreLogic 20-City Home Price Index, U.S. housing prices declined -0.34% in May, the same decline as the prior month, after being revised lower from -0.31%. May’s result was lower than expectations for a -0.2% dip. On a year-over-year (YoY) basis, the 20-city index was up +2.79%, below expectations for +2.91% and down from the prior month’s 3.44% annual pace (revised higher from +3.42%). Of the 20 cities tracked by the index, three fell over the month, and Los Angeles was the weakest-performing market (-0.48%) for the month while Cleveland was the strongest (+1.42%). On an annual basis, house price appreciation was the strongest in New York (+7.37%) and Chicago (+6.09%) and weakest in Tampa (-2.42%) and Dallas (-0.64%).
• The competing Federal Housing Finance Agency (FHFA) House Price Index (HPI) showed U.S. home prices increase in May, with the index improving to -0.2 after being revised higher the prior month to -0.3% (revised up from -0.4%). The results were in line with Wall Street expectations. The government data showed home prices up +2.8% year-over-year, down from +3.0% the prior month. House prices were up YoY in all the 9 regions, but mixed for the month-over-month comparison. The housing market is slowing amid low housing affordability and rising mortgage rates.
• The Commerce Department reported that Construction Spending fell -0.4% in June, below the flat reading expected, and matching the prior month decline after it was negatively revised from -0.3%. Over the past year, construction spending was down -2.9%, up from the -3.5% annual rate the previous month. Total Private Construction was down -0.5%, the same as the month before. Total Public Construction was up +0.1%, also the same as the prior month. Private Residential Spending fell -0.7% month-over-month and Private Nonresidential Spending was down -0.3%. The report showed that Single-Family Construction was down -1.8%, after a -1.1% decline the prior month, and Multifamily Construction was unchanged after a -0.1% decline the prior month. The key takeaway carries forward from the prior month, that residential spending weakened for a third straight month, led by a slowdown in single-family construction.
• The National Association of Realtors (NAR) reported that Pending Home Sales fell -0.8% in June after last month’s +1.8% rise (unrevised), which was below Wall Street expectations for a +0.2% increase. Year-over-year sales were down -0.3%, better than expectations for a -2.1% annual rate and unchanged from the prior month (unrevised). From a regional perspective, the Northeast was up +2.1%, but the South slipped -.07%, the Midwest declined -0.8%, and the West fell -3.9%.
• Weekly MBA Mortgage Applications fell -3.8% for the week ending July 25, following a +0.8% rise the prior week. The Purchase Index was down -5.8% after rising +3.4% the prior week. The Refinance Index fell -1.1% after a -2.6% decline the prior week. The average 30-Year Mortgage Rate slipped to 6.83% from 6.84% the prior week.
• Weekly Initial Jobless Claims were up +1,000 to 218,000 for the week ending July 25, better than expectations for 224,0000. The prior week was unrevised. The number of people already collecting unemployment claims (i.e., Continuing Claims) was unchanged at 1,946,000 for the week ending July 19, better than expectations for 1,953,000. The prior week’s reading was revised lower from 1,955,000.

Asset Class Performance

Source: Bloomberg.
Asset‐class performance is presented by using market returns from an exchange‐traded fund (ETF) proxy that best represents its respective broad asset class. Returns shown are net of fund fees for and do not necessarily represent performance of specific mutual funds and/or exchange-traded funds recommended by The Retirement Planning Group. The performance of those funds may be substantially different from the performance of the broad asset classes and to proxy ETFs represented here. US Bonds (iShares Core US Aggregate Bond ETF); High‐Yield Bond (iShares iBoxx $ High Yield Corporate Bond ETF); Intl Bonds (Vanguard Total International Bond ETF); Large Growth (iShares Russell 1000 Growth ETF); Large Value (iShares Russell 1000 Value ETF); Mid Growth (iShares Russell Mid-Cap Growth ETF); Mid Value (iShares Russell Mid-Cap Value ETF); Small Growth (iShares Russell 2000 Growth ETF); Small Value (iShares Russell 2000 Value ETF); Intl Equity (iShares MSCI EAFE ETF); Emg Markets (iShares MSCI Emerging Markets ETF); and Real Estate (iShares US Real Estate ETF). The return displayed as “Allocation” is a weighted average of the ETF proxies shown as represented by 24% US Bonds, 10% International Bonds, 6% High Yield Bonds, 13.8% Large Growth, 13.8% Large Value, 3.6% Mid Growth, 3.6% Mid Value, 1.2% Small Growth, 1.2% Small Value, 16.8% International Stock, 4.2% Emerging Markets, 1.8% Real Estate.
* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.