Weekly Market Update – August 29, 2025

Quick Takes

• A late-summer selloff on Friday turned the S&P 500 Index and Nasdaq Composite Index negative for the week, but only slightly so. Still, the S&P 500 managed to make its 19th and 20th record high closes before Friday’s fall. 
• The small cap Russell 2000 Index fell -0.5% on Friday but still eked out a positive week with a slight +0.2% gain. That marks three consecutive weeks that the Russell has outperformed the S&P, something that hasn’t happened since July 2024.  
• An upside surprise revision to Q2 GDP, and a sharp rebound in business spending, combined with a largely subdued PCE inflation reading left expectations on track for the Fed to cut interest rates in September (according to the CME FedWatch tool, odds for a cut are 89%).

Source: Bloomberg. Data as of August 29, 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.

Stocks notch new record highs but end the week down slightly

Equity markets pulled the ole switcheroo last week. The previous week had a downside biased week through Thursday, only to be reversed with a dramatic upside final session on Friday. But last week saw an upside biased week through Thursday, only to be reversed with a late-summer selloff on Friday. Although it was a particularly deep selloff, most major indices were down about one-half to one percent; it was enough to bring the S&P 500 Index and Nasdaq Composite Index into negative territory for the week, with declines of -0.1% and -0.2% respectively. One trend that didn’t change last week was the outperformance of small cap stocks over large caps. Although the small cap Russell 2000 Index fell -0.5% on Friday, it managed to eke out a positive week with a slight +0.2% gain. That marks three consecutive weeks that the Russell 2000 has outperformed the S&P 500, something that hasn’t happened since July 2024 – and December 2023 before that. The S&P was still able to notch its 19th and 20th record highs of the year on Wednesday and Thursday while topping the 6,500 level for the first time. 

The economic calendar was chock full last week, with an overall favorable combined outcome of better-than-expected economic expansion and non-accelerating inflation. The second estimate of Q2 Gross Domestic Product (GDP), the broadest measure of U.S. economic activity, showed growth for Q2 revised higher than expected to a +3.3% annualized rate, the fastest GDP growth since Q3 2023 when it hit +4.4%. Meanwhile, the Federal Reserve’s (the Fed) preferred inflation measure, Core Personal Consumption Expenditures (PCE) for July was reported Friday at a +0.3% increase, unchanged from June’s rate and in line with Wall Street expectations. Corroborating the strong GDP report, the Commerce Department’s report on Durable Goods showed Durable Goods Orders Excluding Transportation were up +1.1% in July, well above expectations for a +0.2% reading and a sharp increase from the prior month’s +0.3% level. Importantly, Core Capital Goods Orders (capital goods excluding volatile sectors like transportation and defense), a proxy for business spending, also rose +1.1%, well above expectations for +0.2% and up sharply from a -0.6% decline the prior month. The upside surprise GDP revision and sharp rebound in business spending, combined with largely subdued PCE readings left expectations on track for the Fed to cut interest rates in September, according to the CME FedWatch tool. 

A decline in semiconductor stocks following a lackluster earnings report from the world’s largest chipmaker, Nvidia, seemed to weigh on technology stocks late in the week. Though Nvidia reported decent top- and bottom-line results for Q2, which indicated spending on artificial intelligence (AI) was still accelerating, their revenue guidance was uninspiring. Moreover, other semiconductor companies, like Marvell Technology, had both disappointing earnings and forward guidance. The VanEck Semiconductor ETF dropped -2.9% on Friday, its worst one-day return since April 16 during the depths of the tariff turmoil, which dragged it to a -1.1% return for the week.

International equities fared worse than their U.S. counterparts. The MSCI EAFE Index (developed market non-U.S. stocks) was down -1.5% amid renewed tariff uncertainty, political instability in France, and fading hopes of peace between Russia and Ukraine. The MSCI Emerging Markets Index held up a little better but was still down -0.6% for the week after falling -0.5% the prior week. Mainland Chinese stock markets advanced, extending a recent rally, that Chinese stocks were up, but Hong Kong and Indian stocks were down.

U.S. Treasuries had positive returns for the week as short- and intermediate-term yields declined while long-term yields were up slightly (bond prices and yields move in opposite directions). News that President Trump intended to fire Fed Governor Lisa Cook following evidence of mortgage fraud helped push the yield curve steeper early in the week, and strong demand at several Treasury bill auctions also supported the market. The benchmark 10-year U.S. Treasury note yield slipped -3 basis points for the week, to end at 4.23%, while the 2-year Treasury yield fell -8 basis points to 3.62%. Both the Bloomberg U.S. Aggregate Bond Index and the Bloomberg Global Aggregate ex U.S. Bond Index (non-U.S. bonds) returned +0.2% for the week.

Chart of the Week

The U.S. economy expanded more than originally estimated in the second quarter of 2025. The third and final estimate of real Gross Domestic Product (GDP) for Q2 2025 was revised higher to +3.3% from the previous estimate of +3.0%, and above Wall Street expectations to tick up to +3.1%. Stronger than previously reported business investment drove the gains as capital expenditures (capex) for Artificial Intelligence (AI) surged, fueled further by the One Big Beautiful Bill Act (OBBB). Capex soared over +15% annualized in the first half of 2025. Specifically, software investment jumped to a 195% annualized rate. Consumer spending, the main engine of the economy, helped drive the revision up with Personal Consumption Expenditures (PCE) increasing +1.6%, matching Wall Street consensus estimates, and up from an unrevised +1.4% in the prior estimate. Net exports added +4.95 percentage points to growth in 2Q, as imports sank -29.8% while exports fell -1.3%. Government Spending fell to -0.2% from the prior estimate of +0.4% and is down from +0.6% in the first quarter. The Personal Saving Rate increased to +4.6%, up from 4.3% in the first quarter. The GDP Price Index (GDP Price Deflator) held steady at +2.0% as expected. The bottom line from the report is that it showed strong growth with steady inflation.

U.S. Economy Grew Faster in Second Quarter, New Estimate Shows

Gross Domestic Product (GDP), change from the previous quarter

Source: Commerce Department (actual); WSJ survey of economists (forecasts), The Wall Street Journal.

The Week Ahead

The Labor Day holiday-shortened week will be less busy than last week’s calendar, but still contains some potential market moving reports. Perhaps the most closely watched will be at the end of the week with Friday morning’s Nonfarm Payrolls report for August by the Bureau of Labor Statistics (BLS). Last month saw some surprisingly large negative revisions, and if jobs growth continues to be weak, odds will likely increase for a larger interest rate cut at the Federal Open Market Committee’s September meeting. Other economic data next week include the Institute for Supply Management’s (ISM) Manufacturing and Services Purchasing Managers’ Indexes (PMIs) on Tuesday and Thursday, respectively. The BLS also releases its Job Openings and Labor Turnover Survey (JOLTS) on Wednesday.

A strong second-quarter earnings season winds down, with two tech heavyweights reporting next week. Salesforce announces results on Wednesday and Broadcom releases earnings on Thursday. Shares of the AI chip supplier are up 27% this year. According to data from FactSet, with about 98% of the constituents of the S&P 500 Index having reported for Q2 2025, blended earnings per share (which combines reported data with estimates for those that have yet to report) show that earnings rose around +12% from the same quarter last year. 81% of companies have beaten consensus estimates, the highest percentage since Q3 2023.

Did You Know?

LULL IN LAYOFFS – The percentage of layoffs as a share of total employment in the U.S. in June fell to just 1%, not far from the record low of just under 0.9% reached during the robust job market of 2021. While unemployment remains low and employers haven’t been all that interested in laying people off, companies haven’t been all that interested in hiring, either. (Source: The Wall Street Journal)

BUYERS’ MARKET – The typical home sold in July spent a median 43 days on the market — 8 days longer than a year earlier. That’s the longest time on the market for houses sold in July since 2015. Homes sold in July were on the market the longest in Florida. (Source: Redfin)

TIP ANXIETY – 54% of diners now feel pressured by preset tipping screens, up +7 percentage points from a year ago. 44% of consumers say they have cut back on tipping at restaurants, and 29% would prefer to completely eliminate tipping screens. (Source:  Lightspeed)

This Week in History

RECORDS RECORDED – On August 27, 1955, the 1st edition of the Guinness Book of Records was published in the United Kingdom. (Source: The Wall Street Journal)

Economic Review

• The Commerce Department reported Durable Goods Orders for long-lasting items such as televisions, appliances, and transportation equipment fell -2.8% in July, primarily because of aircraft orders. Wall Street was expecting a -3.8% drop, and it follows an unrevised -9.4% drop the prior month. Durable Goods Orders Excluding Transportation were up +1.1%, above expectations for a +0.2% reading and up from the prior month’s +0.3% level (revised up from the originally reported +0.2%). More impressive, the important Core Capital Goods Orders (capital goods excluding volatile sectors like transportation and defense), a proxy for business spending, rose +1.1%, well above expectations for +0.2% and up sharply from the -0.6% decline the prior month (revised up from -0.8%). Core Capital Goods Shipments, which are factored into GDP, rose +0.7%, beating expectations for a +0.2% gain and up from the +0.4% reading the month before (revised up from +0.3%). The bottom line from the report is that business spending looks like it rebounded nicely in a generally positive all-around report. 
• The cost of goods and services rose +0.2% in July, matching expectations and down a tick from the prior month’s +0.3% (unrevised). For the year, the Personal Consumption Expenditure (PCE) Deflator (aka PCE Price Index) was up +2.6%, in line with expectations and unchanged from the prior month (unrevised). 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, also matching expectations and unchanged from the prior month (unrevised). Year-over-year, the Core-PCE Price Index was up +2.9%, a tick up from the unrevised +2.8% the prior month and a 5-month high, but in line above expectations. 
• Personal Spending increased +0.5% in July, matching expectations and up from +0.4% the prior month (after being revised higher from +0.3%). After adjusting for inflation, Real Personal Spending was +0.3% for the month, also in line with expectations and up from +0.1% the prior month (revised up from +0.3%). Autos accounted for more than one-third of the increase as Americans bought more new cars and trucks in July to try to avoid tariff-related price increases. Personal Income increased +0.4%, up from +0.3% the prior month (unrevised) and in line with expectations. Real Disposable Income was up +0.2% month-over-month, and up +2.0% year-over-year. The Personal Savings Rate was steady at +4.4%.
• The final reading of the July University of Michigan Consumer Sentiment Index dipped to 58.2 from the preliminary reading of 58.6 two weeks ago, where it was expected to stay. That is up from 61.7 the prior month. In the same period a year ago, the index stood at 67.9. The Current Economic Conditions component rose to 61.7 from the preliminary reading of 60.9 but is down from 68.0 the prior month. The Consumer Expectations component was down to 55.9 from the initial estimate of 57.2 and from the prior month’s final reading of 57.7. One-year inflation expectations slid down to 4.8% from the preliminary reading of +4.9%, but up from +4.5% from the previous month. The five-year inflation expectations declined to 3.5% from the +3.9% preliminary reading but up from +3.4% the prior month. The bottom line is that impressions of the economy slipped in many areas and persisted across income and age groups. 
• The Conference Board’s Consumer Confidence Index fell to 97.4 in August from an upwardly revised 98.7 in July (originally 97.2). That was above Wall Street expectations for an increase to 96.5. The Present Situation gauge fell to 131.2 from 132.8 the prior month after it was revised higher from the originally reported 131.5. The Expectations gauge — which reflects consumers’ six-month outlook — declined to 74.8 from 76.9 the prior month (revised higher to 74.4). 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 key takeaway from the report is that the overall confidence index has not changed much since May.
• The Federal Reserve Bank of Chicago reported that U.S. economic activity slipped in July with the Chicago Fed National Activity Index (CFNAI) down -0.19% from -0.18% the prior month (which was revised lower from the originally reported -0.10). That was well short of Wall Street expectations for a reading of -0.11. Readings below zero indicate below-trend-growth in the national economic activity. One of the four broad categories of indicators used to construct the index decreased from the prior month, but three made negative contributions. The Production and Income category fell back into negative territory with a contribution of -0.10, down from +0.01 the prior month. The Employment, Unemployment, and Hours category contributed -0.06, which was an improvement from -0.08 the prior month. The Personal Consumption and Housing category was flat (0.00), up from -0.01. The Sales, Orders, and Inventories category contribution was -0.02, up from -0.10 from the prior month. Overall breadth of the index worsened with 32 of the 85 individual indicators making positive contributions. Improvements fell too, with 42 indicators improving down from 53 the prior month. The CFNAI three-month moving average increased to -0.18 from -0.26 the prior month. During the last 20 years, there has been a 91% correlation between the three-month index level and the quarterly change in real GDP. 
• The Commerce Department reported New Home Sales were expected to rise very modestly (+0.5% or 630,000 units) last month, but instead they dropped -0.6% or 652,000 units (thanks in large part to a huge upward revision for the prior month from +0.6% to +4.1%, or from 627,000 to 656,000). New Home Sales data tend to be volatile month-on-month and are often revised. New-home sales remain far below the recent peak of over 1 million units in August 2020, but are running above the pre-pandemic average of 600,000. Year-over-year, sales of new homes were down -8.2% following a -2.2% annual rate the prior month. By region, sales in the South were down -3.5% for the month and -4.0% for the trailing year. In the Northeast sales were flat for the month and -23.5% for the year. The West was up +11.7% for the month and -19.2% for the year. The Midwest saw sales slow to -6.6% for the month and up +4.9% for the year. The Median New Home Price decreased -5.9% to $403,800 from the prior year. Prices have fallen on an annual basis every month this year except one. The months of supply at the current rate of sales was 9.2, unchanged from the prior month. The key takeaway from the report is that the pace of sales remained sluggish, with affordability constrained from higher mortgage rates and low supply of lesser-priced homes.
• The National Association of Realtors (NAR) reported that Pending Home Sales fell -0.4% in July after the prior month’s -0.8% drop (unrevised). That was worse than Wall Street expectations for a -0.2% decrease. Year-over-year sales were up +0.3%, better than expectations for a +0.1% annual rate and up from the prior month (-0.2% after being revised higher from -0.3%). From a regional perspective, the West was up +3.7%, but the Midwest fell -4.0%, the Northeast fell -0.6%, and the South fell -0.1%.
• According to the S&P Cotality Case-Shiller 20-City Home Price Index, U.S. housing prices declined -0.25% in June, an improvement from -0.32% in May (after being revised higher from -0.34%). That was lower than expectations for a -0.20% dip. It was the fourth consecutive monthly decline, the longest slide since 2022, and second longest in 13 years. On a year-over-year (YoY) basis, the 20-city index was up +2.14%, beating expectations of +2.09% but down from +2.81% the month before (revised higher from +2.79%), and the smallest annual gain since July 2023. Of the 20 cities tracked by the index, 17 fell over the month, and Phoenix was the weakest-performing market (-1.16%) for the month, while Chicago was the strongest (+0.24%). On an annual basis, house price appreciation was the strongest in New York and Chicago.
• The competing Federal Housing Finance Agency (FHFA) House Price Index (HPI) showed U.S. home prices slipped -0.2% in June, down from -0.1% the prior month after being revised higher from -0.2%. The results were a tick lower than Wall Street expectations of -0.1%. The government data showed home prices up +2.6% year-over-year, down from +2.8% the prior month. House prices were up in all of the nine regions on an annual basis but mixed for the month-over-month comparison. The housing market is slowing amid poor housing affordability, rising mortgage rates, and softening demand.
• The Texas Manufacturing Outlook Survey fell in August as the General Business Activity came in at -1.8, down from an unrevised +0.9 the prior month, and twice the expected decline of -0.9. The Production index, a key measure of state manufacturing conditions, declined to +15.3, still a decent pace of growth, but down from the surge to +21.3 the prior month, which was its highest reading in more than three years. New Orders, Shipments, and Unfilled Orders all saw improvements month-over-month. Labor market measures also improved, as Employment, Wages and Hours Worked all increased. The Company Outlook index slipped, and both Prices Paid and Prices Received increased. Most encouragingly, indicators of conditions Six Months Ahead were improved for a fourth straight month, with most components up sharply for the month. The Texas Service Sector Outlook Survey improved nicely for the month, rising to +6.8 from +2.0 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), fell to 41.5 in August from an unrevised 47.1 the prior month. That was well above Wall Street expectations for a 46.0 reading. Readings below the 50 level indicate contraction, and it has been in contraction territory for 21 consecutive months now. The decline was driven by a sharp pullback in New Orders, alongside falls in Employment, Production, and Order Backlogs. Prices Paid decreased -8.3 points for a second consecutive month.
• The Richmond Fed Manufacturing Survey improved to -7 from an unrevised -20 the prior month but remained firmly in contraction territory. That was much better than expectations for a drop to -11. All three component indexes increased but remain in contraction territory. The New Orders and Shipments components rose +19 to -6 and +13 points to -5, respectively. The Employment index moved up +5 points to -11.  After retreating in July, Prices Paid surged again in August. The Richmond Fed Service Sector Survey also improved, jumping to expansion territory at +6 from -8 the prior month.
• The Kansas City Fed Manufacturing Survey was unchanged at +1 in August, and matching expectations. The Production index rose to neutral (0) while Shipments and New Orders rose +3 points each to +6 and +5, respectively. Employment strengthened with the Number of Employees and the Average Employee Workweek both moving out of negative territory. The Prices Paid index declined, but the Prices Received index rose slightly. The Kansas City Fed Service Sector Outlook Survey rose to +4 from -5 the prior month (unrevised).
• Weekly MBA Mortgage Applications slipped -0.5% for the week ending August 22 following a -1.4% fall the prior week. The Purchase Index was up +2.2% after gaining +0.1% the prior week. The Refinance Index fell -3.5% after a -3.1% drop the prior week. The average 30-Year Mortgage Rate ticked up to 6.69% from 6.68% the prior week.
• Weekly Initial Jobless Claims fell -5,000 to 229,000 for the week ending August 22, better than expectations for 230,0000. The prior week was revised lower to 234,000 from 235,000. The number of people already collecting unemployment claims (i.e., Continuing Claims) fell -7,000 to 1,954,000 for the week ending August 15, better than expectations for 1,966,000. The prior week’s reading was revised lower to 1,961,000 from 1,972,000.

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.