Weekly Market Update – September 5, 2025

Quick Takes

• The S&P 500 Index touched all-time highs early on Friday, but stocks ultimately slid -0.3% on the day after the government reported disappointingly low nonfarm payrolls growth in August. The S&P 500 finished the holiday-shortened week up +0.3%.
• U.S. Treasuries fell sharply on the weak employment data, with the benchmark 10-year U.S. Treasury note yield falling -15 basis points over the week to a 5-month low of 4.07%. With yields down, the Bloomberg U.S. Aggregate Bond Index returned +0.9% for the week.
• The CME FedWatch tool is now pricing in a 92% probability for a quarter-point cut at the conclusion of the Fed’s next policy meeting on September 17. Odds have increased to 8% for a half-point cut.

Source: Bloomberg. Data as of September 5, 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.

A Weak Jobs Report Limits Stocks’ Gains While Bonds Jump

The S&P 500 Index touched all-time highs early on Friday, but stocks ultimately slid -0.3% on the day after the Labor Department reported that the US economy only added 22,000 nonfarm payrolls in August, well below Wall Street expectations of 76,600. Over the past three months, nonfarm payrolls have averaged a gain of only 29,000/month. Bond yields sank as futures markets priced in higher odds that the Federal Reserve will deliver multiple rate cuts in the months ahead. The CME FedWatch tool is now pricing in a 92% probability for a quarter-point cut at the conclusion of the Fed’s next policy meeting on September 17. Odds have increased to 8% for a half-point cut. The Fed also meets in October and December, and the probability of three quarter-point cuts through December spiked to 67.9%, while odds of a full point of cuts went from zero to 5.7%. The S&P 500 finished the holiday-shortened week up +0.3%. The small cap Russell 2000 Index finished the week +1.0% higher, its fourth straight week outperforming the S&P – something it hasn’t done since December 2023. The technology-heavy Nasdaq Composite Index led US equity indices with a weekly gain +1.1%. The Nasdaq got a boost from Alphabet (parent company of Google), which finished the week up +10.1% after an antitrust court decided it did not have to divest its Chrome browser and could still charge for search inclusion. Alphabet makes up about 20% of the Communication Services sector, which led all sectors with a +3.0% weekly advance. 

International equities were modestly higher as well. The MSCI EAFE Index (developed market non-U.S. stocks) edged up +0.2 after falling -1.5% the prior week. European stocks were down as headline inflation in the eurozone ticked up in August. Japanese equities were up +3.0% as automobile stocks were boosted by the US officially implementing a trade deal with Japan reached in July. The MSCI Emerging Markets Index outperformed the EAFE, rising +1.4% for the week after falling -0.6% the previous week. Those gains came despite mainland Chinese stock markets falling as investors took profits from its surge since April. 

U.S. Treasuries fell sharply on the weak employment data, with the benchmark 10-year U.S. Treasury note yield falling -15 basis points over the week to a 5-month low of 4.07%. The 2-year Treasury yield fell -11 basis points to 3.51% and the 30-year yield was down -17 basis points to 4.76%. Bond prices move in the opposite direction of yields. The Bloomberg U.S. Aggregate Bond Index returned +0.9% over the week and the Bloomberg Global Aggregate ex U.S. Bond Index (non-U.S. bonds) returned +0.3% for the week.

Chart of the Week

Job creation was at stall-speed again in August, adding to recent signs of the labor market weakening. Nonfarm payrolls increased by just +22,000 for the month, while the unemployment rate ticked up to +4.3% from +4.2% the prior month. Economists surveyed by Bloomberg were looking for a mild slowdown in payrolls to 75,000 after the July increase of 79,000 (which was revised higher by +6,000 from the initial report). More concerning is that prior month revisions also showed a net loss of -13,000 jobs in June after the prior estimate was lowered by -27,000. That marks the first negative month of payrolls since December 2020. Job additions continue to be led by the health care sector, which added +31,000 jobs, while social assistance also contributed +16,000 jobs. Hiring was held back by a payroll reduction in the federal government, which reported a decline of -15,000. While the pace of hiring was slow, average hourly earnings (AHE) increased +0.3% for the month, meeting expectations, though the annual gain of +3.7% was slightly below the forecast for +3.8%. Year-over-year, AHE rose +3.7%, down from the prior month’s unrevised +3.9% 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 34.2 after the prior month was revised down from 34.3, which is where it was expected to remain. Labor-Force Participation was up a tick to 62.3% from 62.2% where it was expected to stay. While the establishment survey showed weak job creation, the more volatile household report, used to calculate the unemployment rate, held better news, showing an increase of +288,000. The bottom line was that job growth and revisions remain far below expectations and the first half’s trend levels. However, it did fortify market expectations for a September 17 Fed rate cut, including higher odds for cuts in October and December (there is no FOMC meeting in November).

Payrolls rose just 22,000 in August, much less than expected

Monthly job creation in the U.S., Jan. 2022–Aug. 2025

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

The Week Ahead

It is a light week for economic data, but it includes several highly anticipated reports. The Bureau of Labor Statistics (BLS) will release more employment data on Tuesday with the preliminary revision of jobs growth for April 2024 through March 2025. After the last two monthly Employment Situation Reports from the BLS that showed unexpected significant downward revisions, more are expected in this release. If severe enough, it could put the prospects of a 50-basis point rate cut in play at the September 16-17 Federal Open Market Committee (FOMC) monetary-policy meeting. A 25-basis point (quarter-point) rate cut is all but assured at that meeting, according to the CME FedWatch tool. The BLS also releases inflation data with the Producer Price Index (PPI) on Wednesday and the Consumer Price Index (CPI) on Thursday. Inflation data has taken a back seat to concerns over a weakening labor market since Fed Chair Jerome Powell’s late August speech at Jackson Hole, Wyoming. The University of Michigan releases its preliminary measure of September Consumer Sentiment on Friday.

Earnings reports will be sparse, but there will be numbers from Casey’s General Stores on Monday, Oracle and Gamestop on Tuesday, Chewy on Wednesday, as well as Adobe and Kroger on Thursday.

Did You Know?

AI TOOK MY JOB – Based on ADP payroll data, adoption of generative AI tools in late 2022 has resulted in a -13% relative decline in employment for workers aged 22-25 in the most AI-exposed fields. Employment for older workers in the same fields and similarly aged workers in non-AI exposed occupations have seen stable or even increasing employment. (Source: Stanford).

FINANCES WEAKENING – 53% of Americans say their personal finances have deteriorated in the last six months, compared to 49% in the spring. 13% of American consumers failed to make their minimum monthly credit card payment in August, compared to 8% in the spring. (Source: National Foundation for Credit Counseling).

CHANGING OF THE GUARD – Due to lower inventory levels in the Northeast and Midwest, home prices in June rose 4% year-over-year in New York, Chicago, Detroit, Cleveland, and Boston. Prices in once-frothy Southern and Western cities like San Francisco, Dallas, Tampa, and Denver are now down year-over-year. (Source: S&P CoreLogic)

This Week in History

THAT WAS THEN, THIS IS NOW – On September 4, 2012, stock in Facebook (now Meta Platforms) hit a record-low close of $17.73, valuing the fledgling social-media company at less than $38 billion. It’s worth $1.9 trillion today. (Source: The Wall Street Journal)

Economic Review

• The Institute for Supply Management’s (ISM) Manufacturing PMI improved to 48.7% in August from an unrevised 48.0% the prior month. That was below Wall Street consensus expectations for it to rise to 49.0% and marks the sixth 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, jumped to 51.4% from 47.1% the prior month — its first positive reading in seven months. The New Export Orders index improved to 47.6% from 46.1%. Employment inched up to 43.8% from 43.4% but has been in contraction for seven months. The Production barometer fell into contraction territory, sinking to 47.8% from 51.4%. The Prices index, a measure of inflation, declined to 63.7% from 64.8%. The ISM Services PMI increased to 52.0% from 50.1%, beating expectations for an improvement to 51.0%. Service-oriented companies, such as restaurants and retailers, employ the majority of Americans. The New Orders component surged to 56.0% from 50.3% and the Business Activity/Production component jumped to 55.0% from 52.6%. Imports jumped to 54.6% from 45.9%. The Employment component improved to 46.5% from 46.4%. The Prices index slid to 69.2% from 69.9%. Overall, the report showed a mixed bag of results with nice improvements in New Orders but ongoing contractions in Employment and historically high prices. 
• Unlike the competing ISM Manufacturing PMI, the S&P Global U.S. Manufacturing PMI crossed into expansion in August, rising to 53.0 from 49.8 the prior month. That was slightly down from the 53.3 flash reading two weeks prior, where it was expected to stay, but still marked the strongest improvement in operating conditions since May 2022. A surge in Production drove the improvement, with production rising to its steepest degree since May 2022. Growth was also helped by a combination of higher New Orders and Inventories, although inventory accumulation was in part reflective of worries over future price developments and possible supply constraints in the months ahead. On the cost front, Input Prices accelerated at the second-sharpest pace in the past three years (surpassed only by June), with tariffs overwhelmingly reported for the price pressures. Despite survey respondents commenting on an uncertain business outlook, especially around tariffs, overall confidence about future output improved since July. Demand, especially from domestic markets, was seen as picking up in the year ahead. Plans to invest in new plants and product lines were also noted by some manufacturers. Some positivity regarding future production, alongside a rise in present sales, led to an increase in Employment.
• The S&P Global U.S. Services PMI continued to expand in August, but at 54.5 was down a bit from July’s seven-month high of 55.7, and down from the 55.4 preliminary reading, where it was expected to stay. New Orders expanded for the 16th consecutive month and at the second highest of the year. But New Export Orders fell further as worries over tariffs and an uncertain business environment limited gains. New export orders have now decreased in each of the past five months, although the last two months’ the reduction was only marginal and the slowest in this sequence. Latest data signaled an increase in Employment levels for a sixth month in a row. Payroll expenses helped to push up their overall Input Costs, and tariffs were also frequently mentioned as a driver of inflation. Output Prices declined a little from the prior month but remain elevated. Inflation concerns and ongoing uncertainty related to federal policies (again, most notably around tariffs) weighed on Business Sentiment in August, with confidence about future activity down to a four-month low and amongst the weakest of the past three years. Still, firms typically expect activity to rise from present levels over the next year.
• The Job Openings Labor Turnover Survey (JOLTS) showed that Job Openings fell again in July to the second-lowest level since the pandemic. According to Bureau of Labor Statistics data, job openings decreased to 7.181 million from 7.357 million in June (revised down from 7.437 million). The median estimate in a Bloomberg survey of economists called for 7.380 million openings. The ratio of Job Openings to Unemployed Workers was 0.99, down from 1.05 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 1.1%, below the 1.4% annual average from 2010 to 2019. The Hiring Rate was also unchanged at 3.3%, remaining at the lowest level since November. The hiring rate typically ranges from 3.7% to 4.0% in a strong economy. 
• The Commerce Department reported that Factory Orders dipped -1.3% in July, matching expectations, and up sharply from -4.8% the prior month (unrevised). Factory Orders Excluding Transportation were up +0.6%, matching expectations and up from +0.4% the prior month (unrevised). Durable Goods Orders for long-lasting items such as televisions, appliances, and transportation equipment fell -2.8%, in line with expectations from where they were in the advance reading two weeks earlier. That was up sharply from the -9.4% drop in June. Durable Goods Orders Ex Transportation were up +1.0%, just shy of expectations for +1.1% which was the reading from the advanced reading, and up from +0.2% the prior month. The important Core Capital Goods Orders (capital goods excluding volatile sectors like transportation and defense), a proxy for business spending, was up +1.1%, unchanged from the advance reading, and a big improvement from June’s -0.6% reading. Core Capital Goods Shipments, which are factored into GDP, were up +0.7%, as expected from the advance reading, and up from the prior month’s +0.3% rise.  The inventory-to-shipments ratio slipped to 1.56 from 1.57.
• According to the U.S. Bureau of Economic Analysis, the U.S. Trade Deficit for July widened to $78.3 billion from $59.1 billion in June (revised from -$60.2 billion). That was worse than the -$77.9 billion deficit expected. Smaller trade deficits help contribute to economic growth, while larger deficits inhibit growth. This significant reduction was primarily attributed to a notable decline in Imports, which increased +5.9% as industrial supplies, materials, and consumer goods increased while automotive vehicles, parts, and engines fell. Exports saw a slight increase of +0.3% as capital goods and automotive vehicles, parts, and engines were up. The key takeaway from the report is that the surge in imports reflects an easing of some of the tariff pressures that had been applied by the announcement of higher reciprocal rates. The downside, however, is that the net export component will be a negative component in the calculation of Q3 GDP.
• The Commerce Department reported that Construction Spending slipped -0.1% in July, matching expectations, and an improvement from the unrevised -0.4% the prior month. Over the past year, construction spending was down -2.8%, a tick up from the -2.9% annual rate the previous month. Total Private Construction was up +0.3%, up from the -0.5% drop the month before. Total Public Construction was up +0.1%, up from -0.2% the prior month. Private Residential Spending increased +0.1% after falling -0.7% the previous month, and Private Nonresidential Spending was down -0.5%, down from -0.3% the prior month. The report showed that Single-Family Construction was up +0.1%, a big improvement from the prior month’s -1.8% drop, but Multifamily Construction worsened to -0.4% after a -0.1% decline the prior month. The key takeaway is that residential spending increased after six straight negative readings, including a positive reading in single-family construction.
• Weekly MBA Mortgage Applications slipped -1.2% for the week ending August 29, following a -0.5% dip the prior week. The Purchase Index was down -3.1% after gaining +2.2% the prior week. The Refinance Index rose +0.9% after a -3.5% drop the prior week. The average 30-Year Mortgage Rate slipped to 6.64% from 6.69% the prior week, the lowest since April 4.
• Weekly Initial Jobless Claims rose +8,000 to 237,000 for the week ending August 29, worse than expectations for 230,0000. The prior week was unrevised. The number of people already collecting unemployment claims (i.e., Continuing Claims) fell -4,000 to 1,940,000 for the week ending August 22, better than expectations for 1,959,000. The prior week’s reading was revised lower to 1,944,000 from 1,954,000.

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.