U.S. equity markets closed the week on a decidedly positive note, with the S&P 500 up approximately 2.4%, marking its best weekly gain since June. The Nasdaq surged nearly 3.9%, reaching another record high, while the Dow Jones and Russell 2000 also posted gains of around 1.3% and 2.4%, respectively. Markets rallied despite renewed trade tensions, buoyed by solid earnings and growing expectations that the Federal Reserve may pivot toward rate cuts as early as September. Tech giants Apple and Nvidia notched sharp weekly returns of 13.3% and 5.2%, respectively, driving much of the weekly U.S. equity strength given their heavy market weighting.

On the Fed front, policymakers have shifted to a more dovish stance. Several Federal Reserve officials cited weakening labor-market signals, including downward revisions to job gains and a rise in unemployment to around 4.2%, which has increased openness to cutting interest rates at the September meeting. Adding to market expectations for easing, President Trump appointed Stephen Miran, the current chairman of the Council of Economic Advisors, to the Fed Board, filling the vacancy left by Adriana Kugler’s resignation.

The latest PCE figure stands at +2.6% year-over-year for June, up from 2.4% the prior month. The July CPI report is due August 12, with forecasts pointing to a modest 0.3% increase in core CPI—a key figure for gauging inflation pressures.

Last week marked the tail end of another strong corporate earnings season. According to FactSet, about 81% of S&P 500 companies beat revenue expectations and 82% surprised positively on earnings, well above historical averages. However, the bar set by analyst consensus forecasts may have been artificially low given analyst caution regarding the timing and magnitude of tariff headwinds. As a result, beats have been less rewarded by the market, while misses have punished with sharp sell-offs averaging -5.5% (compared to a 5-year average of -2.4%). Despite the volatile reactions, the S&P 500 is on track to post second quarter earnings growth of 11.6% year-over-year, per FactSet.

Trade tensions escalated. The Trump administration’s reciprocal tariffs took effect on Thursday, affecting imports from dozens of U.S. trading partners. Among the highest rates was a 39% duty on goods from Switzerland. In addition, the administration announced a 100% tariff on imported semiconductors, with an exemption for companies that commit to manufacture chips in the United States. The U.S.–China tariff truce is near expiry, and President Trump is scheduled to meet with President Putin, further injecting uncertainty into policy outlooks. Reflecting investor caution, equity funds saw $7.82 billion in outflows, while risk-off behavior drove investors toward money market and bond funds.

Looking ahead, this week will bring several crucial economic data points regarding inflation and strength of the consumer. Markets will monitor the July CPI report (August 12), followed by updates to retail sales, the Producer Price Index (August 14), and initial jobless claims, all of which will be instrumental in shaping Fed guidance and sentiment heading into September.

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