Nvidia and UnitedHealth drive shifts in US market dynamics
The US Tech 100 (Nasdaq 100) and the US 500 (S&P 500) finished lower on Friday, while the blue-chip Dow Jones reached a record high – about eight weeks after the Nasdaq and S&P 500 achieved their own milestones. The rally in the Dow was supported by gains in UnitedHealth Group, following Berkshire Hathaway’s disclosure of a major stake. For the week, the Dow gained 770 points, or 1.74%. The S&P 500 rose 0.94% to 6,449, while the Nasdaq 100 added just 0.43%.
Investors are rotating out of the technology sector, prompted by high valuations, softer earnings for Advanced Micro Devices (AMD), and recent government export taxes on Nvidia and AMD. The Dow and the Russell 2000 are seen as better positioned to benefit from a robust economy, reduced trade uncertainty, and the outlook for easier monetary policy, explaining their outperformance last week.
Retail sales and consumer sentiment
Economic data released on Friday was generally positive. July retail sales data was strong, with the retail control group, which contributes to gross domestic product (GDP), rising 0.5% month-on-month (MoM) versus the 0.4% expected. June’s data was also revised upwards from 0.5% to 0.8%.
However, this was offset by a softer-than-expected University of Michigan consumer sentiment index, which fell to 58.6 in August from 61.7 prior, well below the expected 62. Concerns around stagflation arose as one-year-ahead inflation expectations surged to 4.9% from 4.5%, and long-term expectations increased to 3.9% from 3.4%. The pricing of a September Federal Reserve (Fed) rate cut fell to around 84%, down from 105% after last Tuesday’s inline consumer price index (CPI) print.
Zooming out, large and unprecedented shifts in US trade and immigration policy are expected to weigh on US GDP. Despite this, a healthy underlying cyclical backdrop, combined with additional fiscal and monetary easing, is expected to support growth.
Looking ahead
Chair Powell’s comments at this week’s Jackson Hole Symposium will be closely scrutinised. While we think the Fed will deliver an insurance-style 25 basis point (bp) rate cut in September, Fed Chair Powell will likely remain non-committal and data-dependent, especially with one more payroll and CPI report due before the Federal Open Market Committee (FOMC) meeting on Wednesday, 17 September.
- Earnings season highlights
The second quarter (Q2) of 2025 earnings season continues this week, with reports scheduled from major retailers Home Depot, Target, and Walmart, before Nvidia’s earnings report on 28 August, which will conclude this earnings season.