Weekly Market Insights 09/08/2025

Market Recap:

Tech Strength –

Labor Market Weakness

U.S. equities finished mixed last week, with the S&P 500 edging slightly higher and the Nasdaq up more than 1%, while the Dow slipped a tad. Once again, smaller stocks performed better than their larger peers. The outperformance of the Nasdaq was driven by strength in technology and communication services, as Alphabet (aka Google) surged on favorable antitrust rulings, while Broadcom beat expectations with robust AI-driven revenue growth. Consumer discretionary names also advanced, with Tesla gaining on news of a proposed $1 trillion pay package for Elon Musk (that was not a typo!) and early rollout of robotaxi services. By contrast, energy stocks weighed on the broader market, falling roughly 3.5% on weaker commodity trends and growth concerns.

Markets were heavily influenced by a larger-than-anticipated rise in initial weekly jobless claims, a disappointing August ADP report, and a much softer-than-expected U.S. jobs report, which showed just 22,000 positions added in August and unemployment ticking up to 4.3%. This data reinforced expectations that the Federal Reserve may deliver multiple rate cuts in the coming months. Treasury yields fell sharply in response, as the 10-year yield dropped under 4.1%. Lower yields boosted rate-sensitive sectors and lifted investor appetite for risk, while simultaneously putting pressure on the dollar.

The weaker dollar and dovish Fed outlook sparked a surge in precious metals, with gold climbing above $3,600 per ounce to fresh record highs as central banks and investors sought alternatives to U.S. Treasuries. Oil gained modestly as OPEC+ signaled slower production increases while industrial metals painted a mixed picture with copper posting a small gain for the week.

Last Week’s Summary
Last week’s moves came down to a combination of cooling U.S. labor data, shifting Fed expectations, and sector-specific catalysts. Tech and consumer stocks thrived on strong earnings and corporate news, gold and bonds rallied on lower yields, and energy struggled despite modest oil gains. Investors are now looking ahead to inflation data and Fed communications for confirmation of the rate-cut path.

Source: Stockcharts.com

The Week Ahead:  Inflation Takes Center Stage

This week’s market focus turns squarely to inflation data, which could dictate the Federal Reserve’s next move. Tuesday, we will get the annual revision to Non-Farm Payrolls — with the messy data that’s been coming out of the BLS, this is sure to be interesting (Remember – President Trump just fired the Commissioner of the same U.S. Bureau of Labor Statistics for poor reporting). On Wednesday, the Producer Price Index (PPI) will provide an early read on wholesale price trends, followed by Thursday’s highly anticipated Consumer Price Index (CPI) report. Economists are apparently expecting a modest pickup in core inflation, partly reflecting tariff impacts, and the release will be pivotal in shaping expectations ahead of the Fed’s September 17th meeting. Weekly jobless claims and the University of Michigan consumer sentiment survey will help round out the economic picture, offering a clearer sense of how households are faring amid slowing job growth and shifting price pressures.

Broad Overview: High Valuations, Some Economic Cracks and Positive Technicals

Markets remain caught between optimism over potential Fed easing and lingering concerns about economic resilience. Equity valuations are stretched by historical standards, with the S&P 500 trading near record highs despite mixed earnings trends and forward guidance. The backdrop of elevated multiples makes stocks particularly sensitive to incoming data on economic growth and inflation. Tech and growth names continue to lead the stock market, but their momentum tends to depend heavily on the path of interest rates and whether investors remain willing to pay up for future earnings streams.

Economically, inflation remains a central driver, and while consumer price pressures have moderated from their peaks, they remain stubborn in key categories. Importantly, signs of cost increases often emerge first in the Producer Price Index (PPI), reflecting input and supply-chain dynamics, before showing up in consumer inflation measures like CPI. That sequence will be closely watched this week as investors look for early warnings of a re-acceleration. Treasury yields have already shifted lower on expectations of Fed rate cuts, but volatility in bond markets highlights the uncertainty around whether inflation will cooperate with the Fed’s timeline.

At the same time, the labor market is showing cracks. Job creation slowed sharply in August, unemployment ticked higher, and wage growth has cooled. These trends typically suggest the economy is losing momentum, which complicates the Fed’s balancing act: easing too soon risks reigniting inflation, while waiting too long could deepen labor market weakness. Consumer spending, still the engine of U.S. growth, has held up but is showing more signs of fatigue as borrowing costs stay elevated and confidence has softened.

From a technical perspective, however, the market’s trends remain positive. Major indexes are currently trading above key moving averages, and breadth (the participation of more stocks in the rally) has been expanding, suggesting underlying strength beyond just the mega cap tech names. That resilience needs to be respected, even in the face of macro uncertainties. Together, valuations, yields, inflation, consumer health, and now improving market breadth, are presently setting the tone for the next leg of market direction. Staying on top of developing trends and not overreacting to any one data point while adhering to one’s overall risk policy will be prudent to success in the coming months.

Should you have any questions regarding your current strategy or the markets in general, please reach out to your CIAS Investment Adviser Representative.