The S&P 500 Index ($SPX) (SPY) on Friday closed down by -0.64%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down by -0.20%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down by -1.22%.  September E-mini S&P futures (ESU25) fell -0.68%, and September E-mini Nasdaq futures (NQU25) fell -1.31%. 

Stock indexes retreated on Friday, weighed down by weakness in technology stocks.  Marvell Technology tumbled more than -18% to lead semiconductor stocks lower after reporting that Q2 data center revenue missed estimates.  Also, Dell Technologies fell more than -8% to lead computer hardware stocks lower after reporting tighter profit margins on AI servers.   

Stocks added to their losses after the August MNI Chicago PMI fell more than expected and after the University of Michigan's US August consumer sentiment index was unexpectedly revised lower.  Also, inflation pressures remain sticky after the US July core PCE price index, the Fed's preferred inflation gauge, rose by the most in five months.

On the positive side for stocks, US consumer demand remains resilient after July personal spending rose by the most in four months.  Also, the University of Michigan's inflation expectations were unexpectedly revised lower. In addition, dovish comments from Fed Governor Waller and San Francisco Fed President Daly were bullish for stocks as they signaled their support for Fed rate cuts. 

US July personal spending rose +0.5% m/m, the most in four months, and right on expectations.  July personal income rose +0.4% m/m, right on expectations.

The US July core PCE price index, the Fed's preferred inflation gauge, rose to a 5-month high of +2.9% y/y from +2.8% y/y in June, right on expectations but well above the Fed's 2% inflation target.

The US Aug MNI Chicago PMI fell -5.6 to 41.5, weaker than expectations of 46.0.

The University of Michigan's Aug US consumer sentiment index was revised lower by -0.4 to 58.2, weaker than expectations of no change at 58.6.

The University of Michigan Aug 1-year inflation expectations were unexpectedly revised slightly lower by -0.1 to 4.8%, weaker than expectations of an upward revision to 5.0%. The Aug 5-10 year inflation expectations were revised lower by -0.4 to 3.5% from the previously reported 3.9%.

Late Thursday, Fed Governor Christopher Waller stated that he supports a 25-bp rate cut at the September FOMC meeting and anticipates additional rate cuts over the next three to six months.  He said, "With underlying inflation close to 2%, market-based measures of longer-term inflation expectations firmly anchored, and the chances of an undesirable weakening in the labor market increased, proper risk management means the FOMC should be cutting the policy rate now."

San Francisco Fed President Mary Daly signaled she's open to lower interest rates soon, saying, "It will soon be time to recalibrate policy to better match our economy." She added that tariff-related price increases "will be a one-off" and it "will take time before we know that for certain, but we can't wait for perfect certainty without risking harm to the labor market."

Regarding tariffs, President Trump on Monday threatened to impose new tariffs and export restrictions on advanced technology and semiconductors in retaliation against other nations' digital services taxes that hit American companies.  Last week, Mr. Trump widened steel and aluminum tariffs to include more than 400 consumer items that contain the metals, such as motorcycles, auto parts, furniture components, and tableware.  The change went into effect last Monday and did not exclude goods already in transit.  

In other recent tariff news, Mr. Trump on August 13 extended the tariff truce with China for another 90 days until November.  On August 6, Mr. Trump announced that he will double tariffs on US imports from India to 50% from the current 25% tariff, due to India's purchases of Russian oil.  According to Bloomberg Economics, the average US tariff will rise to 15.2% if rates are implemented as announced, up from 13.3% earlier, and significantly higher than the 2.3% in 2024 before the tariffs were announced.

Federal funds futures prices are discounting the chances for a -25 bp rate cut at 88% at the next FOMC meeting on September 16-17.  The markets are discounting the chances at 55% for a second -25 bp rate cut at the following meeting on October 28-29.

Earnings reports indicate that S&P 500 earnings for Q2 are on track to rise +9.1% y/y, much better than the pre-season expectations of +2.8% y/y and the most in four years, according to Bloomberg Intelligence.  With Q2 earnings season winding down, over 95% of S&P 500 firms having reported Q2 earnings, about 82% of companies exceeded profit estimates. 

Overseas stock markets on Friday settled mixed.  The Euro Stoxx 50 fell to a 2-week low and closed down -0.83%.  China's Shanghai Composite closed up +0.37%.  Japan's Nikkei Stock 225 closed down -0.26.

Interest Rates

September 10-year T-notes (ZNU5) Friday closed down -2.5 ticks, and the 10-year T-note yield rose +2.4 bp to 4.227%. 

Sep T-notes posted modest losses on Friday after the US July core PCE price index, the Fed's preferred inflation gauge, rose to a 5-month high of +2.9% y/y.  T-notes also have carryover pressure from weakness in 10-year German bunds after the German Aug CPI rose more than expected.

Losses in T-notes were limited after Fed Governor Christopher Waller said he supports a 25 bp rate cut at the September FOMC meeting and anticipates additional rate cuts over the next three to six months.  Also, the University of Michigan's Aug inflation expectations were revised lower, a dovish factor for Fed policy.

European government bond yields on Friday moved higher.  The 10-year German bund yield rose +2.9 bp to 2.724%.  10-year UK gilt yield rose +2.2 bp to 4.722%.

The ECB's July 1-year CPI expectations remained unchanged from June at +2.6%, which is stronger than the expected +2.5%.  The ECB Jul 3-year CPI expectations unexpectedly climbed to +2.5%, stronger than expectations of no change at +2.4%.

German Aug unemployment unexpectedly fell by -9,000, showing a stronger labor market than expectations of +10,000.

German Jul retail sales fell -1.5% m/m, weaker than expectations of no change and the biggest decline in almost two years.

German Aug CPI (EU harmonized) rose +2.1% y/y, stronger than expectations of +2.0% y/y.

Swaps are discounting the chances at 2% for a -25 bp rate cut by the ECB at the September 11 policy meeting.

US Stock Movers

Chipmakers sold off on Friday, led by an -18% plunge in Marvell Technology (MRVL) to lead losers in the Nasdaq 100 after it reported Q2 data center revenue of $1.49 billion, below the consensus of $1.52 billion.  Also, Lam Research (LRCX) closed down more than -4%, and Broadcom (AVGO), Nvidia (NVDA), and Advanced Micro Devices (AMD) closed down more than -3%.  In addition, ARM Holdings Plc (ARM), ASML Holding NV (ASML), Applied Materials (AMAT), KLA Corp (KLAC), Intel (INTC), ON Semiconductor Corp (ON), and Micron Technology (MU) all closed down by more than 2%.   

Dell Technologies (DELL) closed down more than -8% to lead losers in the S&P 500, and makers of computer hardware are lower after reporting Q2 operating income of $2.28 billion, below the consensus of $2.30 billion.  Also, Super Micro Computer (SMCI) closed down more than -5% and Hewlett Packard Enterprise (HPE) closed down more than -2%. 

Ulta Beauty (ULTA) closed down more than -7% despite reporting better-than-expected Q2 net sales after it warned of a potential pullback by consumers. 

Caterpillar (CAT) closed down more than -3% to lead losers in the Dow Jones Industrials after warning that it faces a larger-than-anticipated tariff headwind of as much as $1.8 billion this year. 

Dollar General (DG) closed down more than -2% despite reporting better-than-expected Q2 EPS after it said it expects "more pressure" in selling, general, and administrative (SG&A) expenses in Q3 and warned of tougher gross margin comparison in Q4. 

Cryptocurrency-exposed stocks fell Friday after the price of Bitcoin (^BTCUSD) dropped more than -3% to a 7-week low.  As a result, Galaxy Digital (GLXY) closed down more than -4%, and Coinbase Global (COIN) and Strategy (MSTR) closed down more than -1%. 

Autodesk (ADSK) closed up more than +9% to lead gainers in the S&P 500 and Nasdaq 100 after reporting Q2 net revenue of $1.76 billion, better than the consensus of $1.72 billion, and forecasting Q3 revenue of $180 billion-$1.81 billion, stronger than the consensus of $1.77 billion.

Ambarella (AMBA) closed up more than +16% after reporting Q2 adjusted EPS of 15 cents, well above the consensus of 6 cents, and raising its 2026 revenue growth estimate to 31%-35% from a May forecast of +19%-25%. 

Affirm Holdings (AFRM) closed up more than +10% after reporting Q4 revenue of $876.4 million, well above the consensus of $838.6 million. 

SentinelOne (S) closed up more than +6% after raising its 2026 revenue forecast to $998 million-$1 billion from a previous forecast of $996 million-$1 billion. 

Celsius Holdings (CELH) closed up more than +5% after PepsiCo increased its stake in the company to approximately 11% on an as-converted basis and will nominate an additional director to serve on Celsius Holdings' board of directors.

Managed healthcare stocks gained on Friday.  Molina Healthcare (MOH) closed up more than +3%, and Elevance Health (ELV) and Centene (CNC) closed up more than +2%.  Also, UnitedHealth Group (UNH) closed up more than +2% to lead gainers in the Dow Jones Industrials.  In addition, Humana (HUM) and CVS Health (CVS) closed up more than +1%.    

Earnings Reports(9/2/2025)

Academy Sports & Outdoors Inc (ASO), HealthEquity Inc (HQY), Signet Jewelers Ltd (SIG), Zscaler Inc (ZS).