Weekly Market Performance — August 1, 2025

Markets Blog

David Matzko, LPL Research

LPL Research provides its Weekly Market Performance for the week of July 28, 2025. After a so-called ‘perfect week’ for the S&P 500 last week, U.S. equities closed a busy week for markets in the red. After hovering near the weekly flatline for much of the week, stocks dropped on Friday following fresh U.S. tariffs and negative surprises in July economic data. Overseas, European and Asian stocks also declined as sentiment was dented by U.S. trade developments. Treasury yields pulled back sharply on Friday to seal weekly gains for the Treasury market on bolstered rate cut bets, while the dollar capped its best month of the year. The broader commodities complex declined, weighed down by a historic repricing of U.S.-traded copper

Index Performance

U.S. and International Equities

U.S. Equities: An action-packed week for capital markets pressured all three major U.S. averages, snapping the S&P 500’s recent winning streak. Quite a few moving pieces were in play nearly every session, with another slice of trade deal clarity arriving over the weekend with the European Union (EU) and Washington, D.C., striking a trade deal. However, the S&P 500 broadly treaded water early this week before moving lower Wednesday, reversing gains from positive quarterly economic data after Federal Reserve (Fed) Chair Jerome (Jay) Powell hinted that rates may stay elevated after holding them steady at the July meeting. Stocks reacted negatively to the decision and Powell’s remarks against the backdrop of the first two Fed Governor dissents since 1993. Stocks reversed strong morning gains again Thursday amid dampened rate cut expectations and month end dynamics. Nonetheless, rate cut bets received a lift Friday as stocks sold off in response to Washington’s latest tariff barrage, which raised the effective tariff rate above 15%. Also denting risk appetite was a greater-than-expected slowdown in non-farm payrolls growth in July and negative revisions to May and June data, alongside a ramp in U.S.-Russia geopolitical tensions.

In earnings, a batch of Magnificent Seven reports arrived this week. Both Meta (META) and Microsoft (MSFT) delivered upbeat quarterly reports and reiterated AI spending plans, bolstering artificial intelligence (AI) optimism Thursday morning. Following Thursday’s close Amazon (AMZN) and Apple (AAPL) delivered second quarter results with Amazon posting underwhelming margins and AWS growth to send shares lower Friday, while Apple delivered strong quarterly iPhone sales and earnings numbers.

International Equities: European equities also ended lower over the last five days. Trade jitters lingered ahead of the August 1 tariff deadline, and as European officials aim for additional carve-outs on the EU trade deal. On the macro front, preliminary second quarter data suggested the broader Eurozone economy expanded more than expected but remained well below first quarter results, while consumer inflation data for July steadied in-line with the June print. All the while earnings season powered forward, with some high-profile reports from early in the week including AstraZeneca delivering in-line core operating profit and standing pat on fiscal year guidance and Barclays surpassing earnings estimates and announcing a £1 billion buyback plan.

After back-to-back weekly gains, Asian equities ended lower in the worst week for the region since April. Hong Kong led declines, sliding sharply on Thursday following unexpected weakness in manufacturing data and the Politburo disappointing with no new stimulus measures, before extending losses on Friday. China received a trade deadline extension after officials met for two days in Stockholm, but trade remained front and center for most of the region. Japan outperformed after securing a better-than-feared 15% U.S. levy and on hopes a Bank of Japan (BOJ) rate cut is around the corner, while South Korea erased week-to-date gains Friday in response to a 15% tariff rate and government plans to hike capital gains and corporate taxes. Taiwan ended slightly higher after paring gains to end the week on an elevated 20% rate. India also fell, extending weekly losses on Friday after the White House issued a 25% tariff rate due to struggling negotiations around agricultural goods.

Fixed Income, Currency, and Commodity Markets

Fixed Income: The Bloomberg U.S. Aggregate Index traded higher this week. The monetary policy rate-sensitive two-year yield ended roughly 21 basis points lower, while the 10-year yield ended 16 basis points lower. Treasuries held gains through the middle of the week, before rallying Friday as rate cut bets jumped from around a 35% chance of two cuts in 2025 to fully pricing in two Fed cuts this year. Shorter-term Treasuries soared (prices higher, yields lower) on July payrolls data and the sharp downward revisions to June data, igniting concerns of a labor market slowdown and that the Fed stuck to its ‘wait-and-see' stance a little too long. Friday’s price action marked the largest drop in yields for two-year notes since last August, as traders boosted bets that central bankers will deliver an interest rate cut as soon as next month.

In other news, at Wednesday’s quarterly refunding announcement (QRA) the Treasury Department decided to generally keep coupon paying securities in line with recent issuance trends despite concerns about relying too heavily on short-term Treasury Bills (T-Bills). Treasury also announced a number of changes to the buyback program, including doubling the frequency of long-end operations. While this will incrementally shorten the maturity of Treasury’s debt stock, the impact should be marginal.

Commodities and Currencies: The Bloomberg Commodities Index traded lower this week, with the historic repricing of U.S. traded copper the biggest story of the week in the commodities complex. Copper traded on New York’s Comex commodities exchange sank over 23% as the U.S. tariff premium over London-traded copper dissipated after the White House announced refined copper will be excluded from 50% levies on the red metal — dragging on the broader commodities complex. West Texas Intermediate (WTI) crude prices held on to a solid weekly advance despite downward pressure on Friday from global growth concerns and another potential OPEC+ output increase at this weekend’s meeting. Potential supply disruption concerns stemming from U.S. pressure on Russia to reach a ceasefire with Ukraine by August 8 sparked supply disruption concerns, plus the White House stated that India will be penalized for importing Russian energy, both supporting prices this week. Gold found positive territory Friday, supported by weak U.S. data and bolstered rate cut bets. In currencies, the dollar posted six-straight gains in its weekly advance after closing its best month of the year, receiving bids on U.S. economic resiliency, before clawing back some of the advance on rising rate cut bets due to the disappointing economic data on Friday.

Economic Weekly Roundup

Revisions Reveal Cracks in the Labor Market. Businesses added 73,000 to their payrolls in July, after a revised gain of 14,000 in June. Investors will focus on the surprise downward revisions to both June’s and May’s estimates. Downward revisions are common during periods of economic slowdowns. June’s initial print was 147,000 but revised down to 14,000. May was also revised downward. With these revisions, employment in May and June combined is 258,000 lower than previously reported. The unemployment rate rose to 4.2% from 4.1% the previous month. The unemployment rate has remained in a narrow range of 4.0% to 4.2% since May 2024, adding some stability to labor conditions. Over the month, employment continued to trend up in health care and in social assistance. The Federal government continued to lose jobs. Over the past 12 months, average hourly earnings have increased by 3.9%, outpacing the rate of inflation and giving consumers some ability to spend.

The downward revisions were the most revealing in this month’s job report. As noted earlier, business demand for labor is slowing, adding uncertainty to the growth trajectory for the latter half of this year. Given the weakness, investors will recalibrate rate expectations. This solidifies our view that the Fed could cut rates in September.

A First Since Early ‘90s. For the first time since 1993, two members of the Federal Open Market Committee (FOMC) dissented from the majority. (Full disclosure: a single dissent has been more common.) Not surprisingly, committee members Michelle Bowman and Christopher Waller wanted to cut rates by a quarter point, but the majority prevailed. To wit, the committee made no changes to the federal funds target rate. The committee pivoted to a slightly more dovish position with the view that economic conditions “moderated in the first half of the year.” The press conference was more nuanced. Powell mixed in some hawkish statements, which weighed on the probability of a September cut Wednesday afternoon. This paves the way for a cut at the next meeting in September. In a separate report Wednesday, we learned that consumer spending and business fixed investment slowed and will likely further decelerate in the latter half of this year.

The rate-setting committee has set the stage to take action at the next meeting. If economic conditions weaken, the committee will likely cut rates by a quarter point in September.

The Week Ahead

The following economic data is slated for the week ahead:

• Monday: Factory Orders (Jun), Durable Goods Orders (Jun final), Capital Goods Orders and Shipments (Jun final)

• Tuesday: Trade Balance (Jun), S&P Global U.S. Services and Composite PMIs (Jul final), ISM Services Index (Jul)

• Wednesday: MBA Mortgage Applications (Aug 1)

• Thursday: Nonfarm Productivity (2Q preliminary), Unit Labor Costs (2Q preliminary), Initial Jobless Claims (Aug 2), Continuing Claims (Jul 26), Wholesale Trade Sales (Jun), Wholesale Inventories (Jun final), New York Fed One-Year Inflation Expectations (Jul), Consumer Credit (Jun)

• Friday: No economic releases scheduled

IMPORTANT DISCLOSURES

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors. To determine which investment(s) may be appropriate for you, please consult your financial professional prior to investing.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk.

Indexes are unmanaged and cannot be invested into directly. Index performance is not indicative of the performance of any investment and does not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

This material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

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