Stocks hit by tech selloff after economic reports: Markets Wrap

(Bloomberg/Rita Nazareth) — Wall Street traders drove stocks lower amid a selloff in tech shares that have powered the surge from April’s meltdown. That’s despite economic data that did little to alter bets on Federal Reserve rate cuts, with bonds and the dollar seeing small moves.

Equities fell after a rally that drove the S&P 500 to all-time highs. The market is bracing for what has historically been the weakest month for US shares, as institutional investors rebalance, retail traders slow their buying, volatility picks up and corporate buying goes dark.

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While macro events are generally more determinant for the market’s direction, seasonal factors can exacerbate moves triggered by the likes of economic data or monetary policy. US consumer spending rose in July by the most in four months, indicating resilient demand in the face of stubborn inflation.

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“Personal spending has been revised upward and remains strong enough to support the US growth narrative,” said Gina Bolvin, President of Bolvin Wealth Management Group. “I still expect seasonal weakness to kick in and would look to be a buyer on dips.”

Despite Friday’s losses, S&P 500 is on track to wrap its fourth straight month of gains, the longest run since September. The Nasdaq 100 fell 1.2%, with Nvidia Corp. leading declines in megacaps. Dell Technologies Inc. sank after reporting tighter profit margins on servers.

The yield on 10-year Treasuries advanced three basis points to 4.23%. The dollar wavered.

The so-called core personal consumption expenditures price index, which excludes food and energy items and is favored by the Federal Reserve, rose 0.3% from June. From the prior year, the gauge picked up to 2.9%, the most since February.

“The good news is, in-line expectations likely keep the status quo intact, which leaves a Fed rate cut in play for September,” said Bret Kenwell at eToro. “The bad news is, inflation is continuing to inch higher, which isn’t really the environment the Fed likely wants to cut in.”

For now though, Kenwell notes that an in-line PCE report should lend more confidence to a September rate cut. Short of a robust jobs reading, it’s hard to see any data derailing the Fed’s plan to cut rates in September, he said.

Fed Governor Christopher Waller late Thursday called for lower rates, saying he would support a quarter-percentage point reduction in September and anticipates additional cuts over the next three to six months.

While he does not currently see the need for an outsized cut, that could change if the jobs report due next week “points to a substantially weakening economy and inflation remains well contained.”

The Fed has kept rates unchanged so far in 2025, largely due to concerns that tariffs could stoke inflationary pressures. But lackluster employment figures released after the July meeting have prompted greater concern, and Fed Chair Jerome Powell said last week a cut could be warranted, citing a “shifting balance of risks.”

Wall Street’s Reaction to PCE:

David Russell at TradeStation:

Today’s numbers keep us on track for a rate cut in September, but there’s significant uncertainty after that given the strong consumer and core inflation well above the Fed’s target.

While there might be some impact from tariffs, fears about spiraling inflation aren’t coming true yet. Strong personal income and spending also suggest consumers remain healthy, even if they’re anxious about the future.

Ellen Zentner at Morgan Stanley Wealth Management:

The Fed opened the door to rate cuts, but the size of that opening is going to depend on whether labor-market weakness continues to look like a bigger risk than rising inflation. Today’s in-line PCE Price Index will keep the focus on the jobs market. For now, the odds still favor a September cut.

Scott Helfstein at Global X:

The Fed’s preferred inflation reading was inline today and that likely paves the way for a September rate cut. The primary drivers of inflation are housing, utilities, and tariffs. Higher rates do nothing to control costs in those areas.

Jennifer Timmerman at Wells Fargo Investment Institute:

Solid gains in July personal income and spending added to recent signs of resilient economic growth early in the third quarter, while PCE inflation data showed lingering inflation pressures. Taken together, we believe the data raises doubts about the need for more aggressive Fed rate cuts in the coming months. Still, barring a blowout nonfarm payrolls print next Friday, we view a September 17 rate cut as likely, given the growing chorus of dovish Fed speak. Next up: the highly visible jobs report for August, perhaps an even more important test of the Fed’s shift toward a more dovish policy stance.

With stocks hanging at record highs, we think the market is vulnerable to event risk as the calendar turns to September. So, we favor trimming equity exposure and rebalancing portfolios to reflect more neutral allocations across asset classes ahead of a typically seasonally weak period this fall.

Chris Zaccarelli at Northlight Asset Management:

Inflation is increasing ever so slightly, but right in line with forecasts and this morning’s PCE data should only increase the probability of a Fed rate cut next month.

Although September is typically the weakest month of the year on average, we don’t see anything on the horizon to knock this bull market off its path. If anything, if there is any volatility in September or October – which would be typical for this time of year – it will likely prove to be a great buying opportunity as we are setting up to rally into year end, especially if the Fed is cutting rates outside of a recession.

Atakan Bakiskan at Berenberg:

The Fed’s preferred measure of inflation rose bang on with the consensus expectation, and nothing stands out in today’s release that would derail the Fed – which remains laser-focused on labor market weakness – from cutting rates in September.

The Fed now leans more against downside risks to labour market than to upside risks to inflation, even though it was the other way around just a month ago. Therefore, so long as the nonfarm payroll report next Friday does not change the narrative of a labour market on the verge of a collapse, the door is wide open for a September rate cut.

Corporate Highlights:

The Trump Administration will revoke waivers for the use of US technologies by the Chinese operations of an Intel Corp. unit, Samsung Electronics Co. and SK Hynix Inc., dealing another blow to China’s access to advanced chipmaking know-how.
Super Micro Computer Inc. cautioned that weaknesses in its controls related to financial disclosures could, if not fixed, hurt the company’s ability to report results “in a timely and accurate manner.”
Marvell Technology Inc.’s results featured a disappointing read on its data center business. It also gave a revenue outlook that is below expectations, raising concerns about its position with AI.
Just weeks after its last quarterly report, Caterpillar Inc. is warning investors it now expects tariffs to have an even greater impact on its business, costing it as much $1.8 billion this year.
Gap Inc. expects its margins will shrink this year, a sign tariffs are slowing recent turnaround momentum.
Petco Health & Wellness Co Inc. surged as much as 31% after raising its earnings targets for the year as the company’s turnaround starts showing signs of progress.
Ulta Beauty Inc. raised its full-year outlook after reporting second-quarter results that topped expectations, even as it warned of a potential pullback by consumers.
UK users of the Mounjaro obesity shot will be spared the full impact of maker Eli Lilly & Co.’s price increase as some pharmacies opt to shield customers — at least for now.
Alibaba Group Holding Ltd. reported a surge in revenue from China’s AI boom, helping offset a surprise drop in profit tied to a worsening battle with Meituan and JD.com Inc. in internet commerce.
Huawei Technologies Co. posted a first-half profit, getting back into the black after the emergence of DeepSeek ignited a wave of AI development across China.
BYD Co.’s profit jumped 14% in the first half on robust demand for its electric vehicles and an aggressive expansion into international markets as it seeks to shake off headwinds at home.

Some of the main moves in markets:

Stocks

The S&P 500 fell 0.7% as of 11:32 a.m. New York time
The Nasdaq 100 fell 1.2%
The Dow Jones Industrial Average fell 0.4%
The Stoxx Europe 600 fell 0.6%
The MSCI World Index fell 0.6%
Bloomberg Magnificent 7 Total Return Index fell 1.2%
The Russell 2000 Index fell 0.7%

Currencies

The Bloomberg Dollar Spot Index was little changed
The euro rose 0.1% to $1.1697
The British pound was little changed at $1.3509
The Japanese yen was little changed at 146.91 per dollar

Cryptocurrencies

Bitcoin fell 3.2% to $108,302.42
Ether fell 3.2% to $4,314.27

Bonds

The yield on 10-year Treasuries advanced three basis points to 4.24%
Germany’s 10-year yield advanced three basis points to 2.72%
Britain’s 10-year yield advanced three basis points to 4.73%
The yield on 2-year Treasuries was little changed at 3.62%
The yield on 30-year Treasuries advanced five basis points to 4.93%

Commodities

West Texas Intermediate crude fell 0.9% to $64.02 a barrel
Spot gold rose 0.8% to $3,445.66 an ounce

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