Weekly Commentary (8/4/25) – Markets Pull Back to Finish July on a Sour Note

Markets pulled back last week as weak payroll numbers spooked investors.
For the week, the DJIA lost 2.92% while the S&P 500 gave back 2.34%. The tech-heavy
Nasdaq declined 2.16% despite earnings from a number of high-flying tech stocks that were
mostly solid. International markets also finished in the red. For the week, the MSCI EAFE
index (developed markets) finished lower by 3.13% while emerging market equities (MSCI
EM) pulled back 2.47%. Small company stocks, represented by the Russell 2000, finished
materially lower by 4.16%. On a positive note, fixed income, represented by the Bloomberg
Aggregate, rose 0.95% for the week as yields moved lower. As a result, the 10 YR US Treasury
closed at a yield of 4.23% (down ~ 17bps from the previous week’s closing yield of ~4.40%).
Gold prices closed at $3347.70/oz – up 0.36% while the U.S. dollar rose 1.07% on the week. Oil
prices rose to close at $67.33 per barrel, up 3.33% on the week.
Last week saw a number of economic releases and earnings reports. Economic news released last
week pointed to a resilient economy with 2Q GDP growing 3.0%, yet some hints of weakness
are beginning to appear. Job openings moved lower by 250,000 while nonfarm payrolls
disappointed and rose by a less-than-expected 73,000 with downward revisions for June and
May. The unemployment rate increased to 4.2%. U.S. manufacturing continues to be in
contraction mode. July ISM Manufacturing PMI came in at 48, down from the previous month at
49 (readings below 50 indicate construction). Encouragingly, new orders and production
actually improved. The weak payrolls and manufacturing numbers increased the odds of Fed
cuts in the months ahead as several major Wall Street firms are now pointing to 2 or 3 cuts
before year-end.
The week ahead is light on economic releases with 2 nd Quarter Productivity and July final
services Purchasing Managers Index due out. 2Q earnings releases will continue for a slew of
companies this week, including Tyson, Palantir, Caterpillar, Eaton, Pfizer, Amgen, McDonalds,
Walt Disney, Coca Cola, McKesson, Lilly, Conoco, and others. With roughly 70% of earnings
already reported for Q2, 63% of the companies have beaten consensus EPS forecasts – one of the
highest frequencies of earnings surprises in over 25 years.
Markets are entering a seasonally weak period (August – October) so investors shouldn’t be
surprised if markets take a breather for a while. Sticking close to a long-term asset allocation
plan is the best course of action.
Enjoy the last month or so of summer!