U.S. Stocks Wrap Up August with a Dip
U.S. markets closed lower Friday, ending a month of record gains with broad selling across most sectors. Light volume ahead of the Labor Day weekend didn't stop sellers from taking control, pushing the $S&P 500(.SPX)$ down 0.6%.
Tech led the decline, falling 1.6% and dragging the broader market lower. Semiconductors $VanEck Semiconductor ETF(SMH)$ got hit especially hard—the Philadelphia Semiconductor Index dropped 3.2% as post-earnings selling hammered $Marvell Technology(MRVL)$ and $Dell Technologies Inc.(DELL)$ . Even $NVIDIA(NVDA)$ couldn't escape, falling 3.29%.
Last Sunday in the premium chat, I shared this chart highlighting the warning signs from the semiconductor sector and the bearish price formation in the S&P 500. That weekly setup has now received its validation. Even though prices had to adjust on Friday—making the previous day's strength look like a potential bull trap—the bearish thesis is playing out.
The pain spread to economically sensitive areas. Industrials dropped 1.0%, weighed down by Caterpillar's 3.61% decline after the company warned that higher tariff costs would push its operating margin to the low end of guidance. Consumer Discretionary also fell 1.1%.
Energy and Financial sectors provided some shelter during the week. $Energy Select Sector SPDR Fund(XLE)$ led the gainers with a 2.55% rise, while $Financial Select Sector SPDR Fund(XLF)$ added 0.78%. But these gains weren't enough to offset an indecisive weekly formation that will be presented in the paid section.
Economic Data Remains Consistent with Expectations
July's Personal Consumption Expenditures data came in largely as expected. The core PCE—the Fed's preferred inflation gauge—rose 0.3% for the month and 2.9% year-over-year.
While that's still above the Fed's 2% target, markets are still pricing in an 86.9% chance of a September rate cut, according to CME's FedWatch Tool.
Fed Governor Waller backed that view, supporting a 25-basis-point cut. But other data looked shakier—the final August University of Michigan Consumer Sentiment reading dropped to 58.2, and the Chicago PMI hit a contractionary 41.5.
Year-to-Date Scoreboard:
$NASDAQ 100(NDX)$ : +11.4%
$S&P 500(.SPX)$ : +9.8%
Russell 2000 $iShares Russell 2000 ETF(IWM)$ : +6.0%
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