Market Drivers:

• Corporate Earnings Impress: Meta and Microsoft delivered strong Q2/Q4 earnings, driven by robust AI and cloud demand. Amazon also beat estimates, though Q3 guidance was mixed. Qualcomm faced headwinds despite an earnings beat.
• US Labor Market Weakens Significantly: July Nonfarm Payrolls came in well below expectations, compounded by substantial downward revisions for May and June, fueling recession concerns and increasing Fed rate cut probabilities.
• Manufacturing and Services Slow: June US Durable Goods Orders saw a sharp decline, primarily in transportation. The June US ISM Services index indicated marginal expansion, with employment contracting.
• Tariff Landscape Evolves: Several key trade agreements were reached ahead of the August 1st deadline, mitigating some tariff risks, though uncertainty remains with major partners like China and India.
• Federal Reserve Holds, but Data Shifts Outlook: The Fed maintained rates in July, but recent weaker economic data is building pressure for a potential September rate cut.
• Inflation Ticks Up: June CPI showed a slight increase, with tariffs noted as a contributing factor to rising input costs.
• Market Volatility: Last Friday saw a significant market downturn following jobs data and tariff news, but markets rebounded on Monday as earnings strength provided support.

Trade and Tariffs: A Wave of New Agreements

The global capital markets have experienced a notable week of volatility and significant data releases since last Wednesday, August 30. While robust earnings from tech giants provided some uplift, a starkly weaker U.S. labor market report and evolving trade policy dynamics introduced fresh concerns, keeping investors on edge.

Key Corporate Earnings: AI and Cloud Drive Tech Strength

The past week saw key earnings reports from several technology behemoths, largely painting a picture of resilience driven by artificial intelligence (AI) and cloud computing.

• Meta Platforms (META) delivered a strong second-quarter performance, blowing past analyst expectations for both revenue and earnings per share. The company reported robust advertising revenue and continued user growth across its platforms. Crucially, Meta's substantial investments in AI appear to be yielding dividends, with the company forecasting continued high capital expenditures into 2026 to support its AI ambitions. The stock surged in response to these results.¹
• Microsoft (MSFT) also posted impressive fourth-quarter fiscal 2025 results, exceeding revenue and earnings estimates. The standout performer was its Intelligent Cloud division, particularly Azure, which demonstrated strong growth fueled by surging demand for AI services.² Microsoft's market capitalization briefly crossed the $4 trillion mark following the positive report, underscoring its leadership in the AI infrastructure space.³‍
• Amazon (AMZN) reported second-quarter results that topped analyst expectations for both revenue and earnings.⁴ Its Amazon Web Services (AWS) cloud segment continued its strong growth trajectory, and online retail sales also performed well. ⁵ However, the company's third-quarter operating income guidance came in below consensus estimates, leading to a slight dip in the stock during after-hours trading, as investors weighed the impact of ongoing investments against profitability outlooks.⁶‍
• Qualcomm (QCOM), despite reporting better-than-expected third-quarter earnings, saw its stock decline.⁷ The primary drivers for this downturn were a softer-than-anticipated revenue growth forecast and persistent concerns about the impending loss of Apple as a major customer, as Apple plans to shift to in-house modem production in the coming years.⁸

Economic Data: Signs of Slowing in the U.S.

Economic indicators released over the past week have pointed to a moderation in U.S. economic activity, particularly in the labor market.

• July U.S. Nonfarm Payrolls: This was arguably the most impactful data point of the week. The U.S. economy added a mere 73,000 jobs in July, significantly missing consensus expectations.⁹ More strikingly, the Bureau of Labor Statistics announced substantial downward revisions to the prior two months' data: May's figure was revised down by 125,000 jobs, and June's by 133,000, resulting in a staggering cumulative downward adjustment of 258,000 jobs.¹⁰ This dramatic weakening of the labor market data has intensified concerns about slowing economic growth and increased market expectations for a Federal Reserve interest rate cut as early as September.¹¹
• June U.S. Durable Goods Orders: New orders for manufactured durable goods saw a sharp 9.3% decrease in June.12 This decline was largely driven by a significant plunge in transportation equipment orders, particularly civilian aircraft, after a surge in May.¹³ Excluding the volatile transportation sector, new orders showed a modest 0.2% increase, indicating a mixed but overall contracting picture for new factory orders. ¹⁴
• June U.S. ISM Services PMI: The Institute for Supply Management's (ISM) Purchasing Managers' Index for the services sector fell to 50.1 in July from 50.8 in June.¹⁵ A reading above 50 indicates expansion, so this suggests only marginal growth. Notably, the employment component of the index contracted at a faster pace, and businesses cited U.S. trade policy as an ongoing concern.¹⁶

Trade Policy and Tariffs: Deals Emerge Ahead of Deadline

Leading up to the August 1, 2025, deadline for new reciprocal tariffs, which was the end of the 90-day extension of the tariffs announced on April 2, the U.S. government announced several trade agreements with key partners.¹⁷ Deals were reportedly reached with the European Union, Japan, Indonesia, South Korea, and the United Kingdom, which generally aim to reduce tariff rates for these countries and enhance export opportunities for U.S. businesses.¹⁸ However, major trading partners like India and China have not yet finalized agreements, leaving them exposed to potential tariff increases.¹⁹ The initial imposition of these broader tariffs by the Trump administration was cited as a contributing factor to the market's downturn last Friday.²⁰

Central Bank Actions and Inflation

The Federal Reserve concluded its July Federal Open Market Committee (FOMC) meeting last Wednesday, July 30, and as expected, held its benchmark interest rate steady at 4.25%-4.50%. ²¹ While the Fed acknowledged that the economy remains in a "solid position," its statement noted a "moderation" in economic activity. 22 Two FOMC members dissented, favoring an immediate rate cut.²³ The subsequent release of the significantly weaker Nonfarm Payrolls report has put increased pressure on the Fed to consider a rate cut at its September meeting, as the central bank balances its dual mandate of maximum employment and price stability.²²

On the inflation front, the June Consumer Price Index (CPI), released mid-July, showed a slight uptick, with headline CPI-U inflation rising to 2.67% year-over-year.²⁴ Core CPI-U, excluding volatile food and energy, was at 2.93%.²⁴ Tariffs have been noted by some analysts as contributing to rising input costs and potentially feeding into higher selling prices.²⁵

Broader Market Trends

The week concluded with a notable shift in market sentiment. Last Friday, the U.S. stock market experienced its sharpest single-day decline since May, with the S&P 500 falling 1.6% and posting a 2.4% loss for the week.26 The Dow Jones Industrial Average fell 1.2%, and the Nasdaq Composite fell 2.2%.²⁶ This sell-off was largely a reaction to the disappointing July jobs report and concerns surrounding the new tariffs. However, markets demonstrated resilience on Monday, rebounding sharply, particularly in the tech sector, with the Dow rising 1.3%, the S&P 500 adding 1.5%, and the Nasdaq jumping 2%, as investors digested the strong corporate earnings reports.²⁷ Treasury yields fell last week, reflecting increased expectations for future rate cuts in response to the softening economic data. ²⁶

In summary, the global capital markets are navigating a complex environment characterized by strong corporate performance in key growth sectors like AI and cloud, offset by emerging signs of a cooling U.S. economy and ongoing uncertainty surrounding global trade policies. We will continue to monitor these developments closely to assess their implications for investment strategies.

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Footnotes:

1 Ortutay, Barbara. "Meta stock surges after Q2 results blow past expectations despite heavy AI spending." AP News, July 30, 2025.

2"Microsoft Cloud and AI Revenue Soar." Nasdaq, August 5, 2025.

3 "Microsoft becomes $4 trillion company, TCS lays off 12,000 employees, Apple’s record iPhone growth, Xiaomiand Vivo’s new phone and other top tech news of the week." The EconomicTimes, August 2, 2025.

4 Kessel, Andrew. "Amazon's Earnings Top Expectations as Online Sales, AWS Deliver Strong Growth." Investopedia,July 31, 2025.

5 "Amazon tops Q2 estimates with $167.7B in revenue, $19.2B in profits; AWS up 17% to $30.9B." GeekWire,July 31, 2025.

6 "Amazon posts a powerhouse quarter again; shares dip as guidance is weighed." Seeking Alpha, July 31,2025.

7 "Qualcomm Stock Slips as Some Revenue Growth Disappoints." Investopedia, July 31, 2025.

8 "Qualcomm Post Earnings: Apple Is Falling From The Tree." Seeking Alpha, July 31, 2025.

9 "How Unusual Was July's Jobs Report Revision? Here's What My Analysis Found." The Daily Economy,August 5, 2025.

10 "No Evidence for Trump's Claims of 'Rigged' or 'Phony' Job Numbers." FactCheck.org, August 4, 2025.

11 "Wall Street falls the most since May after employers slash hiring and tariffs roll out." AP News,July 31, 2025.

12 "Monthly Advance Report on Durable Goods Manufacturers' Shipments, Inventories and Orders June." U.S.Census Bureau, July 25, 2025.

13 "U.S. Factory Orders See Steepest Drop Since Pandemic Peak." Modern Distribution Management, August4, 2025.

14 "Monthly Advance Report on Durable Goods Manufacturers' Shipments, Inventories and Orders June." U.S.Census Bureau, July 25, 2025.

15 Frankl, Ed. "U.S. Services-Sector Activity Slows — ISM." Morningstar, August 5, 2025.

16 Tyson, Jim. "Service sector slows, employment falls as tariffs take hold: ISM survey." CFO Dive,August 5, 2025.

17 "Multiple Trade Deals Reached as August 1 Deadline Nears." Polsinelli, July 31, 2025.

18 "Multiple Trade Deals Reached as August 1 Deadline Nears." Polsinelli, July 31, 2025.

19 "Multiple Trade Deals Reached as August 1 Deadline Nears." Polsinelli, July 31, 2025.

20 "Wall Street falls the most since May after employers slash hiring and tariffs roll out." AP News,July 31, 2025.

21 "The Fed - FOMC meeting commentary July 2026." Nuveen, July 30, 2025.

22 "July 2025 Fed Meeting: Rates Hold Steady Once More, Potentially Setting Up Fall Intrigue." Chase,July 31, 2025.

23 "FOMC Holds Interest Rates Steady at July 2025 Meeting." American Deposit Management, July 31, 2025.

24 "Inflation Update." U.S.Congress Joint Economic Committee, July 15, 2025.

25 "United States Inflation Rate." Trading Economics.

26 "Wall Street falls the most since May after employers slash hiring and tariffs roll out." AP News,July 31, 2025.

27 Wisnefski, Stephen. "Markets News,Aug. 4, 2025: Stocks Close Sharply Higher as Market Rebounds From Sell-Off;Nvidia, AMD Lead Chip Sector Rally." Investopedia, August 4, 2025.

Researched and compiled with the assistance of Gemini 2.5.