Stocks Hit by Tech Rout Before September Challenge: Markets Wrap

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

Following a rally to all-time highs, the S&P 500 fell almost 1%. The market is bracing for what is known as 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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“It’s month end, and we are entering the most historically challenging month of the year,” said Louis Navellier at Navellier & Associates. “Being cautious would seem prudent. It may not last long, given the repeated success of dip buyers.”

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.

“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 set for its fourth straight monthly advance. The Nasdaq 100 fell 1.3%, with Nvidia Corp. leading megacaps down. Dell Technologies Inc. sank amid tighter profit margins on servers. Companies exposed to AI computing got hit as Marvell Technology Inc.’s outlook raised concerns about demand for data-center equipment.

The yield on 10-year Treasuries rose two basis points to 4.22%. 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.

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.”

“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,” said Ellen Zentner at Morgan Stanley Wealth Management. “For now, the odds still favor a September cut.”

With the Fed remaining laser-focused on labor market weakness, as long as next Friday’s data does not change the narrative of a jobs market on the verge of a collapse, the door is wide open for a September rate cut, according to Atakan Bakiskan at Berenberg.

“Barring a blowout nonfarm payrolls print next Friday, we view a September 17 rate cut as likely, given the growing chorus of dovish Fedspeak,” said Jennifer Timmerman at Wells Fargo Investment Institute.

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.”

Friday’s data left intact expectations that the Fed will cut interest rates twice this year, beginning as soon as next month, in response to signs of a softer labor market even as inflation remains above the 2% target.

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

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, according to Chris Zaccarelli at Northlight Asset Management.

“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,” he said.

If there is any volatility in September or October, 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,” Zaccarelli concluded.

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.” 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 1:06 p.m. New York time The Nasdaq 100 fell 1.3% The Dow Jones Industrial Average fell 0.3% The MSCI World Index fell 0.6% Bloomberg Magnificent 7 Total Return Index fell 1.5% The Russell 2000 Index fell 0.6% Currencies

The Bloomberg Dollar Spot Index was little changed The euro rose 0.1% to $1.1699 The British pound was little changed at $1.3504 The Japanese yen was little changed at 146.90 per dollar Cryptocurrencies

Bitcoin fell 3.1% to $108,481.37 Ether fell 2.9% to $4,327.21 Bonds

The yield on 10-year Treasuries advanced two basis points to 4.22% Germany’s 10-year yield advanced three basis points to 2.72% Britain’s 10-year yield advanced two basis points to 4.72% The yield on 2-year Treasuries declined one basis point to 3.62% The yield on 30-year Treasuries advanced four basis points to 4.91% Commodities

West Texas Intermediate crude fell 1% to $63.98 a barrel Spot gold rose 1% to $3,449.60 an ounce ©2025 Bloomberg L.P.