U.S. equities ended last week broadly higher, supported by optimism over potential looming interest rate cuts and resilient economic data, though Friday’s session was mixed. The S&P 500 dipped 0.3% after briefly hitting a record high, and Nasdaq fell 0.4% amid weakness in chipmakers—Applied Materials plunged 14% on a downbeat forecast, while Nvidia slipped 0.9%. The Dow set a new intraday high, boosted by a 12% surge in UnitedHealth following Berkshire Hathaway’s disclosure of a major stake, though it fell short of a record close. Investors digested a busy week of mixed economic releases, including inflation data, July retail sales and the U.S. consumer sentiment survey. Geopolitical tensions were back in the headlines, with markets cautious ahead of President Trump’s meeting with President Putin and renewed trade uncertainty from proposed tariffs on steel and semiconductors. For the week, the Dow outperformed with a 1.7% gain, while the S&P 500 and Nasdaq rose 0.9% and 0.8%, respectively.
On the economic front, consumer inflation ticked up modestly, coming in softer than forecasted for July. The Consumer Price Index (CPI) increased +0.2% on the month, or +2.7% year-over-year, slightly below the consensus expectation. Headline CPI held fairly flat, as the combination of rising medical care and airfare costs were offset by falling gas prices. Core CPI (which excludes food and energy) rose 3.1% year-over-year, a bit hotter than expected due to rising costs for shelter and services. The slight uptick doesn’t appear significant enough to derail the U.S. Federal Reserve (Fed). The question heading into this week was whether tariff costs would show evidence of leaking into broader inflation, providing the Fed further room to cut rates in September given rising concerns over the labor market. Tariff costs (represented by core goods, ex used autos) decelerated from +3.1% month-over-month annualized to +2.0% month-over-month annualized. Contrary to expectations, the effects of tariffs appeared to decelerate while non-tariff costs increased. While this report can be “sliced and diced” in numerous ways, it appears this past spring’s inventory buildup has helped to contain tariff-induced price pressures, at least for the near-term.
In contrast, the Producer Price Index (PPI) surprised economists with a +0.9% monthly jump for July following muted results in June. The report reflects an increase in energy prices, food prices and an increase in core producer prices. This sharp pickup in prices briefly rattled equity markets on Thursday following record highs as it challenged the narrative around cooling inflation. This marks the highest month-over-month increase since June 2022, but it wasn’t enough to shake investors as the S&P finished positive on the day. The divergence in inflation data demands further attention but still leaves the door open for the Fed to lower rates in the upcoming September meeting.
On Friday, July Retail Sales data showed a +0.5% increase month-over-month in July 2025, in line with market expectations and following an upwardly revised 0.9% in June. The largest increases were seen in sales at motor vehicles and parts dealers (1.6%) and furniture and home furniture stores (1.4%). Stripping out autos, the 0.3% rate of growth was right in line with forecasts. The breadth in this month’s report was very positive as nine sectors showed growth compared to just four that declined. On a year-over-year basis, headline sales increased 3.92%, with five sectors showing year-over-year growth in excess of 5%.
Wrapping up the week on the macro front on Friday was the release of the U.S. Consumer Sentiment survey, which softened in August as households anticipated higher goods prices because of import tariffs. The University of Michigan’s Surveys of Consumers on Friday said its Consumer Sentiment Index dropped to 58.6 this month from a final reading of 61.7 in July. Economists polled by Reuters had forecasted that the index would increase to 62.0. This marks the first time in four months that sentiment has fallen as concerns regarding unemployment and mixed inflation data still loom.
Expectations for the Fed policy whipsawed back and forth with each piece of economic data released, but the theme ultimately tilted dovish. The market remains convinced that the Fed’s next move is a rate cut in the upcoming September meeting, with futures pricing this in at an 89% probability late on Friday. Putting it all together, last week delivered a mix of narratives continuing to support a Fed rate cut and in turn provided a favorable tailwind for broader equity markets.
In addition to significant macro data releases, a number of high-profile companies announced earnings. The extremely strong earnings season is almost wrapped up with 459 companies in the S&P 500 having reported earnings for the second quarter (Q2) of 2025. Of these companies, 81% reported earnings above analyst expectations and 14% reported earnings below analyst expectations. Earnings for Q2 are running at $66.80 per share compared to estimates of $64.65, which is up 5% from Q2 2024. The Q2 2025 earnings season experienced widespread upward revisions to corporate guidance and 2026 earnings estimates. It appears that companies have been more resilient to tariffs than originally feared, with average S&P 500 profit margins ticking slightly higher than the previous quarter and above the five-year average.
Notable earnings reports came from Cisco Systems (CSCO) this week, which delivered strong results above Wall Street estimates, with earnings per share and revenue topping forecasts. Company management revealed that artificial intelligence infrastructure orders from larger cloud-based customers exceeded $2 billion in fiscal year 2025, more than double the initial projections. While the cloud-based enterprise infrastructure buildout continues to gain momentum, the semiconductor equipment industry faltered slightly with Applied Materials (AMAT) issuing weaker-than-expected guidance for the next quarter, sending its shares plunging roughly 12%. This divergence within these industries illustrates the mixed landscape within the technology sector. One of the more eye-catching moments last week was the surge in UnitedHealth Group (UNH) stock after a bid of confidence from Warren Buffett’s Berkshire Hathaway disclosing a stake of roughly $1.6 billion in UNH. Additionally, hedge fund manager Michael Burry (author of “The Big Short”) also published a large position in the company, resulting in UnitedHealth’s biggest single-day gain in almost five years. This move singlehandedly helped push the Dow over 100 points on Friday and offered relief for UNH investors, as shares were down almost 45% year-to-date prior to last week.
Sector-wise, broadening out was the main theme with blue chips and cyclicals leading the rally. The Dow reached record intraday highs driven by strength in industrials and health care. Meanwhile, the S&P 500’s record run was supported by gains in consumer discretionary and communication services. Overall, seven of the 11 S&P 500 sectors closed in positive territory, with health care and communication services posting standout returns of 4.6% and 3.5%, respectively. The S&P 500 ended Friday’s session at 6,449, bringing quarter-to-date gains to 4%, and year-to-date growth to 9.7%.
Another trend from the week was the resurgence within small-cap stocks, which rose over 3% for the week and outperformed large-cap peers. Small caps are more sensitive to interest rates due to their reliance on debt financing. It was one of the strongest weeks for the Russell 2000 and signals a potential trend reversal as small-cap stocks have lagged significantly year-to-date. The rally in small caps was broad-based, but it was led by economically sensitive, cyclical sectors—a sign of growing risk appetite. Attractive current valuations paired with the catalyst of future rate cuts may support further momentum within the current small-cap rally.
Looking ahead, market attention will turn to the final stretch of earnings season, with key reports expected from Palo Alto Networks, Home Depot, Lowes and Walmart. Later in the week, investor focus will shift to monetary policy as Fed Chair Jerome Powell is scheduled to deliver a closely watched keynote speech on Friday morning at the Federal Reserve’s annual Jackson Hole Economic Symposium.
Week of August 18 – 22: Major U.S. Economic Reports and Fed Speakers
| Time (ET) | Report | Period | Median Forecast | Previous |
| MONDAY, AUG. 18 | ||||
| 10:00 AM | Home builder confidence index | Aug. | 34 | 33 |
| TUESDAY, AUG. 19 | ||||
| 8:30 AM | Housing starts | July | 1.30 million | 1.32 million |
| 8:30 AM | Building permits | July | 1.39 million | 1.4 million |
| WEDNESDAY, AUG. 20 | ||||
| 2:00 PM | Minutes of Federal Reserve’s May FOMC meeting | |||
| THURSDAY, AUG. 21 | ||||
| 8:30 AM | Initial jobless claims | Aug.16 | 224,000 | 224,000 |
| 8:30 AM | Philadelphia Fed manufacturing survey | Aug. | 5.0 | 15.9 |
| 9:45 AM | S&P flash U.S. services PMI | Aug. | 55.7 | |
| 9:45 AM | S&P flash U.S. manufacturing PMI | Aug. | 49.8 | |
| 10:00 AM | Existing home sales | July | 4.0 million | 3.93 million |
| 10:00 AM | U.S. leading economic indicators | July | -0.10% | -0.30% |
| FRIDAY, AUG. 22 | ||||
| Fed Chair Jerome Powell speaks from Jackson Hole |