Market Recap – Thursday, July 31, 2025

Mixed Market Performance Amid Trade Uncertainty and Tariff Developments

Stocks closed mostly lower today, as the S&P 500 and Nasdaq continued to struggle after their recent record highs. The S&P 500 dropped for the second day in a row, following a six-day winning streak earlier this week. Laggards in today's trading included sectors like energy, copper, trucking, and pharma, while outperformers included insurers, hospitals, and China tech. Despite some mixed results from big tech, with both MSFT and META showing gains, the market showed some signs of weakness as investor sentiment shifted.

There was a lot of focus on trade news, particularly regarding tariffs ahead of tomorrow’s “snapback” tariff deadline. President Trump announced some tariff extensions and new tariff rates on countries like Mexico, India, and Brazil. The market, however, remained focused on the uncertainty removal dynamic, with many companies discussing mitigation measures to handle the tariff impact.

On the economic front, the June core PCE was in line with expectations, but personal spending was a bit below consensus. Jobless claims were slightly better than expected, and the Q2 Employment Cost Index (ECI) showed a modest increase, indicating steady wage growth. The upcoming nonfarm payrolls report on Friday is expected to be a key input for the Fed's next move on interest rates.

The earnings season continues to roll in, with some notable earnings beats, especially from tech giants like Microsoft and Meta. Market participants are looking toward these earnings results, alongside trade and economic data, to gauge the strength of the economy.

Here’s Our Take

Despite the overall pullback in the market, particularly in sectors like energy and pharma, the AI secular growth story remains a strong tailwind, particularly for big tech stocks like MSFT and META. Trade developments, particularly around tariffs, continue to weigh on market sentiment, but some of this uncertainty seems to be priced in as companies discuss mitigation strategies. The upcoming nonfarm payrolls report will be critical for understanding the labor market's trajectory and the Fed's next move. With a mix of earnings beats and trade uncertainty, the market remains in a delicate balancing act, but the path of least resistance seems to be slightly downward, at least in the short term. We remain cautious, particularly as we await further clarity from the Fed and economic data.

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