Market Recap – Wednesday, August 27, 2025
Stocks Close Higher as S&P 500 Hits Record; All Eyes on Nvidia and Inflation Data
Stocks edged higher today, with the S&P 500 setting a fresh record close as investors shrugged off political noise and braced for key earnings and inflation data. The Dow rose 0.32%, the S&P 500 gained 0.24%, and the Nasdaq climbed 0.21%, while the Russell 2000 outperformed with a 0.64% jump. Gains were broad-based but led by energy, software, tech hardware, banks, insurers, department stores, and travel names. On the flip side, laggards included exchanges, payments, MedTech, food, and China tech. Treasuries were mixed but saw more curve steepening, with the 2Y/30Y spread widening to its highest level since late 2021. The dollar finished flat, gold added 0.5%, and crude oil rose 1.4%. Bitcoin futures rose 0.8%.
Markets remained quiet ahead of Nvidia's closely watched earnings report after the bell and Friday’s key core PCE inflation release. Expectations are high for Nvidia to deliver a strong quarter and provide upbeat guidance as the AI boom continues, with many hoping it will reignite enthusiasm for the AI trade following recent valuation concerns. Meanwhile, political pressure on the Fed intensified as legal wrangling began over Trump’s attempt to fire Fed Governor Lisa Cook — though the market has taken it in stride so far. Fed officials continued to signal patience, with NY Fed President Williams noting that current monetary policy is “moderately restrictive” and future rate cuts will depend on incoming data. Markets are pricing in nearly 90% odds of a September cut.
Earnings highlights included a string of upbeat reports from cloud and enterprise software firms. MongoDB surged 38% after beating estimates and raising guidance, with analysts pointing to Atlas growth, AI tailwinds, and strong enterprise momentum. Okta also topped expectations and noted stabilization in net revenue retention. Retail stocks were mixed: Kohl’s rallied 24% after a strong Q2 and raised guidance, while Abercrombie dipped on a cautious Q3 outlook and larger-than-expected tariff headwinds. Canada Goose jumped 16% on reports of a potential privatization deal. Other M&A news included Sompo’s $3.5B acquisition of Aspen Insurance and T-Mobile reportedly eyeing additional spectrum. Outside of earnings, American Eagle jumped 8.5% on a new Travis Kelce collaboration, and Cracker Barrel reversed its rebranding, sending shares up 8%.
Here’s Our Take
Stocks are holding up impressively in the face of multiple uncertainties — from high expectations around Nvidia’s AI-fueled growth to escalating political interference in the Federal Reserve. The S&P 500's record close reflects continued investor optimism that strong earnings and moderating inflation will keep the soft landing narrative intact. The muted reaction to the Fed drama suggests markets remain confident in the institution’s independence, at least for now. But risks are building under the surface. Friday’s PCE inflation report could test that confidence if it comes in hotter than expected — especially after July CPI and PPI prints already showed some reacceleration.
Meanwhile, enthusiasm for AI remains strong, but Nvidia’s report needs to exceed a very high bar to keep the rally alive. Any signs of slowdown, margin pressure, or demand saturation could weigh on tech sentiment. At the same time, the earnings outperformance from retailers like Kohl’s and software names like MongoDB shows that investors are still rewarding solid execution — especially where there's margin expansion and product momentum. But the growing impact of tariffs on retailers and food companies like Smucker is another macro headwind to watch. Overall, the market is walking a fine line between excitement over innovation and caution about policy risks, setting the stage for a potentially volatile few days ahead.
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