Market Movers & Shakers

U.S. equities hit fresh all-time highs early last week before a sharp reversal on Friday following a weaker-than-expected payrolls report that erased all of the prior week’s gains. The S&P 500 declined by 2.36% last week, while Dow Jones Industrial Average and Nasdaq fell 2.92% and 2.17%, respectively. The declines marked the worst weekly performance for U.S. stocks since Liberation Day in early April. Market breadth narrowed significantly last week, as the small-cap Russell 2000 dropped 4.17% and the equal-weight S&P 500 lagged the cap-weighted index by 93 basis points. Nine of the eleven S&P 500 sectors ended the week in negative territory. Utilities was the top performing sector, gaining 1.52%, while Communication Services was the only other sector to finish in the green, though it was essentially flat, eking out a 0.02% gain. On the downside, Materials, Consumer Discretionary, and Healthcare led the declines. Treasury yields declined across the curve, with sharper drops at the short-end leading to a steepening of the yield curve. The yield on the 2-Year U.S. Treasury Note plunged more than 25 basis points on Friday, marking the largest single day decline since 2023. Despite a 1.2% decline in the ICE U.S. Dollar Index (DXY) on Friday, the U.S. dollar notched a solid weekly gain across most major currency crosses. Gold finished the week higher, posting a 1.9% gain, while copper prices cratered more than 23% after President Trump unveiled 50% tariffs on copper products but not the raw material itself. Volatility, as measured by the VIX, spiked on Friday, rising nearly four points to 20.5. Looking ahead, stocks are heading into a historically challenging stretch of the year, with August and September traditionally delivering weaker returns and higher volatility.



Source: Bloomberg

Last week’s calendar was one of the busiest of the year in terms of market-moving events, including the release of second-quarter GDP and June PCE data, earnings from four of the Magnificent Seven stocks, an FOMC meeting and interest rate decision, the July payrolls report, and the August 1st tariff deadline set by President Trump.

Second-quarter GDP data showed the economy rebounded more strongly than expected, expanding 3.0% and reversing the 0.5% contraction in the first quarter. At face value, the headline three percent GDP growth figure seems pretty solid; however, looking under the hood tells a bit of a different story. Recall that when calculating GDP, imports (spending on goods and services produced outside the domestic economy) are subtracted. So, in the first quarter, when businesses stockpiled inventory before the initial wave of tariffs hit, GDP growth was pushed into negative territory as a result of surging imports. That dynamic reversed course in the second quarter, having an opposite (positive) impact on GDP as imports slowed. Real final sales to private domestic purchases, the sum of consumer spending and gross private fixed investment, was growing at 3.4% as recent as the third quarter of last year. That figure slipped to 2.9% in Q4, then 1.9% in Q1, and finally 1.2% in the most recent quarter, marking the third sequential quarter-over-quarter decline. June PCE data, released last Thursday, came in slightly hotter than expected and indicated a modest pickup in inflation. Core PCE, the Fed’s preferred inflation gauge that strips out the cost of food and energy, rose 0.3% on the month and 2.8% year-over-year. Prices for furnishings and durable household equipment rose 1.3%, the largest increase since March 2022, while recreational goods and vehicles prices increased by 0.9%, the largest rise since February 2024 – both considered to be tariff sensitive groups.



Source: U.S. Bureau of Economic Analysis via FRED®

The earnings calendar was jam packed last week, with mega cap tech heavyweights Amazon, Apple, Meta, and Microsoft all reporting results. Amazon’s results came in ahead of analyst expectations, with the company reporting no signs of weakened demand from tariffs. However, softer performance in AWS and concerns over margin contraction pressured the stock. Apple delivered a solid quarter, with revenue rising approximately 10.5% year-over-year, driven by strong iPhone sales and robust performance in Greater China. Similar to Amazon, Apple also noted that tariffs had a minimal impact on its operations. Facebook, Instagram, and WhatsApp parent company Meta, reported revenue that climbed 22% year-over-year, fueled by AI-driven gains in ad sales and increased user engagement. And last, but certainly not least, Microsoft delivered strong revenue and operating income growth, with key takeaways centered on Azure’s performance, healthy margins, and continued momentum from accelerated cloud migration. The earnings report catapulted Microsoft shares to all-time highs, pushing the company’s market capitalization above $4 trillion for the first time.

The Federal Open Market Committee (FOMC) held its July meeting last week, leaving interest rates unchanged and maintaining the target range for the federal funds rate at 4.25-4.50%. The decision to hold rates steady was widely anticipated, though key takeaways included dissents from two Fed governors and the hawkish tone of Jerome Powell’s press conference. Heading into the meeting, consensus among economists was for the Fed to signal openness to a September rate cut; however, Fed Chair Powell poured cold water on those expectations during the Q&A session of the press conference. Powell noted that inflation remains above the Federal Reserve’s 2% target and that it could be argued the Fed is “looking through” tariff induced goods inflation by not hiking rates. His remarks stood in sharp contrast to the dovish tone market participants had been hoping to hear. Fed Vice Chair for Supervision Michelle Bowman and Governor Christopher Waller voted against the decision to keep rates steady, favoring instead to lower the fed funds rate by a quarter percentage point, marking the first time since 1993 that two members formally dissented on a decision. Bowman and Waller both cited concerns about weakness in the labor market as reasons for their dissents.



Source: Bureau of Labor Statistics, LSEG

Speaking of labor market weakness, the Bureau of Labor Statistics (BLS) released July payrolls data on Friday, and the results came in well below expectations. The data showed the U.S. economy added 73,000 nonfarm payrolls in July, well below consensus forecasts for 115,000 additions. While July’s jobs number was weaker than expected, it was the sharp downward revisions to May and June payroll data that drew the most attention from markets. May’s original estimate of 144,000 additions was revised lower to just 19,000, while June’s original estimate of 147,000 was taken down to just 14,000. The net downward revision of 258,000 jobs for the prior two months brought the three-month average payroll growth down to 35,000, the lowest since 2020. One of the worst performing areas of the labor market in terms of payrolls growth was in federal, state and local government, which is unsurprising given DOGE efforts and the current administration’s desires to shrink the public workforce. The unemployment rate ticked up to 4.2% last month, though before rounding the figure came in at 4.248%, just 0.002% away from rounding the figure higher to 4.3%. The labor force participation rate fell to 62.2% from 62.3% in June, down for three straight months and capping a further rise in the unemployment rate. Odds of a September interest rate cut rose to 90% from below 40% following the payrolls report, according to the CME Fedwatch tool. The massive downward revisions led to the abrupt and immediate firing of BLS Commissioner Erika McEntarfer by President Trump, who suggested the numbers were manipulated for political reasons.

Amid a whirlwind of earnings news and economic data releases, markets also spent the week focused on the looming August 1st trade and tariff deadline. President Trump ultimately unveiled a new round of tariffs, signing an executive order to raise tariffs on a number of trading partners. Canada faces a 10% increase, with its previous rate of 25% being upped to 35%, as Trump cites Canada’s continued inaction in curbing the flow of fentanyl as the reason for imposing the higher rate. Brazil was hit with an additional 40% tariff, raising its total to 50%, as Trump ramped up criticism of the treatment of former Brazilian President Jair Bolsonaro. Along the same lines, a 25% tariff was imposed on India, with the threat of additional penalties if it continues to purchase Russian oil. But even U.S. allies and countries considered to be “neutral” on the world stage faced higher rates. Switzerland’s rate rose from 31% to 39%, putting it among the countries with the highest overall tariff levels, while Taiwan saw a 20% duty imposed. Mexico, on the other hand, was granted a 90-day extension as trade negotiations continue. All of the newly unveiled tariff rates are set to go into effect on August 7th.

Updates & News*

Earnings season has historically provided ample opportunities to put cash to work on the transition level, as single-stock volatility typically rises when companies report results. New accounts and accounts with recent deposits that have been under Tandem’s management for a week are approximately one-third of the way invested in our strategies. By the one-month mark, new money is just over 50% of the way in line with our strategies, and by the three-month mark nearly two-thirds of the way invested.

On the earnings front, IDEXX Laboratories posted a strong second quarter, with revenue and earnings beating expectations while increasing full-year guidance. The pet healthcare company said revenue growth was driven by strength in its companion animal group. ResMed, a leading maker of CPAP and sleep apnea devices, delivered a strong quarter marked by double-digit revenue growth, more than 200 basis points of gross margin expansion, and a 13% increase to its quarterly dividend. New York Stock Exchange parent company, Intercontinental Exchange, experienced record revenues and double-digit earnings per share growth last quarter as heightened volatility in financial markets in April boosted trading activity. Tyler Technologies, a technology and software provider for the public sector, reported SaaS revenue growth of 21.5% last quarter, marking its 18th consecutive quarter of SaaS growth of 20% or more. On the company’s earnings call, CEO Lynn Moore Jr., said the company is not seeing any fundamental change in public sector demand or purchasing behavior, and that the vast majority of Tyler’s clients do not expect federal funding, DOGE or other macro factors to impact their spend with Tyler. Outside of earnings, STERIS, a global provider of infection prevention, contamination control, and surgical technologies and supplies, announced a 10.5% increase to its quarterly dividend, raising the payout from $0.57 to $0.63 a share.

Source: Source of all data is FactSet, unless otherwise noted.

*The transition level activity taken by Tandem is applicable to new manager-traded accounts and new money in manager-traded accounts, not the composite or firm-wide level. New manager-traded accounts and new money in manager-traded accounts are not automatically invested on the first day. Rather, they are transitioned into our strategy over a longer time period that is dependent upon market conditions, this process differs from Tandem’s model-provided strategies, where money is invested on the day the account opens. Strategy level activity is applicable to the composite and action is taken at the firm-wide level.

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