Weekly Market Commentary September 1st to September 5th 2025
This past week was chock-full of data surrounding the labor market and the health of the manufacturing and services industries. Tariffs were also in the spotlight to start the week as court battles surrounding the legality of levies added uncertainty.
Over the weekend a federal appeals court ruled President Trump’s “Liberation Day” tariffs illegal, saying the act of imposing levies on other countries is an act of the Legislative branch (Congress) and not the Executive branch (the President). The fight will make its way to the Supreme Court for a final ruling, but the timeline of said events is uncertain. If deemed illegal, it’s possible all tariff collections will have to be paid back, causing potential problems for the government’s balance sheet which could have negative impact on interest rates and the national debt.
For economic data, Manufacturing remains weak, contracting for the sixth straight month as producers remain bogged down by higher import costs from tariffs. Susan Spence, chair of the ISM’s Manufacturing Business Survey Committee, stated “We continue to have weak demand overall, still due to tariff uncertainty.” Services, on the other hand, remain strong as activity picked up in August supported by data centers and another round of front-running ahead of reciprocal tariffs. Survey participants noted the struggle of absorbing increased costs with one participant in the food-services industry expecting full tariff costs to be passed down by October.
August’s labor market data was poor across the board. Unemployment ticked higher to 4.3%, a level not seen since the pandemic recovery. Average hourly earnings declined from last year and missed expectations. Non-farm payrolls saw significantly fewer jobs added than expected, only 22,000, with manufacturing payrolls seeing a loss of jobs. JOLTS Job Openings declined to 7.2 million jobs while layoff levels increased. This weak data compounds the downward revisions over the last few months, increasing the likelihood for rate cuts. At the time of this writing, there are three 25bp rate cuts priced in for 2025.
The equity markets were close to flat on the week after two positive days were met with two negative days. The S&P 500 closed 0.3% higher to 6,481, the Nasdaq 1.1% higher to 21,700, and the Dow Jones Industrials 0.3% lower to 45,401. The increased odds in rate cuts sent yields lower, with the 2-Year U.S. Treasury yield falling 10bps to 3.52%, and the 10-Year yield falling 14bps to 4.09%.
This upcoming week will give us key inflation data in the form of CPI and PPI which will give the FOMC everything they need to decide on interest rates come September 17th.
