Market Performance Overview
The week concluded with significant volatility as multiple crosscurrents shaped financial markets. The S&P 500 (SPY) experienced a challenging end to July, declining in the final session amid escalating tariff tensions and Federal Reserve uncertainty. The index, which had logged its 15th record close of 2025 earlier in the week, faced headwinds from President Trump's sweeping global tariff announcements affecting 92 countries.
Federal Reserve Policy and Interest Rates
The Federal Reserve held interest rates unchanged at 4.25%-4.50% on Wednesday, marking the fifth consecutive meeting without a rate change. However, the decision revealed internal divisions, with two governors—Michelle Bowman and Christopher Waller—dissenting and favoring an immediate 25 basis point cut, marking the first such disagreement since 1993. Chair Jerome Powell maintained the Fed's cautious stance despite mounting political pressure from President Trump to lower rates.
Following Friday's disappointing jobs report, market expectations for a September rate cut surged to 66%, up from 37% earlier in the week. The weak employment data has reignited speculation about the Fed's dual mandate priorities.
Labor Market Weakness
The July employment report delivered a significant disappointment, with the U.S. economy adding only 73,000 jobs compared to expectations of 100,000. The report was further weakened by substantial downward revisions totaling 258,000 jobs for May and June. The unemployment rate ticked up to 4.2% from 4.1%.
Manufacturing shed 11,000 jobs in July, highlighting the impact of tariff uncertainty on business decision-making. Federal government employment declined by 12,000 jobs, continuing a trend that has resulted in 84,000 federal job losses year-to-date.
Tariff Escalation and Trade Policy
President Trump significantly escalated trade tensions throughout the week, culminating in a sweeping executive order imposing tariffs ranging from 10% to 41% on imports from 92 countries. Canadian goods faced particularly harsh treatment, with tariffs increasing from 25% to 35%. The announcement sparked immediate market volatility, with futures declining sharply across major indices.
Cryptocurrency Markets
Ethereum (ETH.X) emerged as July's standout performer in the cryptocurrency space, surging 60% to top $3,900, significantly outpacing Bitcoin (BTC.X), which gained only 11% during the same period. The divergence highlighted institutional demand shifts within the crypto ecosystem.
Technology Sector Earnings and Performance
Magnificent Seven Dominance
The week was dominated by earnings from major technology companies, with mixed results driving significant market movements.
Microsoft (MSFT) delivered exceptional results, with shares rallying over 8% in after-hours trading. The company reported adjusted earnings of $3.65 per share on $76.4 billion in revenue, both exceeding expectations. Azure cloud revenue jumped 39% year-over-year to $75 billion annually, accelerating from 33% growth in the previous quarter. The strong performance positioned Microsoft to cross the $4 trillion market capitalization threshold.
Meta (META) posted an even more impressive performance, with shares surging 12% after reporting second-quarter earnings of $7.14 per share versus expectations of $5.88. Revenue reached $47.5 billion, up 22% year-over-year and beating estimates of $44.8 billion. The company's focus on artificial intelligence spending continues to drive results, with capex guidance raised to $66-$72 billion for 2025.
Apple (AAPL) reported record June quarter revenue of $94 billion, up 10% year-over-year, driven by strong iPhone sales that increased 13% to $44.6 billion. Despite the strong results, CEO Tim Cook warned of $1.1 billion in tariff-related costs for the upcoming quarter. The company's stock rose modestly following the earnings beat.
Amazon (AMZN) experienced a sharp 7% decline despite beating earnings and revenue expectations. The disappointment stemmed from weaker-than-expected third-quarter operating income guidance of $15.5-$20.5 billion versus Wall Street's $19.5 billion estimate. AWS revenue grew 17.5% to $30.9 billion, but operating margins compressed to 32.9% from 35.5% a year ago.
Other Notable Tech Earnings
Spotify (SPOT) tumbled 12% for its worst day in two years after posting a surprise €86 million ($100 million) net loss, reversing from a profit in the prior year. Despite adding 8 million premium subscribers and beating user growth estimates, revenue of €4.19 billion missed expectations.
Reddit (RDDT) surged following exceptional second-quarter results, with revenue growing 78% to $500 million, marking the fastest growth in three years. The social media platform's AI-powered Reddit Answers feature reached 6 million weekly users, up from 1 million in the previous quarter.
Banking Sector Performance
UBS (UBSG) jumped 3% after reporting stellar second-quarter results, with profits more than doubling to $2.4 billion. The Swiss bank's wealth management division attracted $23 billion in net new assets, while trading revenue surged 25% year-over-year to $2.3 billion.
Consumer Cyclical
Starbucks (SBUX) gained 5% despite missing earnings expectations, as revenue of $9.5 billion beat estimates of $9.3 billion. However, same-store sales declined 2% globally for the sixth consecutive quarter, continuing a troubling trend.
Currency Markets
The U.S. Dollar Index (DXY) showed strength throughout the week, seeking to snap a six-month losing streak. EUR/USD experienced significant volatility, initially rising to $1.1750 on US-EU trade deal optimism before crashing 1.3% in its worst day since May as concerns emerged about the deal's broader economic impact.
USD/JPY hit a four-month high near ¥150 after the Bank of Japan held rates unchanged for the fifth consecutive meeting, disappointing those expecting a hike. The yen's weakness reflected the diverging monetary policy paths between the Fed and BoJ.
IPO Market Revival
Figma (FIG) delivered one of the year's most spectacular IPO debuts, soaring 250% on its first trading day to close at $115.50, valuing the company at approximately $67 billion. The design software company raised $1.2 billion in the offering, significantly exceeding the $20 billion valuation from its abandoned Adobe acquisition. The successful debut has reignited optimism for the IPO market, which had been dormant due to trade uncertainties.
Market Outlook and Key Themes
The week highlighted several critical themes shaping markets:
Trade Policy Uncertainty: The escalation of tariff threats has created significant uncertainty for businesses, contributing to weakened hiring and delayed investment decisions.
Federal Reserve Policy Pivot: The combination of a dovish internal split at the Fed and deteriorating labor market conditions has increased expectations for monetary policy easing.
AI Investment Surge: Technology companies continue to invest heavily in artificial intelligence infrastructure, with mixed results on profitability but strong revenue growth in cloud services.
Labor Market Softening: The sharp deceleration in job creation, combined with substantial downward revisions, suggests the labor market is weakening more rapidly than previously anticipated.
As markets head into August, investors will closely monitor additional economic data, corporate earnings, and any further developments in trade policy. The interplay between tariff-driven inflation pressures and labor market weakness presents a complex challenge for Federal Reserve policymakers as they navigate the path forward.
