Wall Street closed out last week on a softer note after a batch of disappointing consumer data took some of the shine off a strong run for equities. The S&P 500 dipped 0.2%, the Nasdaq Composite slid 0.3% and the Dow Jones Industrial Average eased 0.2%, with healthcare names among the weakest performers while energy stocks bucked the trend.
The main trigger was a 0.6% monthly drop in US retail sales for July, the first decline since January. The University of Michigan’s preliminary consumer sentiment reading fell to 51.0. Longer dated Treasury yields still pushed higher regardless, with the 10 year note approaching 4.7% and the 30 year bond touching around 5.26%. Oil also firmed, with WTI trading near $82 a barrel and Brent close to $89, as the standoff over the Strait of Hormuz and wider Middle East tensions kept a floor under prices.
Even with Friday’s pullback, the broader picture for the week was constructive. The S&P 500 still added 0.4% and the Nasdaq gained 0.1%, extending both indices’ weekly winning streak to three, even as the Dow finished 0.6% lower. The standout data point was inflation, with headline CPI for July cooling to 3.4% year on year and core CPI easing to 2.5%. Producer prices also came in softer than expected. Together, this has reduced expectations of a Fed rate increase in September, with markets now increasingly favouring a pause. Economic growth remains resilient, consumer spending is broadly stable and corporate earnings expectations are still solid, which continues to support the case for equities even as inflation, long dated bond yields and geopolitical risk stay on investors’ radar as potential flashpoints.
Asia trades cautiously as investors weigh oil against fading rate hike fears
Asian markets were broadly flat on Monday as investors weighed rising oil prices tied to the Iran and Hormuz standoff against a markedly lower probability of a near term Fed rate hike following last week’s soft US data.
MSCI’s Asia Pacific index held largely flat, Japan’s Nikkei gained 0.4%, and Australia’s ASX 200 fell 0.3%. Markets in South Korea were shut for a public holiday.
US equity futures were little changed in overnight trade following the S&P 500 and Nasdaq’s third consecutive weekly advance. Softer than expected July inflation has eased rate hike concerns, and resilient corporate earnings have provided further support, but the combination of weak retail sales and surging oil prices remains a genuine source of risk. Investors are now turning their attention to earnings from major US retailers this week and to Wednesday’s Federal Reserve meeting minutes for further clues on the policy path.
European equities ease back from record levels
European shares closed marginally lower on Friday, pulling back from the prior session’s record close. The STOXX Europe 50 slipped 0.1% from Thursday’s all time high, while the broader STOXX Europe index eased 0.2%.
Technology names retreated across the region and pharmaceutical stocks were notably weak, led lower by Argenx and Sanofi. Banks and insurers were a bright spot, however, holding up well despite a sharp rise in European sovereign bond yields at the longer end of the curve.
Currencies and commodities: dollar softens, euro firms, oil stays supported
This section covers how the US dollar, the euro and key commodities such as oil are trading following last week’s data and the ongoing Middle East tensions.
Currencies
The US dollar weakened for a third straight session, with the DXY index slipping to around 99.5 as softer economic data further dented expectations of an imminent Fed rate move. EUR/USD climbed to 1.1580, close to recent highs, reflecting the corresponding strength in the single currency. Markets are now looking ahead to the Fed minutes and to guidance expected from the Jackson Hole symposium for the next directional signal.
Commodities
Oil eased slightly during Asian trading hours after posting strong gains the previous week. Brent fell 0.16% to $88.42 a barrel and WTI eased 0.2% to $81.31, following a weekly gain of more than 5% for Brent. Persistent friction between the US and Iran, disruption to shipping through the Strait of Hormuz and continued attacks in the Red Sea are all still underpinning prices, even as some forecasters trim their 2026 demand outlook.
In a related geopolitical development, Trump has ordered the Pentagon to substantially reduce joint military exercises with South Korea, citing their cost and his improved relationship with North Korean leader Kim Jong Un. He also criticised Seoul for declining to join the Iran war. The move comes just as the annual joint drills are due to begin, despite North Korean objections.
Stocks in focus: the companies driving headlines
A number of individual names made significant moves last week on the back of corporate news, analyst rating changes and quarterly results.
Corporate news and individual movers
Chipmaker Nvidia is reportedly in discussions to invest as much as $3 billion in SB Energy, a SoftBank backed developer building a data centre campus in Ohio for OpenAI. The talks reportedly form part of a broader financing arrangement that could see Nvidia extend around $100 billion in credit support, underlining its growing role in funding AI infrastructure alongside its core chip business.
AI developer Anthropic is said to be targeting annual revenue of $190 to $200 billion by 2028, more than four times its current $47 billion run rate, as investors weigh up its prospects ahead of a possible public listing. Valuation comparisons being floated include Palantir, Cloudflare and SpaceX, though the scale of the target leaves considerable room for disappointment if growth slows or AI infrastructure costs remain elevated.
Alibaba is selling its Lingxi Games unit to Trustar Capital in a transaction reportedly valuing the gaming studio at more than $1.5 billion. The sale is part of chief executive Eddie Wu’s wider restructuring drive, as the group steps back from non core businesses to concentrate capital on artificial intelligence and cloud computing, where it is targeting $100 billion in AI revenue over the next five years.
Payments group PayPal reportedly rejected a joint approach from Stripe and Advent International worth $60.50 per share, valuing the company at close to $53 billion, on the grounds that the offer undervalued the business. Talks over an improved bid are said to be continuing, with a deal possibly emerging within weeks. PayPal shares rose 1.7% on the news, extending a rally driven by takeover speculation.
US drone manufacturers rallied after President Trump imposed new tariffs aimed at strengthening domestic production and supply chains. Unusual Machines jumped 25%, Red Cat gained 8%, Ondas rose 4% and AeroVironment added 2.8%. The tariffs range from 25% to 100% depending on the country of origin, with reduced rates for certain allied nations, and are designed in part to encourage manufacturers to build capacity within the US.
Berkshire Hathaway lifted its stake in Alphabet by 83% during the second quarter to nearly 106 million shares, worth $37.8 billion and now its third largest equity holding. The conglomerate also added to positions in Delta Air Lines and Macy’s while exiting Constellation Brands entirely. In total, Berkshire bought roughly $23.5 billion of stock during the quarter, reversing its recent pattern of net selling.
Reddit shares jumped more than 12% on Friday after it was announced the company will join the S&P 500, replacing AvalonBay Communities from 18 August. J.P. Morgan estimates index tracking funds will need to buy around 16.7 million Reddit shares, nearly three times the stock’s average daily trading volume. Despite the pop, the shares remain down more than 31% since the start of the year.
Analyst calls to watch
Morgan Stanley flagged four potential catalysts for SpaceX through the end of the year: improving performance and usage of its Grok AI product, the anticipated September launch of Starship Flight 14, higher pricing for AI computing services, and a possible distributed inference network built around robotics and connected devices. The bank kept its Overweight rating and $300 price target, citing meaningful upside potential.
New Street Research upgraded Micron to Buy with a $1,250 price target, arguing the memory chip industry is moving away from its traditional boom and bust cycle towards a more structural growth pattern. The firm expects artificial intelligence to eventually drive around two thirds of memory demand, supporting steadier cash generation and a shallower downturn profile, a shift it believes could support a valuation in the $2 to $3 trillion range by 2030.
Needham reiterated Lumentum as its top pick in the optical technology sector, citing robust AI infrastructure demand. Fiscal fourth quarter revenue surged 109% year on year to $1.01 billion, with earnings and margins both ahead of expectations. Guidance for the first quarter also topped consensus estimates, reinforcing confidence in the growth trajectory despite ongoing valuation concerns.
J.P. Morgan upgraded SanDisk to Overweight with a December 2027 price target of $2,250, pointing to strong AI driven NAND flash memory demand and a business model it views as less cyclical than in the past. Long term supply agreements worth around $94 billion are expected to support margins, while total NAND demand could reach $500 billion by 2027. SanDisk’s technology roadmap and earnings outlook further strengthen the investment case.
HSBC downgraded Cisco to Hold from Buy and trimmed its price target to $120 from $137, citing valuation concerns and a lack of near term catalysts despite solid results and upbeat guidance for fiscal 2027. The bank expects earnings growth to moderate after 2027, though networking revenue should still benefit from strong hyperscaler demand tied to AI infrastructure build outs.
Alphavalue upgraded ACS to Add, citing strong growth at its US construction arm Turner. Sales at the unit rose 22.7% and margins expanded by close to 70 basis points, with AI and digital projects now accounting for 44% of its €46 billion order backlog. The broker had previously raised its price target by 46.1% to €120, and views the group’s recent Thiess acquisition as a further support to profitability.
Goldman Sachs raised its 12 month target for the STOXX 600 to 695 from 660, implying roughly 5.5% further upside, citing resilient European economies and solid corporate earnings. The bank forecasts aggregate earnings growth of 23.4% for the index and continues to view European equities as cheaper than their US counterparts, with attractive shareholder returns on offer. A prolonged energy price shock remains the key risk to this view.
Separately, Morgan Stanley expects the Federal Reserve to remain on hold through the end of the year as disinflation continues, helped by fading tariff effects, easing energy price pressure and moderating shelter inflation. The bank forecasts 50 basis points of rate cuts next year, starting in March, though it flags that risks remain skewed towards tighter policy if supply shocks or AI related demand pressures intensify.
What investors should watch this week
The coming days are likely to be shaped by the ongoing US and Iran standoff and its knock on effects for energy prices and global interest rate expectations. Investors will be paying close attention to the Federal Reserve and European Central Bank meeting minutes, alongside a busy US data calendar covering PMIs, industrial production and trade figures. Inflation, retail sales and employment data out of the UK, Canada, Japan, China and Australia will also help shape sentiment through the week.
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