Last Week in Markets
Last week in markets was defined by the Federal Reserve’s decision to resume interest rate cuts, marking its first move lower in nearly a year. The Fed delivered a 25 basis point (0.25%) reduction, a widely anticipated step that came in response to growing signs of weakness in the U.S. labor market. While inflation remains elevated, policymakers opted for a proactive stance, framing the cut less as a signal of imminent recession and more as insurance against a potential slowdown. The decision was almost unanimous, with the only dissent coming from new Fed board member Stephen Miran, who advocated for a larger 50 basis point cut.
Markets largely welcomed the move, seeing it as the beginning of a new easing cycle. Current pricing implies investors expect two more rate cuts in 2025, with October and December viewed as the most likely months for action. The Fed itself has kept its messaging cautious, but optimism in risk assets suggests traders believe the policy shift will continue.
Equities reflected that confidence. After a midweek pullback, U.S. stock indexes closed the week solidly higher. The NASDAQ gained more than 2%, while the S&P 500 and Dow each advanced over 1%, pushing all three benchmarks to fresh record levels. For the S&P 500, it marked the sixth positive week in the past seven.
Small-cap stocks also staged a breakout. The Russell 2000 Index rose 2.2%, at one point climbing above its previous record high from November 2021 before paring back slightly on Friday. Despite the strong weekly performance, small caps remain behind large caps year-to-date, reflecting the ongoing tilt in investor preference toward larger, more resilient names.
Taken together, last week’s developments reinforced the narrative of a Fed easing cycle intersecting with equity markets already near all-time highs. For investors, the combination of policy support and strong index momentum may continue to set the tone in the weeks ahead—though the durability of the rally will hinge on whether incoming data justifies the market’s aggressive expectations for further cuts.
Looking AheadLooking ahead, the focus this week will be on Friday’s inflation release, which should provide clarity on whether the recent uptick in price pressures persisted through August. The last reading of the Personal Consumption Expenditures (PCE) Index—the Fed’s preferred inflation gauge—showed core PCE rising 2.9% year-over-year in July, the fastest pace in five months. A continuation of that trend would complicate the Fed’s path, as it seeks to balance support for a cooling labor market with the risk of reaccelerating inflation.On equities, our stance remains constructive, though mindful of volatility. Pullbacks could offer attractive entry points, particularly as both monetary and fiscal policy look set to become more supportive over the next year. Lower interest rates and anticipated tax cuts create a more favorable backdrop for growth, while the fading impact of trade-policy uncertainty and tariffs could remove another drag on corporate sentiment.In practice, we see the best opportunities in U.S. large- and mid-cap stocks, with an emphasis on quality names and select cyclicals poised to benefit from an easing rate environment. Beyond the mega-cap technology leaders that have driven performance in recent years, we expect market leadership could broaden, rewarding investors positioned in sectors with cyclical and structural tailwinds.From a sector perspective, we favor Technology, particularly Robotics and automation, Consumer Discretionary, especially consumer packaged goods, and Defense, where heightened geopolitical spending provides a durable growth runway. Together, these areas combine both resilience and upside potential in a shifting macro environment.
Earnings This Week:
This week brings a slate of closely watched earnings reports, with several marquee names set to provide updates that will offer both stock-specific insights and broader signals about the health of the consumer and corporate spending. The calendar highlights two key retailers in very different categories AutoZone and Costco each positioned as bellwethers for their respective industries.
AutoZone (AZO) will take center stage Tuesday morning when it releases fiscal fourth-quarter results. The company is often discussed as a potential candidate for a stock split given its lofty share price north of $4,000 per share, but beyond optics, the fundamentals matter most. AutoZone has a consistent track record of earnings growth, often proving resilient even as broader economic conditions shift. This report will shed light on whether that trend continues in a slowing macro backdrop, particularly as consumers balance spending priorities between vehicle upkeep and other necessities.
Later in the week, attention shifts to Costco Wholesale (COST), which reports fiscal fourth-quarter earnings after Thursday’s close. Costco remains a favorite for both long-term investors and consumers, offering strong historical returns and a loyal membership-driven model that underpins steady sales growth.
Management has already flagged net sales of $84.4 billion for the quarter, representing 8% growth year-over-year, though falling short of the $86.1 billion consensus estimate.
Full-year sales climbed 8.1% to $269.9 billion, underscoring Costco’s ability to scale despite headwinds. The earnings call will likely focus on membership trends, consumer demand resilience, and margin dynamics in a competitive retail environment.
Top Upgrades/Downgrades from This Week & last week:
Susquehanna Maintains Positive on Teradyne, Raises Price Target to $200
Citigroup Maintains Buy on Bullish, Raises Price Target to $70
Goldman Sachs Maintains Neutral on Tesla, Raises Price Target to $395
Benchmark Upgrades Intel to Buy, Announces $43 Price Target
B. Riley Securities Maintains Buy on IonQ, Raises Price Target to $100
Benchmark Maintains Buy on Lyft, Raises Price Target to $26
Raymond James Initiates Coverage On CoreWeave with Outperform Rating, Announces Price Target of $130
JP Morgan Maintains Overweight on Roblox, Raises Price Target to $160
Wedbush Maintains Outperform on Oklo, Raises Price Target to $150
Wedbush Reiterates Outperform on Amazon.com, Maintains $250 Price Target
Keefe, Bruyette & Woods Maintains Underperform on Federal National Mortgage, Raises Price Target to $10
Keefe, Bruyette & Woods Maintains Underperform on Federal Home Loan, Raises Price Target to $11
Wedbush Maintains Outperform on Micron Technology, Raises Price Target to $200
