Stock market today: Dow, S&P 500, Nasdaq slide to solid month on sour note as Trump's tariff deadline, jobs report loom

Stocks closed Thursday lower, paring earlier gains, but capped a strong July for the S&P 500 (+2.3%) and Nasdaq (+3.7%), primarily driven by robust Big Tech earnings. Meta surged over 11% and Microsoft reached a $4 trillion market capitalization, boosting confidence in AI investments. However, market sentiment was tempered by the impending Trump tariff deadline and accelerating June PCE inflation, which remained above the Fed's 2% target. The Federal Reserve's decision to hold rates steady, coupled with Chair Powell's remarks, significantly reduced September rate cut expectations to below 40%, shifting investor focus to Friday's key jobs report.

Analysis

The market is exhibiting a clear divergence between robust corporate fundamentals in the technology sector and mounting macroeconomic headwinds. While the S&P 500 and Nasdaq posted strong monthly gains of 2.3% and 3.7% respectively, Thursday's session saw a reversal of early gains, with the major indices closing down. This negative price action occurred despite exceptional earnings reports from key technology players. Meta (META) surged over 11% and Microsoft (MSFT) surpassed a $4 trillion market capitalization, validating the massive capital expenditures directed toward artificial intelligence. These results also buoyed related stocks like CoreWeave (CRWV), which climbed over 12%. However, this bullish sentiment was overshadowed by several risk factors. The Federal Reserve's decision to hold interest rates steady, combined with Chair Powell's noncommittal stance on future cuts, caused market-implied odds for a September rate reduction to fall below 40%. This hawkish sentiment was reinforced by the June Personal Consumption Expenditures (PCE) data, which showed an acceleration in price increases, keeping inflation above the Fed's 2% target. Furthermore, geopolitical uncertainty is escalating with an impending tariff deadline and ongoing trade negotiations, weighing on broader market sentiment and contributing to the Dow's 0.7% slide.

Key Decisions for Investors

• Investors should recognize the market's heightened sensitivity to macroeconomic data; closely monitor the upcoming jobs report and tariff news as these factors are currently overriding even stellar corporate earnings and driving short-term volatility.
• The exceptional performance of Meta and Microsoft validates the AI investment thesis, suggesting long-term investors should consider maintaining or initiating positions in companies with clear leadership in AI infrastructure and applications, as evidenced by significant customer spending and strong guidance.
• Given the bifurcation between strong tech performance and broader market weakness, a selective approach is warranted, focusing on companies with demonstrated fundamental strength like Roblox or CoreWeave, while being cautious of negative guidance or strategic shifts that can impact sentiment, as seen with Arm's stock decline.