The U.S. stock market experienced a notable pullback on Friday, August 29, 2025, after a week of impressive record highs. The Dow Jones Industrial Average dropped 202 points, the S&P 500 fell 0.8%, and the Nasdaq Composite lost 1.3%. This cooling-off period follows a fresh uptick in inflation data and rising concerns over potential tariffs, particularly with September, historically a challenging month for markets, on the horizon.
For traders and investors, today’s movements underscore the dynamic nature of financial markets. The S&P 500 ETF Trust (SPY), a widely tracked indicator, traded around $644.64, approximately 0.66% down from the previous session, with intra-day swings reflecting underlying caution. Despite Friday’s decline, all three major indexes remain firmly positive for August: the Dow up over 3%, and both the S&P 500 and Nasdaq gaining around 2%.
The S&P 500’s retreat from its record close above 6,500 signals profit-taking after hitting all-time highs. Ross Mayfield of Baird noted that while the PCE number was “fine,” an “earnings overhang” and profit-taking dynamics are at play. Similarly, the Dow’s cautious start reflected broader investor sentiment influenced by economic data and trade policy concerns.
Technology stocks, particularly those sensitive to growth expectations, bore the brunt of the downturn. Nvidia (NVDA) fell 2.9% following mixed data-center revenue reports, while Palantir also experienced a notable dip. The decline of Marvell Technology (MRVL) by 15% after issuing weak Q3 revenue guidance, despite meeting Q2 expectations, highlights how quickly investor sentiment can shift based on forward-looking projections. Conversely, companies like Ambarella (AMBA) surged 15% on strong AI-driven demand and raised revenue guidance, demonstrating opportunities for discerning investors.
The latest inflation data revealed that the core Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s preferred inflation gauge, rose 2.9% year-over-year in July. While in line with expectations, this marks the fastest pace since February. This uptick complicates the Fed’s path forward, as they weigh the risks of reigniting inflation against slowing economic growth. While markets still anticipate a September rate cut, the probability is tightening, urging traders to closely monitor upcoming Fed communications.
Beyond individual stock movements, corporate warnings about the impact of tariffs also set a cautious tone. Caterpillar (CAT) dropped 4% after flagging up to $1.8 billion in potential costs due to tariffs, and Gap (GPS) similarly noted tariff-related profit pressures. This illustrates how geopolitical factors can directly influence corporate profitability and, consequently, stock performance.
Consumer sentiment also showed signs of weakening. The University of Michigan’s consumer sentiment index slipped to 58.2 in August, and both near-term and long-term inflation expectations rose. This suggests that households are becoming more concerned about persistent inflation, impacting spending on big-ticket items.
Looking ahead, while August has been robust, September’s historical volatility, combined with inflation concerns and tariff impacts, suggests potential for sharper market swings. However, the underlying resilience of the market, driven by the AI rally and ongoing prospects of Fed rate cuts, offers continued support. Investors are advised to remain informed, monitor economic data and corporate earnings closely, and maintain a balanced perspective to navigate potential volatility effectively.
