The U.S. earnings season so far has seen some bumper results from some of the largest companies in the world with Amazon, Apple, Meta, and Microsoft all reporting very strong quarterly earnings that surpassed Wall Street estimates. Despite these strong performances, stocks  were sharply down last week and have been flat but  volatile in recent days. Some of the wariness from the market is down to the weight of expectations and heady already valuations with Amazon’s great results in particular just not great enough (they are seen to be lagging their larger peers in cloud (17.5% growth over the last 3 months just didn’t cut it for investors given the AI infrastructure spend). 

However, the recent declines were really down to renewed macroeconomic concerns, including a disappointing July jobs report showing only 73,000 jobs added—well short of forecasts—which raised fears of an economic slowdown. Investor sentiment was further shaken by President Trump’s announcement of new tariffs on 68 countries and the European Union, stoking worries about profit margins, global supply chains, and the risk of retaliatory trade measures. These developments, combined with ongoing geopolitical uncertainty and speculation over potential Federal Reserve interest rate cuts, drove sharp market sell-offs and heightened volatility, despite generally positive corporate earnings

The biggest market mover came on Friday with the release of much weaker than expected U.S. non-farm payrolls data for July. The headline number of 73,000 jobs added missed consensus estimates, but even more shocking were the substantial downward revisions to May and June figures. This pulled the 3-month average job gains down to just 35,000, painting a picture of a rapidly slowing labor market. Unemployment ticked up to 4.2% and came within a hair of 4.3%. Markets reacted swiftly, pricing in a near certainty of the Fed cutting rates at their next meeting. The U.S. dollar dropped 0.8%, while 2-year Treasury yields plunged 27 basis points as rate cut bets soared. Equities fell on growth concerns.

Controversy erupted when President Trump responded by firing the Bureau of Labor Statistics Commissioner, accusing the agency of publishing fake data. This raised worries about the political independence and credibility of a key government statistical body. Compounding the shifting Fed outlook was the early resignation of Fed Governor Kugler, opening up another potential dovish appointment for Trump.

Oil prices were another focal point, dropping nearly 2% on news of further supply increases from OPEC+ in September. WTI fell back near $68. Crude was also pressured by President Trump threatening even higher tariffs on India if they don't stop oil purchases from Russia. The ultimatum comes ahead of a key deadline this week for Russian action in Ukraine.

However, there were some bright spots for local investors. Australia retail sales jumped 1.2% in June, double expectations, as consumers respond to rising real incomes. Meanwhile, easing inflation might still give the RBA room with market expectations for rates by year end edging down to 3.2% in the last week. On the other hand, this is likely supported by lower U.S. rate expectations, which are seen as signalling a U.S.-led global slowdown—a less rosy outlook for Australia’s cyclical economy.

As the new week begins, markets are closely watching the ongoing debt ceiling negotiations in the U.S., services PMI data globally, and any further sanctions news tied to the Ukraine war deadline. The RBA and Bank of England are expected to cut rates at their upcoming meetings amid cooling inflation and growth headwinds.

The week underscores the cross-currents buffeting markets, with slowing growth and renewed disinflation competing against still historically tight labour markets and geopolitical wildcards. Investors are walking a tightrope between "bad news is good news" on the monetary policy front and risks of a harder landing. Fasten your seatbelts - the second half of 2025 is shaping up to be a bumpy ride.