US stocks fell over the week, with the Nasdaq down 0.65% and the Russell 2000 posting its first loss since early August. The S&P 500 and MidCap 400 also slipped, while the Dow was little changed. Energy shares outperformed on rising oil prices after President Trump urged the EU to stop buying Russian energy. Losses were driven by hawkish Fed commentary that dampened hopes for rate cuts. Chair Jerome Powell flagged inflation and labor risks, while other officials cautioned against easing too soon. August’s core PCE inflation held steady at 2.9% y/y, while consumer spending and income edged above forecasts. 2Q GDP growth was revised higher to 3.8%, fueled by stronger consumer demand. PMI data showed activity slowing but still expanding, with the economy tracking 2.2% growth for 3Q. Housing strengthened, as new home sales jumped 20% to their highest since early 2022, while existing sales held steady but prices rose again. Treasury yields climbed, pushing bonds lower as rate cut expectations faded.
In Europe, the STOXX Europe 600 ended flat, though national indexes gained modestly, including Italy’s FTSE MIB and Germany’s DAX. Eurozone business activity hit a 16-month high, led by services growth, but weaker manufacturing dragged confidence to a four-month low. In the UK, PMI dropped sharply to 51.0 as both services and manufacturing cooled, with auto industry disruptions weighing on output and sentiment falling to its lowest since June. German indicators were mixed: business confidence weakened, but consumers grew slightly less pessimistic thanks to improved income expectations.
