What to watch this week

The week ahead will bring US investors just four days of trading and a crucial jobs report, the first since July's dramatic revisions and the abrupt change at the top of the Bureau of Labor Statistics surprised investors.

The August jobs report's importance for investors is downstream of its importance for the Federal Reserve. Who will be serving on the Federal Reserve's Board of Governors by the end of the week ahead is far from certain.

Last week, President Trump sought to remove Fed governor Lisa Cook from the central bank's board of governors. Cook challenged the decision, and a hearing on Friday left the decision in legal limbo. A Senate hearing for Trump's nominee to fill a temporary vacancy on the board is also set for the coming week.

Outside of the monthly jobs report, labor market data will be a focus this week, with reports on job openings and a reading on private payroll growth from ADP set for release on Wednesday and Thursday, respectively.

Key readings on the manufacturing and services sectors will also round out a busy economic calendar. On the earnings side, results from Dow member Salesforce (CRM), Broadcom (AVGO), Lululemon (LULU), DocuSign (DOCU), and Macy's (M) will feature as we enter the lull between the second and third quarter earnings seasons. Figma (FIG) will also provide its first report since going public.

Stocks finished last week little-changed, with optimism over the US economy pushing stocks to record highs on Thursday, while a modest disappointment on inflation data sent stocks lower on the week's final trading day.

Still, the major indexes capped off their fourth straight winning month, with the S&P 500 (^GSPC) notching its first close above 6,500 on Thursday, as markets turn the page to the final month of the third quarter of 2025.

The US labor market showed signs of a slowdown in July.

That was only the beginning of what's been a dramatic month for the normally staid world of economic policy.

In July, the US economy added 73,000 jobs, while revisions for May and June saw over 250,000 previously reported job gains wiped away. Following this report, President Trump removed Erika McEntarfer as commissioner of the Bureau of Labor Statistics.

The US economy is expected to have created 73,000 new jobs in the month of August, and the unemployment rate is forecast to rise to 4.3%.

In a key policy speech at the Jackson Hole Economic Symposium on Aug. 22, Fed Chair Jerome Powell signaled that the central bank is likely to begin lowering interest rates at its policy meeting in September, pointing to a “curious” US labor market.

“While the labor market appears to be in balance, it is a curious kind of balance that results from a marked slowing in both the supply of and demand for workers,” Powell said.

“This unusual situation suggests that downside risks to employment are rising,” he added. “And if those risks materialize, they can do so quickly in the form of sharply higher layoffs and rising unemployment.”

Federal Reserve Chair Jerome Powell holds a document during a tour of the Federal Reserve Board building, which is currently undergoing renovations, in Washington, D.C., U.S., July 24, 2025. REUTERS/Kent Nishimura · REUTERS / Reuters

Questions over the health of the US labor market appear to have pushed Powell toward backing a rate cut from the central bank, a move that had already been supported by two of his colleagues on the FOMC — a contingent that is set to grow this week too.

The Senate Banking Committee is scheduled to hold a nomination hearing on Thursday for Stephen Miran, Trump's nominee to replace Adriana Kugler, who stepped down from the Fed board on Aug. 8. Should Miran get through the Senate as expected, yet another voice likely to support more aggressive rate cuts will be in the room when the Fed's next policy meeting kicks off on Sept. 16.

Whether Fed governor Lisa Cook will also be in attendance remains less clear.

Cook sued President Trump this week after the president removed her from the Fed board due to alleged mortgage fraud. At a court hearing on Friday, the judge declined to make a ruling.

The legal drama surrounding Cook, Trump, and the Fed isn't expected to have a near-term impact on where interest rates are headed this year. That answer still remains “lower.”

But as Mohamed El-Erian argued in an op-ed for Yahoo Finance earlier this week, the cracks in the foundation of the central bank's independence are starting to show.

With second quarter earnings season just about wrapped up — some 98% of S&P 500 companies have already reported results — we can say this remains a market dominated by the “Magnificent Seven” tech giants: Apple (AAPL), Amazon (AMZN), Alphabet (GOOG, GOOGL), Meta (META), Microsoft (MSFT), Nvidia (NVDA), and Tesla (TSLA).

Data from FactSet's John Butters published Friday showed earnings growth for the Magnificent Seven names during the second quarter came in at 26.6%, well outpacing the 8.1% annual earnings growth realized by the other 493 members of the index so far.

Meta, Microsoft, Amazon, and Nvidia's earnings were four of the top six contributors to the index's earnings growth during the quarter.

Only Vertex Pharmaceuticals (VRTX), which reported net income that flipped from a loss of $3.6 billion a year ago to a gain of $1.03 billion in the latest quarter, and Warner Bros. Discovery (WBD), which reported net income of $1.6 billion against a loss of nearly $10 billion a year ago, broke up what would've been a clean sweep for the Big Tech leaders.

In his report on Friday, Butters noted that analysts expect earnings growth for the Magnificent Seven names to slow in the coming quarters. For the rest of the S&P 500, earnings growth is expected to reaccelerate in the first part of 2026.

Both data points help explain why the stock market's rally has been so durable since the mid-April bottom.

On April 9, Trump took the worst-case scenario for tariffs off the table. An easy case for why stocks should go up.

But the fundamental backdrop for both the stock market's highest-profile names and the jumble of less flashy companies that make up the rest of the S&P 500 has also improved.

Over the long run, nothing matters more to stock prices than earnings growth.

Over the short run, nothing matters more to stock prices than the rate of change of that growth.

When the second quarter earnings season began, investors were looking for the second quarter to mark a sharp slowdown from the first. By the time the second quarter earnings season started to wrap up, that slowdown was more modest.

Between June 30 and Friday's close, the S&P 500 rose 5%.

Economic data: US markets closed for Labor Day.

Earnings calendar: US markets closed for Labor Day.

Economic data: S&P Global US manufacturing PMI, August final reading (53.3 previously); ISM manufacturing PMI (48.9 expected, 48 previously)

Earnings calendar: Zscaler (ZS), Nebius Group (NBIS), NIO (NIO)

Economic data: MBA mortgage applications, week ending Aug. 29 (-0.5% previously); JOLTS job openings (7.23 million expected, 7.4 million previously); Factory orders, July (-1.4% expected, -4.8% previously); Wards total vehicle sales, August (16 million annualized expected, 16.41 million previously); Federal Reserve releases Beige Book

Earnings calendar: Salesforce (CRM), Figma (FIG), Hewlett Packard Enterprise Company (HPE), Dollar Tree (DLTR), The Campbell's Company (CPB), Macy's (M), C3.ai (AI), American Eagle Outfitters (AEO)

Economic data: ADP private payrolls, August (+70,000 expected, +104,000 previously); Initial jobless claims, week ending Aug. 29 (228,000 expected, 229,000 previously); Trade balance (-$62.6 billion expected, -$60.2 billion previously); ISM services PMI, August (50.5 expected, 50.1 previously); S&P Global US services PMI, August final reading (50.5 expected, 50.1 previously)

Earnings calendar: Broadcom (AVGO), Copart (CPRT), Lululemon (LULU), DocuSign (DOCU)

Economic data: Nonfarm payrolls, August (+75,000 expected, +73,000 previously); Unemployment rate, August (4.3% expected, 4.2% previously); Average hourly earnings, month-on-month, August (+0.3% expected, +0.3% previously); Average hourly earnings, year-on-year, August (+3.8% expected, +3.9% previously)

Earnings calendar: ABM Industries (ABM)