Monthly Market Insights | September 2025

U.S. Markets

Stocks posted a solid gain in August as investors eyed the Federal Reserve’s next move with interest rates.

The Standard & Poor’s 500 Index advanced 1.91 percent, while the Nasdaq Composite rose 1.58 percent. The Dow Jones Industrial Average led, picking up 3.20 percent.1

The greatest coaches aren’t just game changers; they are life changers.   Tony Dungy, who won the Super Bowl both as a player (XIII) and as a head coach (XLI)

Fed Forward

Stocks advanced in early August as a sluggish jobs report, followed by upbeat inflation news, seemed to crack the door for the Fed to adjust short-term rates.2

Mid-month, markets mostly moved sideways as investors nervously parsed the latest batches of economic news ahead of the Fed’s annual symposium.

The S&P 500 and Nasdaq fell after the Fed released the minutes from its July meeting, which revealed that most Federal Open Market Committee members were more concerned about inflation than the job market.3

Powell Opens the Door

However, markets rebounded smartly after Fed Chair Powell opened the door to a rate move at the Fed’s September meeting. Powell contended that “the downside risk of employment is greater than the upside risk of inflation.”4

Powell's statement was in sharp contrast to the July meeting minutes and perhaps indicated a shift in the central bank's thinking. Stocks extended their rally and the S&P 500 closed above 6500 for the first time on August 28.5

As the month came to a close, investors welcomed the second-quarter update from the nation’s most influential AI company. However, stocks were under pressure on the final day of trading as investors appeared to move to a risk-off position with the Labor Day holiday weekend in sight.6

Sector Scorecard

Eight of the 11 S&P 500 Index sectors finished the month higher, but technology (-0.11 percent) lagged. Technology is the largest sector of the S&P 500.7

Communication Services (+3.71 percent), Consumer Discretionary (+4.66 percent), Financials (+3.09 percent), Healthcare (+5.37 percent), Materials (+5.19 percent), Energy (+3.65 percent), Real Estate (+2.17 percent), and Consumer Staples (+1.25 percent) posted gains for the month. Industrials (0.00 percent) were flat.7

Joining technology on the downside was Utilities (-1.58 percent).7

What Investors May Be Talking About in September

All eyes will be on the Fed’s next scheduled two-day policy meeting, which concludes on September 17.

Investors will be watching to see whether the Fed adjusts rates and paying close attention to signals about its direction for the rest of the year and into 2026. At Jackson Hole, Chair Powell signaled that the Fed now views risks to employment as more pressing than those from inflation—a notable shift in emphasis from earlier guidance.8

Another factor to keep in mind is that Fed Chair Powell’s four-year term as Chairman ends on May 15, 2026. Powell has managed the economy through COVID, a spike in inflation, and supply chain issues. But part of his legacy will be how he manages short-term rates during his last few months in office.9

World Markets

The MSCI EAFE Index rose 4.06 percent in August.10

European markets were mixed. Italy (+6.18 percent) and Spain (+3.74 percent) posted solid gains, while France and Germany lagged behind. The UK’s FTSE 100 rose 1.41 percent.11

Pacific Rim markets were also mixed. Japan led, tacking on 4.01 percent, while Korea and India were under pressure. China’s Hang Seng Index rose 1.23 percent.11

Indicators

Gross Domestic Product (GDP)

The economy grew at a revised 3.3 percent annualized pace in the second quarter, up from the 3.0 percent initial estimate and higher than the 3.1 percent growth economists expected. By comparison, the economy contracted by 0.5 percent over the first quarter.12

Employment

Employers added 73,000 jobs in July, below the 100,000 that economists were expecting. Gains for May and June were revised downward to 19,000 and 14,000 jobs added, respectively—a downward revision of 258,000 jobs. Unemployment inched back up to 4.2 percent from June’s 4.1 percent pace.13

Retail Sales

As expected, consumer spending rose 0.5 percent in July over the prior month, down from June’s upwardly revised 0.9 percent gain. Consumers bought more cars and car parts (+1.6 percent) as well as furniture (+1.4 percent), which drove much of the gain.14

Industrial Production

Industrial output edged down 0.1 percent in July, missing expectations. Manufacturing was flat, while utilities fell 0.2 percent and mining decreased 0.4 percent.15

Housing

Housing starts increased 5.2 percent in July over the prior month, reaching a five-month high and exceeding expectations. An ongoing surge in multifamily starts drove the rise as builders responded to meet higher demands for rental housing. Geographically, the Midwest (+33.3 percent) and the South (+19.2 percent) drove gains, offsetting losses in the Northeast (-11.6 percent) and the West (-27.5 percent).16

Sales of existing homes rose 2.0 percent in July over the prior month, topping expectations and rebounding from June’s 2.7 percent month-over-month decline. The median existing home sales price was $422,400.17

New home sales slowed 0.6 percent in July over the prior month, ahead of market expectations but a marked slowdown from June’s upwardly revised 5.3 percent monthly gain. Regionally, declines in the South and Midwest offset gains in the West. There were 499,000 unsold new homes on the market in July, equal to 9.2 months of supply at the latest pace of sales.18

Consumer Price Index (CPI)

In line with expectations, consumer prices rose 0.2 percent in July over the prior month, which was slightly cooler than June’s 0.3 percent monthly increase. Year over year, prices rose 2.7 percent, matching June’s annualized increase and slightly lower than the 2.8 percent economists expected. Core inflation, which excludes volatile food and energy prices, rose 0.3 percent month over month as expected and 3.1 percent year over year, slightly above expectations.19

Durable Goods Orders

Orders of manufactured goods designed to last three years or longer declined 2.8 percent in July, beating market expectations for a 4.0 percent drop.20

The Fed

While the Fed did not hold a formal meeting in August, it did hold its annual symposium, which offered some clues as to its next move on monetary policy.

In his speech, Fed Chair Jerome Powell hinted that the Fed was open to adjusting rates, which took some investors by surprise and led to a sharp rally on Wall Street.21

Powell said, "The downside risk of employment is greater than the upside risk of inflation. “ He explained that the supply of and demand for workers were both dropping, and made the case that some softening in the labor market would act as a check against inflation.22

The Federal Open Market Committee has 12 members who vote on interest rate policy. Its next meeting will be held on September 16-17.

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