US Economy Falters as AI Bets Reshape Markets
Market Snapshot
- S&P 500: 6,513 (+0.27%)
- DOW: 45,711 (+0.43%)
- NASDAQ: 21,879 (+0.37%)
- FTSE 100 (U.K.): (+0.23%)
- CSI 300 (CN): (-0.70%)
- STOXX 600 (E.U.): (+0.06%)
- US 10-Year Yield: 4.08%
- US 2-Year Yield: 3.55%
- Gold: $3,631 (-0.16%)
- Bitcoin: $111,253 (-0.71%)
- Ethereum: $4,288 (-0.45%)
US Economy Shows Signs of Weakness
The US labour market is weaker than previously understood after the Bureau of Labor Statistics (BLS) revised its data, stating that 911,000 fewer jobs were added in the year to March 2025. This represents the largest annual adjustment in over two decades, bringing the total downward revision over the last 16 months to 1.2 million jobs. The adjustments have drawn criticism from the White House.
Adding to the concern, investor sentiment is souring, with over 40% of individual investors now bearish on the stock market's direction, a figure well above historical averages. Wall Street is bracing for a consumer spending squeeze amid slowing wage growth and soft hiring. However, small-business sentiment saw a slight rise in August, with owners expecting stronger sales despite ongoing struggles with worker quality and shortages.
Corporate and Tech Highlights
Oracle's AI-Powered Surge
Software firm Oracle saw its shares soar more than 27% in after-hours trading, despite reporting mixed first-quarter earnings. Investor enthusiasm was driven by a massive increase in its contracted work backlog, which grew from $138 billion to $455 billion. The company attributed this growth to intense demand for renting artificial intelligence servers in the cloud. Oracle projects revenue in its cloud infrastructure business will jump 77% this fiscal year and is aggressively building new data centres to meet demand, with capital expenditures expected to reach $35 billion in fiscal 2026.
Apple Unveils New Products to Tepid Response
Apple launched its latest product line-up, including the iPhone 17 series, to an unimpressed market, with its stock falling 1.5%. The headline addition is the new, much thinner iPhone Air, priced at $999. However, some commentators have labelled it an impractical purchase due to sacrifices in camera quality and battery life.
The higher-end Pro models, starting at $1,100, feature a redesigned 'full-width camera plateau' with three 48MP sensors, the new A19 Pro chip, and a vapour chamber cooling system for better performance. The company also revealed updated AirPods Pro with AI-powered live language translation and a new Apple Watch Series 11 with enhanced health features, such as hypertension tracking. Analysts suggest investors were hoping for more significant AI advancements, an area where the tech giant is perceived to be lagging.
AI Disrupts Travel Industry
Artificial intelligence startups are launching 'AI agents' that challenge the business models of established travel platforms like Airbnb, Expedia, and Booking.com. These new tools aim to help travellers book directly with hotels and airlines, bypassing the intermediary platforms and their commission fees, which can be as high as 20%. In response, major travel companies are integrating OpenAI's tools and leveraging their vast customer data to develop their own AI assistants and maintain their market position.
Health Sector Developments
UnitedHealth shares gained after the company stated that 78% of its Medicare Advantage members would be in highly-rated plans, a development expected to lead to larger government bonus payments. This comes as the Centers for Medicare and Medicaid Services (CMS) is reportedly making it more difficult for insurers to achieve high-quality ratings.
Meanwhile, Novo Nordisk, the Danish company behind the popular weight-loss drug Wegovy, announced it will cut approximately 9,000 jobs, or 11.5% of its workforce. The move is a response to supply chain difficulties and increasing competition in the lucrative GLP-1 market. This decision comes as a recent review rated weight-loss drugs from Novo Nordisk and Eli Lilly as more cost-effective due to lower prices and proven cardiovascular benefits.
Washington and Policy
Legal and Political Infighting
A federal judge has temporarily blocked President Trump's attempt to fire Federal Reserve Governor Lisa Cook, ruling that she has a strong case that her removal violated the 'for cause' provision of the Federal Reserve Act. The ruling allows her to continue in her role. Separately, tensions have reportedly emerged between Treasury Secretary Scott Bessent and Bill Pulte, the regulator of mortgage giants Fannie Mae and Freddie Mac, which could complicate discussions about the future of the two government-sponsored enterprises.
US Postal Rule Change Halts Global Mail
Global postal traffic to the US has plunged by 81% in one week after the government eliminated the tax-free entry for packages valued under $800. The change has forced over 88 of the world's postal operators to pause services to the country due to new customs duties and administrative requirements, effectively closing America to many international deliveries.
Market Movers and Global Deals
Buy-now-pay-later firm Klarna priced its IPO at $40 per share, targeting a valuation of around $15 billion. The company is seeking to rebrand itself as a broader digital financial assistant to better compete with rivals like Affirm, even as it faces questions over its path to profitability.
In other market news, crypto exchange Gemini is set to go public after securing a $50 million investment from Nasdaq, and a Dogecoin ETF is expected to begin trading this week. Dutch AI infrastructure firm Nebius saw its stock soar after securing a computing power deal with Microsoft, while chip equipment giant ASML invested €1.3 billion in French startup Mistral AI. In a major resources deal, Anglo American and Teck Resources have agreed to a $53 billion merger. Finally, in aerospace, Airbus delivered 61 planes in August, edging out rival Boeing, which continues to face supply chain challenges.
Real Estate and Commodities
The demand for lumber is slowing, with prices falling to a 52-week low. An expected boost from tariffs on Canadian lumber failed to materialise for US producers, as a slowdown in new building projects has reduced overall demand.
In contrast, the total value of the US housing market has surged by $20 trillion over the last five years, reaching a record $55 trillion. According to property marketplace Zillow, this 57% rise has been driven primarily by an imbalance between high demand and limited supply. The growth is now increasingly concentrated in tech-heavy metropolitan areas, where an influx of AI professionals is inflating property values and office rents.
NOTE: This content is for informational and educational purposes only and does not constitute financial advice. Always do your own research. Not financial advice (NFA).