Since the Federal Reserve's decision last month to hold interest rates steady, a shift appears to be underway at the U.S. central bank. Several Fed officials sound increasingly uneasy about the labor market and signal their openness to, if not impatience with, a rate cut as soon as September.
U.S. stocks closed higher Friday, capping a choppy week of trading with the market’s third winning week in the last four and another milestone.
The S&P 500 rose 0.8%, finishing just shy of the record it set last week. The benchmark index also wiped out its losses from a slide last week.
The Dow Jones Industrial Average climbed 0.5%, and the Nasdaq composite added 1% to the all-time high it set a day earlier.
Technology companies, with their hefty stock values, did much of the heavy lifting for the market. Nvidia rose 1.1% and Apple gained 4.2%.
Gilead Sciences jumped 8.3% for one of the market’s biggest gains. It reported financial results that easily beat analysts’ forecasts, while also raising its earnings forecast for the year. Expedia Group rose 4.1% after also reporting encouraging financial results.
They are among the final big batch of companies within the S&P 500 to report mostly strong financial results for the second quarter. Still, many have warned that current tariffs could cut into their profits.
Financial sector stocks also helped drive the market higher. Bank of America gained 2.4% and Mastercard rose 2.3%.
Elsewhere in the market, entertainment giant Paramount Skydance slid 10.5% a day after the company was created by the closing of an $8 billion merger of Skydance and Paramount. Shares in rival Warner Bros. Discovery sank 8%.
The main focus throughout the week has been on President Donald Trump’s trade war and its potential impact on the U.S. economy, as well as the Federal Reserve’s interest rate policy. Trump began imposing higher import taxes on dozens of countries Ton hursday.
Still, the market appeared to largely shrug off the latest tariff escalation.
“The S&P 500’s rebound this week may highlight the extent to which the market is becoming numb to tariff headlines,” said Daniel Skelly, head of Morgan Stanley’s Wealth Management Market Research & Strategy Team.
The unknown path of the economy amid an unpredictable tariff policy has been the key reason for the Fed to hold its benchmark interest rate steady.
Fed Chair Jerome Powell, though, has been under increasing pressure from Trump to cut interest rates. Policy decisions aren’t made solely by the Fed chair. All 12 members of the Federal Open Market Committee vote on interest rate changes.
Trump has an opportunity to exert more control over the Fed following his nomination of Stephen Miran to a vacancy on the Fed’s board of governors. Miran is a top economic adviser to Trump and is a near-certain vote in support of lower interest rates.
The Fed’s last decision to hold interest rates steady included two votes to lower interest rates. Its next meeting is in September, and Wall Street is overwhelmingly betting that the central bank will cut interest rates by a quarter of a percentage point.
Treasury yields edged higher. The yield on the 10-year Treasury rose to 4.28% from 4.25% late Thursday. The yield on the two-year Treasury, which more closely tracks expectations for Fed actions, rose to 3.76% from 3.73% late Thursday.
The expectation for an interest rate cut follows a series of signals last week that the economy could be weakening. That included reports showing that inflation edged higher in June and employers in the U.S. hit the brakes on hiring in July.
Both are key concerns for the Fed, which has been trying to cool inflation down to its target rate of 2% while also fulfilling its “full employment” mandate.
Lower interest rates can give the economy and investment prices a boost, though the downside is that they can also push inflation higher. Concerns about inflation reheating could be overshadowed by worries about a weakening employment market.
Wall Street and the Fed will get more insight next week on inflation’s temperature and the economy. The government will release updates on inflation at both the consumer and wholesale levels, along with a report on retail sales.
“We believe stocks will stay supported amid solid fundamentals, but fresh headlines in the coming week may challenge investor sentiment that remains vulnerable to tariff, economic, and geopolitical risks,” said Ulrike Hoffmann-Burchardi, chief investment officer for the Americas and global head of equities at UBS Global Wealth Management.
All told, the S&P 500 rose 49.45 points to 6,389.45. The Dow rose 206.97 points to 44,175.61, and the Nasdaq rose 207.32 points to finish at 21,450.02.
Asian markets closed mostly lower except in Tokyo, where the Nikkei rose 1.9% after Japan’s main trade envoy said the U.S. had agreed to correct a problem over tariffs that will apply to exports to the U.S.
European markets were mixed.
President Donald Trump has removed former U.S. Rep. Billy Long as IRS commissioner less than two months after his confirmation, a White House official said Friday.
It was not immediately clear why Long was dismissed. His quick exit makes him the shortest-tenured IRS commissioner confirmed by the Senate since the position was created in 1862.
Long said in a social media post that Trump had nominated him for an ambassadorship.
“It is an honor to serve my friend President Trump and I am excited to take on my new role as the ambassador to Iceland. I am thrilled to answer his call to service and deeply committed to advancing his bold agenda. Exciting times ahead!” the former Missouri congressman wrote on X.
Treasury Secretary Scott Bessent will serve as acting IRS commissioner, according to the White House official, who was not authorized to speak publicly and spoke on condition of anonymity.
Long’s ouster only compounds the turmoil at the nation’s tax collector, which has been beset by turnover since the beginning of Trump’s second term. The IRS shuffled through four acting leaders before Long was confirmed in June, and has lost a quarter of its staff since the Department of Government Efficiency burrowed in with a self-stated mission to reduce waste, fraud, and abuse.
In a message to IRS employees after he was confirmed, Long talked about his plans for his first few months in office, a milestone he did not reach.
“In my first 90 days ,I plan to ask you, my employee partners, to help me develop a new culture here,” Long wrote. “I’m big on culture, and I’m anxious to develop one that makes your lives and the taxpayers’ lives better.”
In many ways, he was an unusual pick for the role. While in Congress, where he served from 2011 to 2023, Long sponsored legislation to get rid of the IRS. A former auctioneer, Long had no background in tax administration.
The Senate confirmed Long on a 53-44 vote despite Democrats’ concerns about the Republican’s past work for a firm that pitched a fraud-ridden coronavirus pandemic-era tax break and about campaign contributions he received after Trump nominated him.
After leaving Congress to mount an unsuccessful 2022 bid for the U.S. Senate, Long worked with a firm that distributed the pandemic-era employee retention tax credit. That tax credit program was eventually shut down after then-IRS Commissioner Daniel Werfel determined that it was fraudulent.
Democrats called for a criminal investigation into Long’s connections to other alleged tax credit loopholes. The lawmakers allege that firms connected to Long duped investors into spending millions of dollars to purchase fake tax credits.
The acting leaders who preceded Long in the role included one who resigned over a deal between the IRS and the Department of Homeland Security to share immigrants’ tax data with Immigration and Customs Enforcement and another whose appointment led to a fight between former Trump adviser Elon Musk and Bessent.
Long’s departure comes after the agency underwent a series of DOGE-related job cuts this year. The Treasury Inspector General for Tax Administration reports that the agency has been cut down from 103,000 workers in January to 77,000 workers in May 2025. Most of the reductions came from DOGE’s deferred resignation program. The workforce reductions were part of the Trump administration’s efforts to shrink the size of the federal bureaucracy.
The U.S. Air Force said Thursday it would deny all transgender service members who have served between 15 and 18 years the option to retire early and would instead separate them without retirement benefits. One Air Force sergeant said he was “betrayed and devastated” by the move.
The move means that transgender service members will now be faced with the choice of either taking a lump-sum separation payment offered to junior troops or being removed from the service.
An Air Force spokesperson told The Associated Press that “although service members with 15 to 18 years of honorable service were permitted to apply for an exception to policy, none of the exceptions to policy were approved.” About a dozen service members had been “prematurely notified” that they would be able to retire before that decision was reversed, according to the spokesperson who spoke on condition of anonymity to discuss internal Air Force policy.
A memo issued Monday announcing the new policy, which was reviewed by the AP, said that the choice to deny retirement benefits was made “after careful consideration of the individual applications.”
All transgender members of the Air Force are being separated from the service under the Trump administration’s policies.
The move comes after the Pentagon was given permission in early May by the Supreme Court to move forward with a ban on all transgender troops serving in the military. Days later, Defense Secretary Pete Hegseth announced a policy that would offer currently openly serving transgender troops the option to either volunteer to leave and take a large, one-time separation payout or be involuntarily separated at a later date.
A Pentagon official told reporters in May that they viewed the policy as treating “anyone impacted by it with dignity and respect.”
However, in late July, transgender troops told Military.com that they were finding the entire separation process, which has included reverting their service records back to their birth gender, “dehumanizing” or “open cruelty.”
Shannon Leary, a lawyer who represents LGBTQ+ people in employment discrimination cases, says she expects lawsuits to challenge Thursday’s decision. “It seems quite arbitrary on its face and cruel,” she said. “These military members have dedicated their lives to serving our country.”
Normally, Leary said, when early retirement is offered in the military, it’s available to all members who have served over 15 years. She said she expects other service branches to follow the Air Force’s path.
One Air Force service member says he’s ‘devastated’
Logan Ireland, a master sergeant in the U.S. Air Force who has 15 years of service, including a deployment to Afghanistan, is one of the airmen impacted by the policy. “I feel betrayed and devastated by the news,” he said.
Ireland said he was told that his retirement was being denied on Wednesday when his chain of command, “with tears in their eyes,” told him the news.
Officials have said that as of Dec. 9, 2024, there were 4,240 troops diagnosed with “gender dysphoria” on active duty, National Guard, and Reserve. Pentagon officials have decided to use the condition and its diagnosis as the main way to identify troops who are trans.
However, the two are not an exact match — not every transgender person has the condition. As a result, there is an understanding that the actual number of transgender people within the military’s roughly 2 million troops may be higher.
Under the latest policy, active duty troops had until June 6 to voluntarily identify themselves and receive a payout, while troops in the National Guard and Reserve had until July 7. Pentagon officials previously told reporters that they plan to lean on commanders and existing annual medical screenings to find any transgender service members who do not come forward.
In 2025, the story of female CEO turnover isn’t about a record-breaking wave of departures—it’s about enduring precarity and declining representation. But here’s the part of the story we don’t talk about enough: the glass rug—when women finally break through to the top job, only to have it pulled out from under them.
One of the most powerful ways to change that? Majority-female boards.
In the Fortune 500 and S&P 500, they remain virtually nonexistent. General Motors is a rare—and shining—example, with women holding 53.8% of its board seats. That kind of representation gives women CEOs a fair shot at success. Without it, the glass rug keeps getting pulled out from under them.
As I wrote for the World Economic Forum (When women lead, economies leap), intentional action works. Parity is possible—and it’s good for business and the economy.
Majority-female boards aren’t symbolism; they’re a safeguard against the glass rug and a catalyst for economic growth.
Fears of a recession are back on investors’ minds. But predicting the onset of an economic downturn, let alone the length and severity of one, is difficult even for the experts.
As a rule of thumb, two quarters of gross domestic product contraction is generally accepted as a recession, but the official start date is declared by the Business Cycle Dating Committee of the National Bureau of Economic Research.
While we often don’t know we’re in a recession until it‘s well underway, here are some economic signals worth watching to get a sense of the economy’s health.
What Are the Key Economic Indicators?
These indicators can help give us a better understanding of where the economy and the markets stand, but they can’t perfectly predict the future. Further, many of these measures are affected by a variety of factors that may or may not point to a recession, so interpreting the data isn’t always cut and dry.
Here are some of the key indicators that economists track to understand economic health and where we might be headed.
- Real GDP. A prolonged slowdown or outright decline in GDP growth may be a cause for concern. The general rule of thumb is that two quarters of contraction can be considered a recession.
- Consumer spending. Consumer spending is the largest component of GDP. Consumers tend to tighten their belts in response to economic uncertainty, which can lead to lower economic output.
- Employment. Recessions tend to stifle wage increases and promotions, and they may trigger layoffs. Higher initial jobless claims and lower or declining job growth may be signs of a recession.
- Inflation. Inflation tends to rise during periods of economic expansion. The opposite is usually true during contractionary periods, but persistent high inflation without corresponding economic growth may cause consumers to cut back on spending.
- Interest rates. High inflation may cause the Federal Reserve to raise interest rates to contain it. In contrast, the central bank may lower rates to encourage borrowing and bolster job growth at the risk of raising inflation.
- Yield curve. An inverted yield curve occurs when short-term bond yields are higher than those of longer-term bonds. This indicates future expectations of lower interest rates, and thus lower growth and inflation. Inverted yield curves have historically occurred ahead of recessions.
- Stock market performance. While the stock market and the economy don’t always move in tandem, economic uncertainty can prompt market selloffs.
We’ll take a closer look at where these indicators stand. Keep in mind that it can take time for the data to catch up to what‘s going on because most of our traditional economic data is released at least a month behind when it happened.
GDP Growth Has Slowed in the First Half of 2025
Data as of June 30, 2025.
Gross domestic product is a key measure of economic health. GDP is the monetary value of all finished goods and services made within a country during a certain period, and it‘s used to estimate the size of the economy. GDP growth year over year indicates a healthy economy, while slowing growth or an outright decline can be cause for concern.
Preliminary GDP data released by the US Bureau of Economic Analysis showed that economic growth grew 3% in the second quarter of 2025, following a 0.5% contraction in the first quarter. As Morningstar senior reporter Sarah Hansen noted, that contraction was largely driven by a spike in imports, as US companies stocked up ahead of widespread tariffs.
GDP growth for the first half of 2025 is down from recent years. Morningstar Senior US Economist Preston Caldwell acknowledges that GDP tends to be volatile, but he expects the slowdown in economic growth to continue as consumers get more cautious.
Consumer Spending at Odds With Consumer Sentiment
Data as of June 30, 2025.
Consumer spending accounts for just under 70% of US GDP. As the largest component of the economy, it is one of the main determinants of the country’s economic health.
In the second quarter of 2025, real personal consumption expenditure increased by 1.4% from the previous quarter. First-quarter spending is often the lowest of the four quarters, as consumers cut back after the holidays and leading up to summer travel.
While the latest spending data doesn’t sound any alarms, consumer sentiment is still significantly lower than in 2024, according to research from the University of Michigan. Consumers are pessimistic, but that pessimism hasn’t fully translated into a pullback in spending. The question that economists have is whether the spending data will catch up with how consumers are feeling.
Quarterly Change in Consumer Spending
Labor Market Shows Signs of Cooling, Downward Revisions in Reported Numbers
Data as of July 31, 2025.
There are multiple ways to look at the health of the US labor market, which is tied to the overall health of the economy. Job growth is a primary indicator. The monthly nonfarm payrolls report from the Bureau of Labor Statistics shows the change in the number of workers in the US, with some exceptions like farming, active military, and self-employment.
The US economy added fewer jobs than expected in July as unemployment ticked up slightly. The Bureau of Labor Statistics also made larger-than-normal revisions to the previously reported May and June numbers. With these revisions, employment in May and June combined is 258,000 lower than previously reported.
Even before the numbers were revised down, economists saw some less-encouraging signs in June’s underlying data. Morningstar’s Sarah Hansen pointed out that state and local government hiring spiked while private-sector hiring slowed. The revised data paint a more negative picture.
Inflation Ticks Up as Consumer Prices Rise
Data as of June 30, 2025.
The Consumer Price Index increased 2.7% on an annual basis in June, up from 2.4% in May. Every month, the CPI increased 0.3%. The Core CPI, which excludes volatile food and energy costs, was up 2.9% in 2024.
Consumer prices trended up in response to tariffs as producers started passing along higher import prices. For now, US companies are still shouldering much of the burden, but that could change in the coming months.
Analysts Expect Federal-Funds Rate Cut in September
Data as of July 30, 2025.
The Federal Reserve’s dual mandate requires it to promote maximum employment while holding prices steady. The central bank typically aims to hold long-run inflation at an annual rate of 2%, as measured by the Personal Consumption Expenditures Price Index. The Fed’s two goals of high employment and low inflation are often at odds with each other, so managing them is a balancing act.
As Morningstar Senior US Economist Preston Caldwell explains, the Federal Reserve is cautious about the inflationary effects of changing interest rates. Caldwell expects that the Fed will still cut rates twice this year, with the first cut likely coming in September.