Stock Market Outlook August 4 – 8: How to trade

Stock Market Recap and Sector Insights: Week of July 28 – August 1

Before looking ahead to the stock market outlook for the week of August 4–8, 2025, it’s important to review how markets performed during the previous week. From July 28 to August 1, the S&P 500 experienced significant volatility. It initially hit its 15th record close of the year but then dropped sharply amid rising global tariff tensions and uncertainty surrounding Federal Reserve policy. The Dow Jones Industrial Average and Russell 2000 indexes took the biggest hits, with the latter underscoring widespread weakness among small-cap stocks.

The Nasdaq Composite, however, showed relative strength, supported by robust earnings reports from major technology players such as Microsoft and Meta Platforms. Despite these pockets of resilience, the overall market finished the week in negative territory, driven by several key factors. The Federal Open Market Committee’s hawkish stance on interest rates played a central role. Although rates were held steady between 4.25% and 4.50%, internal disagreements and Chair Powell’s cautious remarks unsettled investors. The trade environment further dampened sentiment, as sweeping tariffs imposed by President Trump targeted imports from 92 countries, with Canadian goods facing hikes from 25% to 35%. Lastly, July’s jobs report fell short of expectations, revealing only 73,000 new jobs added and downward revisions to previous months’ figures.

Weekly Performance of the U.S. Indices

Source: Ki-Wealth Research

Within this challenging backdrop, theutilities sectorstood out as the top performer, benefiting from a unique combination of structural, economic, and technological drivers. The surge inartificial intelligenceadoption has fueled a sharp rise in electricity demand, particularly from data centers. Analysts estimate that by 2030, data centers could consume as much as 11% of U.S. electricity—a substantial increase from today’s 4.5%. Utilities are leveraging this trend by investing heavily in infrastructure upgrades and capacity expansions, positioning themselves for steady, long-term growth.

These efforts are supported by favorable regulatory developments, including successful rate cases that allow utilities to raise electricity prices. For example,DTE Energysecured a $217 million rate increase in Michigan, whileWEC Energy Groupobtained 6.9% and 8.5% rate hikes for its Wisconsin utilities. Such increases contribute to more substantial revenues and improved profit margins, enhancing the appeal of utility stocks. Additionally, growing risks from wildfires and hurricanes have prompted utilities to invest in forest management and infrastructure hardening. These proactive measures not only protect assets but also justify further rate adjustments, which regulators are increasingly approving.

Despite its traditional defensive reputation, the utilities sector is outperforming even in a risk-on market environment. Other defensive sectors, includinghealthcareand consumer staples, have lagged behind, making utilities a compelling blend of stability and growth. Moreover, utilities appear less exposed to tariff pressures since they typically pass higher costs onto consumers through regulated rate hikes. While domestic production incentives might reduce import reliance over time, current capacity remains limited, underscoring the sector’s resilience amid global trade uncertainties.

Performance by Sector, 1 Day versus Week of July 28-August 1, 2025

Source: Finviz, Ki-Wealth Research

As I highlighted in my previousstock market analysis, the market responded negatively to the conflicting signals from recent ISM and Consumer Sentiment reports. The July ISM Manufacturing index came in weaker than anticipated at 48.0, falling short of the 49.5 forecast and marking the 19th consecutive month of contraction. Key components underperformed as well, with employment dropping to 43.4 and new orders declining to 47.1. Although prices paid eased to 64.8—below expectations—they still reflect persistently high input costs.

At the same time, the final July reading of the University of Michigan consumer sentiment index slipped slightly to 61.7, just under expectations. Inflation expectations showed a mixed picture: the 1-year outlook rose to 4.5%, while the longer-term 5-10 year forecast eased to 3.4%.

Impact of Trump’s 2025 Tariff Policies: Key Sectors and Economic Outlook

In the week of August 4 to August 8, pivotal tariff decisions are set to influence the stock market landscape. President Donald Trump has enacted an executive order introducing new global tariff rates, scheduled to take effect on August 7, 2025. This move is a key element of his “reciprocal tariffs” strategy, impacting 68 countries, including the European Union.

The tariff rates vary significantly, ranging from 10% to as high as 41%, depending on the country. Notably, Syria, Laos, and Myanmar face the steepest tariffs, between 40% and 41%. Canada is set to experience a notable increase, with tariffs rising to 35% from the previous 25% on goods beyond the scope of the USMCA agreement. This adjustment is justified by the U.S. government as a measure addressing drug trafficking concerns.

Meanwhile, China and Mexico are excluded from this latest order as negotiations continue. For all other countries not explicitly listed, a baseline tariff of 10% will be applied. These developments are poised to create ripple effects across global trade and financial markets in the immediate term.

Investors should prepare for continued downward pressure stemming from the implementation of Trump’s tariff measures in the upcoming week. Ki-Wealth has identified the sectors most exposed to these changes and their anticipated impacts:

Manufacturing: Steel, copper, and auto parts face significant tariff surcharges under the 2025 framework. Although manufacturing output is forecasted to rise by 2.1% driven by protectionist measures, this growth comes with trade-offs—increased consumer prices and diminished operational efficiency.

Construction:The sector is projected to contract by 3.5% as tariffs raise the cost of imported materials and equipment. Increased expenses on machinery and building supplies are expected to strain project budgets and delay timelines.

Agriculture:Output is expected to decline by 0.9%, influenced by retaliatory tariffs from trade partners and higher costs for imported fertilizers and machinery.

Textiles and Apparel:Short-term price hikes of 40% for shoes and 38% for apparel will burden consumers. Longer-term elevated prices position this sector among the hardest hit by tariff policies.

Vulnerability to Tariffs by Sector, Updated on August 2, 2025

Source: Ki-Wealth Research

Beyond individual industries, the broader U.S. economy is set to feel the strain. Ki-Wealth’s analysis, grounded in publicly available data, anticipates a 0.5 percentage point reduction in Real GDP growth for both 2025 and 2026. Unemployment is projected to increase by 0.3 percentage points by year-end, while household incomes may shrink by an average of $2,400 in 2025 due to rising prices.

Market Outlook for August 4–8: Anticipating a Tepid Week

As the trading week of August 4 to August 8, 2025 approaches, investors should brace for a subdued market environment marked by flat or declining stock prices and lower trading volumes, largely influenced by the ongoing vacation season.

U.S. Factory Orders: How They Will Affect the Stock Market?

Monday’s spotlight will be on U.S. Factory Orders data.Expectations are for a 5.2% month-over-month decline in June, a sharp reversal from May’s robust 8.2% gain. The downturn is primarily attributed to a steep drop in transportation equipment orders, especially nondefense aircraft, which plunged 22.4%. Nondefense aircraft orders had soared 239.8% in May but fell dramatically in June due to tariff-related uncertainties, causing airlines to delay purchases, alongside a slowdown in Boeing’s order intake. Durable goods orders overall fell 9.3% in June following a strong May surge, with core capital goods (excluding defense and aircraft) down 0.7%, signaling waning business investment. This softening points to potential pressure on industrial sectors, particularly aerospace and machinery, as lower order volumes weigh on performance.

The U.S. Factory Orders, Forecast

U.S. Balance of Trade: What Will Be the Implications on Sectors?

Tuesday brings a key focus on the U.S. trade balance.The consensus anticipates the trade deficit narrowing from $71.5 billion in May to $61.4 billion in June. This notable contraction reflects a sharp decline in imports—down $11.5 billion—largely due to businesses front-loading purchases earlier in the year to sidestep escalating tariffs. The pattern reveals a cooling in the U.S. domestic demand and inventory glut, especially across retail and manufacturing. This import drop follows a surge earlier in 2025 tied to tariff uncertainty under the Trump administration. Exports fell only marginally by $1.1 billion, indicating that the deficit’s improvement stems mainly from reduced imports. While a smaller trade deficit could bolster GDP growth, it may also strengthen the U.S. dollar. A stronger dollar typically coincides with weaker stock market performance, and companies dependent on global supply chains might face higher costs due to reduced imports and tariffs, potentially pressuring industrial and consumer discretionary sectors.

The U.S. Balance of Trade Forecast

Overall, cyclical sectors connected to manufacturing and capital investment may face selling pressure this week, prompting investors to pivot toward defensive sectors like utilities and healthcare, as well as resilient technology and AI stocks that have weathered recent volatility.

Estimated Impact of the Improving Trade Balance in the U.S. by Sector

Source: Ki-Wealth Research

30-Year Mortgage Rate and Construction Spending: What to Expect?

On Wednesday, August 6, attention will focus on the U.S. 30-year mortgage rate, which the U.S. Census Bureau forecasts to remain elevated at 6.82%. This sustained high rate signals costly borrowing conditions, likely suppressing mortgage applications and dampening demand for new homes. As a result, homebuilders may delay or cancel projects, anticipating lower returns. This slowdown in construction activity could ripple through related sectors, reducing demand for building materials and labor.

The U.S. 30-Year Mortgage Rate Forecast

The U.S. Construction Spending Forecast

However, the Mortgage Bankers Association of America (MBA) offers a more optimistic outlook, projecting a gradual decline in the 30-year mortgage rate starting this August, potentially reaching 6.3% by June 30, 2026. Should this scenario unfold, construction spending might experience a rebound later this year. Companies such as Lennar, D.R. Horton, and Toll Brothers could see increased volatility tied to rate fluctuations, while mortgage lenders and banks may face shifts in loan demand and refinancing volumes. Investors would be well-advised to monitor these dynamics closely in the coming months.

U.S. Jobless Claims, Productivity, and Labor Costs: What Investors Should Know

On Thursday, August 7, attention will focus on the U.S. initial jobless claims, along with Q2 2025 Non-Farm productivity and unit labor costs.Market expectations point to a significant rebound in Non-Farm productivity, improving from a -1.5% decline in Q1 to a 1.8% increase quarter-over-quarter. The dip in productivity during Q1 was partly driven by labor hoarding, as companies retained workers despite slower output growth.

By Q2, businesses began optimizing their workforce, resulting in higher output per hour worked. Several factors contributed to this shift: disruptions that lingered from late 2024, including shipping delays, started to ease, enabling smoother production cycles and better inventory management. Additionally, increased hydrocarbon production, particularly in the Permian Basin, bolstered industrial productivity. Rising exports of petroleum and LNG further boosted output without a corresponding rise in labor input.

Technological advancements also played a role. Continued investments in cloud computing, AI, and automation—especially within manufacturing and logistics—enhanced operational efficiency. Companies such as Microsoft reported strong growth in productivity software adoption, supporting broader workforce efficiency gains. The economy’s shift toward capital-intensive, high-output sectors like energy, technology, and logistics is expected to lift overall productivity metrics.

According to Ki-Wealth simulation and scenario analysis, if these trends hold, they could underpin stronger U.S. GDP growth and potentially influence Federal Reserve decisions regarding interest rates.

Historical Correlations Between Non-Farm Productivity, GDP and Unit Labor Costs

Source: Ki-Wealth Research

Investment Strategy for the Week of August 4-8, 2025

As we look ahead to the upcoming trading week, market sentiment remains cautious with a bearish tilt. Investors are weighed down by new tariff measures and the Federal Reserve’s interest rate stance, creating a generally pessimistic atmosphere. Ki-Wealth’s analysis suggests that defensive sectors such as utilities and consumer staples are likely to demonstrate greater resilience. Conversely, technology and industrial sectors face heightened risks due to tariff vulnerabilities and valuation pressures. Given the ongoing uncertainty surrounding trade policies, our overall market rating for the week stands between Neutral and Bearish across most sectors.

Sector Ratings for the Week of August 4-8, 2025

Estimated Probabilities of Stock Market Decline, August 4-8, 2025

Source: Ki-Wealth Risk Analysis

S&P 500 Faces Downside Pressure; Range Bound Trading Expected

Technical indicators point to increased volatility for the S&P 500 this week. On Friday, August 1, the index slipped below its 21-day moving average, signaling bearish momentum. Key support levels remain near 6,200 and 6,135, but absent any strong bullish catalysts, upside momentum looks limited. Traders should brace for choppy, range-bound action between 6,350 and 6,135. Ki-Wealth advises locking in profits now and holding cash to capitalize on potential long entries during anticipated market pullbacks in the coming weeks.

S&P 500 Index Daily Technical Chart

Source: Trading View, Ki-Wealth analysis

Nasdaq 100 Index Outlook: Cautious Approach Advised Amid Bearish Trends

Investors should temper expectations for a significant rebound to new highs in the Nasdaq 100 Index. Despite Friday’s RSI suggesting the index is oversold, the broader trend remains biased toward downside movement. Ki-Wealth advises adopting a strategy similar to that recommended for the S&P 500 Index—capitalizing on recent strong gains by taking profits and holding cash reserves. This approach positions investors to acquire quality technology stocks opportunistically during the anticipated market correction.

Nasdaq 100 Index Daily Technical Chart

Source: Trading View, Ki-Wealth analysis

Earnings to Watch This Week

Below, we’d like to highlight the most prominent earnings reports for the week.

Monday:PLTR, MELI,VRTX, WMB, SPG, AXON,ON, HIMS, TSN, CBT, FRPT

Tuesday:AMD, CAT, ETN, ANET, PFE, DUK, ZTS,SMCI, FIS, TOST, IT, ALAB, YUMC, ZBRA,SNAP, RIVN, MOS, SWKS, FOUR, FTDR, CAMT

Wednesday:MCD, NVO,DIS, UBER, SHOP, APP, DASH, FTNT, COR,DKNG, TPG, TRMB, GPN, FNF,DUOL, PAYC, U,LINE, PAAS,DAVE

Thursday:LLY,TM,QBTS,GILD, COP,CEG,BN,VST, LNG, TTWO, DDOG,KVUE,WBD, PINS, EXPE, GDDY, TWLO, USFD, KTOS, EPAM, DBX, ELAN, ROAD

Friday:PAA, WULF, ESNT, TEM, SHC

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