The final trading week of August 2025 gave investors plenty to analyze as Wall Street balanced record highs, shifting sector leadership, inflation data, and profit-taking ahead of Labor Day. While the Dow Jones Industrial Average managed fresh records, the S&P 500 and Nasdaq Composite ended the week slightly lower, reflecting a healthy rotation out of crowded technology trades into energy, financials, and defensive sectors.
This detailed weekly stock market recap breaks down daily market movements, economic data, sector performance, fund flows, and what traders should expect heading into September—historically one of the most volatile months for equities.
Index Performance: Weekly Summary
The week saw mixed results across the major indices, with signs of strength in value and cyclical stocks, while mega-cap technology names cooled:
- Dow Jones Industrial Average (DJIA): Finished Friday at 45,544.88, down 0.2% for the day and modestly lower for the week. Still, it recorded a 1.5% gain for the week overall, hitting a record closing high on Thursday before easing on profit-taking.
- S&P 500: Closed at 6,460.26 on Friday, down 0.6% for the day but up 0.3% for the week, enough to log its fourth straight monthly gain.
- Nasdaq Composite: Ended at 21,455.55, falling 1.2% on Friday and posting a 0.6% weekly decline, dragged by weakness in large technology and semiconductor stocks.
- Russell 2000 (small caps): Advanced 0.2% for the week, signaling improving appetite for broader market participation outside of mega-caps.
Year-to-date returns as of August 29, 2025:
- S&P 500: +9.8%
- Dow: +7.1%
- Nasdaq: +11.1%
- Russell 2000: +6.1%
Monday, August 25 – Market Cools After Record Highs
Wall Street opened the week on a cautious note following record highs in the prior week. Investors avoided aggressive positioning ahead of the Personal Consumption Expenditures (PCE) inflation report, which many viewed as critical to the Federal Reserve’s next interest-rate decision.
- Dow Jones fell about 350 points, snapping its record-setting streak.
- S&P 500 declined 0.4%, reflecting modest risk aversion.
- Nasdaq slipped 0.2%, as traders reduced exposure to overextended technology stocks.
Investor attention remained fixated on Fed Chair Jerome Powell’s Jackson Hole remarks, where he emphasized flexibility in monetary policy and left the door open for rate cuts if labor market weakness becomes evident.
Tuesday, August 26 – Consumer Confidence Offers Support
Markets stabilized on Tuesday thanks to consumer confidence data that showed households remain willing to spend despite stubbornly high prices.
- The Dow gained more than 150 points.
- The S&P 500 rose 0.5%, lifted by consumer discretionary and retail names.
- The Nasdaq added modestly, though gains were capped by renewed weakness in semiconductors.
While confidence dipped slightly compared to July, the reading remained well within expansion territory, suggesting that consumer spending—the backbone of the U.S. economy—remains resilient. Retail, travel, and leisure stocks responded positively, reflecting optimism in discretionary spending patterns.
Wednesday, August 27 – PCE Inflation Sparks Volatility
Wednesday’s session was dominated by the release of the PCE inflation report—the Federal Reserve’s preferred inflation gauge.
- Headline PCE inflation held steady at 2.6% year-over-year.
- Core PCE inflation, which strips out food and energy, ticked up to 2.9%, highlighting sticky underlying price pressures.
Markets reacted with volatility:
- The S&P 500 ended flat after swinging between gains and losses.
- Treasury yields dipped, supporting utilities and real estate stocks, both of which are sensitive to interest-rate expectations.
- The Nasdaq lagged, as traders booked profits in mega-cap names like Apple, Microsoft, and Nvidia following months of sharp gains.
While inflation is cooling compared to prior years, the slower pace of decline underscores the challenge facing the Fed—balancing the need to cut rates with the risk of reigniting price pressures.
Thursday, August 28 – Nvidia and AI Fuel Record Highs
Thursday delivered the strongest performance of the week as optimism surrounding artificial intelligence (AI) returned to the spotlight.
- Nvidia’s quarterly earnings confirmed explosive demand for AI infrastructure, with revenue soaring 56% year-over-year.
- Despite slightly missing sky-high expectations, the results reinforced Wall Street’s conviction that AI remains a long-term growth driver.
- Other technology leaders, including Snowflake (up 20%) and HP Inc. (up 4.6%), rallied after reporting strong AI-driven demand in their businesses.
Major indices surged:
- S&P 500 gained 0.3% to a record 6,501.86.
- Nasdaq climbed 0.5% to 21,705.16.
- Dow advanced 0.1% to 45,636.90, also a record closing level.
Sector performance was broad, with communication services up 0.94% and energy up 0.68%. The AI rally demonstrated the market’s continued appetite for growth themes, even as investors diversify into value sectors.
Friday, August 29 – Profit-Taking Ahead of Labor Day
The week ended with a risk-off tone as investors secured profits before the Labor Day holiday and the start of September trading—a historically turbulent month for equities.
- S&P 500 fell 0.6%, retreating to 6,460.26.
- Dow declined 0.2% (-92 points), closing at 45,544.88.
- Nasdaq dropped 1.2%, ending at 21,455.55, its weakest performance of the week.
Despite Friday’s pullback, all three indices recorded their fourth consecutive monthly gain, cementing August as a period of resilience for the 2025 bull market.
Fund flows data highlighted investor repositioning:
- U.S. equity funds attracted $571 million in inflows, a turnaround from the prior week’s outflows.
- Small-cap funds drew $762 million, while mid-caps and large-caps posted outflows of $1.96 billion and $459 million, respectively.
- Financial sector funds gained $1.54 billion in inflows, reflecting investor preference for value plays.
- Bond funds recorded $5.6 billion in inflows, while money-market funds gained $12.1 billion, underscoring ongoing demand for income-generating assets.
Sector Highlights – Rotation Gains Momentum
The week highlighted a growing rotation away from mega-cap technology and into sectors with stronger near-term fundamentals:
- Energy: Outperformed thanks to firming oil prices and optimistic global demand forecasts.
- Financials: Benefited from strong loan growth, healthy balance sheets, and investor fund inflows.
- Real Estate: Rose as Treasury yields eased following the PCE report, boosting property valuations.
- Healthcare: Attracted defensive flows as traders sought protection ahead of September volatility.
- Technology: Lagged despite Nvidia’s AI boost, weighed down by weakness in semiconductors and large-cap software names.
This broadening of market leadership signals that the 2025 rally is no longer concentrated solely in technology—a bullish sign for long-term stability.
Economic Data Recap
Key reports shaping sentiment during the week included:
- PCE Inflation: Headline steady at 2.6%; core at 2.9%.
- Consumer Confidence (Conference Board): Fell to 97.4 from July’s 98.7 but remained in positive territory.
- University of Michigan Consumer Sentiment: Dropped to 58.2, a three-month low, reflecting concerns over inflation expectations.
- Labor Market: Weekly unemployment claims remained steady, suggesting ongoing resilience in hiring.
The data painted a mixed picture—while inflation is trending lower, consumer confidence is softening, reflecting household strain from high borrowing costs and lingering price pressures.
Investor Sentiment and Federal Reserve Outlook
Markets are now pricing in an 89% probability of a Federal Reserve rate cut in September, as reflected in Fed funds futures. While inflation remains above the central bank’s 2% target, the cooling pace provides enough flexibility for policymakers to begin easing policy.
Investor sentiment improved during August as stocks extended their gains. However, with consumer sentiment indicators weakening and inflation still above target, market participants remain cautious about potential downside risks. Many strategists view any September pullbacks as opportunities to rotate into underappreciated sectors like energy, financials, and healthcare.
Weekly Outlook: September 1 – September 5, 2025
Looking forward, investors will face several key catalysts:
- Non-Farm Payrolls (Friday, Sept 5): Critical gauge of labor market health.
- ISM Manufacturing Index (Tuesday, Sept 2): Update on industrial activity amid slowing global demand.
- Fed Speeches: Policymakers are likely to provide further clarity on interest-rate plans.
- AI Earnings Momentum: Tech traders will continue to monitor AI-related names for signs of sustained growth.
September is historically one of the most volatile months for equities, and with indices near record highs, traders will likely remain vigilant.
Finally
The week of August 25–29, 2025 reflected the delicate balance between optimism and caution:
- The Dow Jones and S&P 500 advanced modestly, while the Nasdaq slipped amid profit-taking in technology stocks.
- AI earnings fueled record highs mid-week, with Nvidia, Snowflake, and HP demonstrating the secular growth potential of artificial intelligence.
- Inflation data confirmed gradual cooling, keeping the Fed on track for a likely rate cut in September.
- Sector rotation into energy, financials, and healthcare showed a healthier, more diversified rally beyond mega-cap tech.
- Investors head into September mindful of its volatility, but the resilience of the 2025 bull market suggests opportunities remain across multiple asset classes.
In short, the August rally broadened, the bull market endured, and the market narrative shifted from tech-centric gains to more balanced growth across sectors—a positive sign for long-term investors.