Stick With America Trade Despite AI Hype?
US stocks gained on Friday as investors breathed a relative sigh of relief over an inflation report that came in line with expectations. Wall Street also digested new data signaling souring consumer sentiment and President Trump's fresh round of punishing tariffs.
The Dow Jones Industrial Average (^DJI) and the S&P 500 (^GSPC) rose roughly 0.6%. The tech-heavy Nasdaq Composite (^IXIC) climbed 0.4%.
The gains marked a shift after three straight days of losses for the major US gauges. Still, all three major indexes ended the week lower by less than 1%.
Stocks rebounded from a late-morning slump as investors contemplated the latest inflation data and the results of the University of Michigan's consumer sentiment survey, which found that Americans were more pessimistic about the US economy than expected in September.
August's reading of the Personal Consumption Expenditures (PCE) index, which contains the Fed-favored "core" PCE measure of inflation, showed prices rising in line with expectations. The "core" PCE price index rose 2.9% year over year and 0.2% month over month in August, both coming in alongside what economists were expecting, even as inflation remained sticky and well above the Fed's 2% target.
Meanwhile, investors are studying Trump's new threat to put a 100% levy on imports of branded drugs. The rate will apply to any pharmaceutical company that isn't already building a manufacturing plant in the US, the president said in a social media post late Thursday, but offered no further details. Shares of drugmakers in Europe and Asia faltered after the move.
Imports of heavy trucks and certain categories of furniture also face new heftier tariffs, Trump said, with the new duties to come into effect on Oct. 1 — less than a week away.
The trade salvo adds fresh uncertainty for markets already grappling with concerns about the sustainability of the AI boom and a high risk of a US government shutdown. The S&P 500 is eyeing its first weekly loss this month after a Wall Street slump snapped a record-setting rally.
Meanwhile, Trump signed an order approving a deal to spin off TikTok's US operations from China's ByteDance, though Beijing still needs to sign off on the agreement. But the proposed $14 billion price tag was greeted with surprise on Wall Street, seen as undervaluing a global leader in social media estimated to potentially be worth $40 billion.
Some of the "Magnificent Seven" Big Tech stocks also closed lower for the week. Amazon (AMZN) led the declines, dropping more than 4% over the five day period, while Meta (META) and Alphabet (GOOGL, GOOG) also notched weekly losses.
Microsoft (MSFT) slipped more than 1% during the five-day period while Nvidia (NVDA) and Tesla (TSLA) closed out higher.
Electronic Arts surge on report it may go private
Electronic Arts (EA) stock surged on Friday after the Wall Street Journal reported the electronic game maker is nearing a deal to go private.
Shares jumped 15% in afternoon trading.
According to the report, the deal, valued at $50 billion, would be the largest leveraged buyout of all time.
Private equity firm Silver Lake and Saudi Arabia’s Public Investment Fund are some of the investors involved in the agreement, which could be disclosed as early as next week.
Silver rallies over 3%, nearing 2011 high
Silver's (SI=F) rally continued on Friday, pulling the precious metal closer to its 2011 high of $49.
Contracts for silver rose nearly 4% as of midday trading to $46.88 per troy ounce. On Monday, silver broke above a resistance level of $42 and is now up 10% over the past five days.
For the year, silver prices have gained more than 60%, outpacing the similarly impressive rally in gold (GC=F), which has returned 46% year to date.
Wall Street sees more room to run in the rallies in gold and silver as investors look to safe havens, the Federal Reserve begins its easing cycle, and the dollar index (DX-Y.NYB) declines. Though UBS noted that silver could see heightened volatility in the near term.
“We expect silver to attract catch-up and high-beta-gold trades, paving the way for further gains in the coming quarters,” the UBS analysts wrote in a note last week. “That said, unlike the strategic nature of gold interest, we expect investors to take a more tactical stance when it comes to silver. This implies that they will be quicker to exit positions and book profits in silver.”
Allie Canal of Yahoo Finance also reports foreign investors are sticking with US stocks amid Trump tariff turmoil:
In April, talk of a “Sell America” trade picked up steam on Wall Street following the unveiling of President Trump's "Liberation Day" tariffs. US stocks, Treasurys, and the dollar all tumbled at once — an unusual dislocation that shook confidence in America’s safe-haven status.
But recent data indicates that investors abroad have actually stuck with US stocks in 2025.
From the start of the year to the end of June, foreign investors allocated more than 30% of their US financial assets to equities — near record highs and well above the long-term average of about 19%, according to Ned Davis Research. That means globally, investors aren't rotating away from equities as a share of the pie despite this year's tariff turmoil.
(Source: Ned Davis Research)The simplest reason for the absence of a major shift in allocation is that, since the market's rebound from April lows, tariff news hasn't weighed on stocks all that much. The initial panic faded as companies managed the impact better than investors feared. According to Citi, the US effective tariff rate is now closer to 9%, roughly half the 18% theoretical rate, underscoring how carve-outs, transshipments, stockpiling, and thinner margins have helped blunt the impact of higher levies.
At the same time, falling interest rates and renewed optimism about US growth have steadied investor confidence. Still, Trump’s latest wave of tariffs clouds the outlook, raising questions over whether the trade war’s impact will remain minimal.
“From my standpoint, the expectations for the US were extremely high coming into this year, and expectations for the international markets were extremely low,” Keith Lerner, chief investment officer at Truist, said. “So that just means that a little bit of good news [goes] a long way for these other markets. And a little bad news can go a long way for the US market.”
That bad news also included President Trump’s escalating rhetoric against Federal Reserve Chair Jerome Powell, which stoked fears over the Fed’s independence at a time when investors were already questioning the resilience of the US economy.
Instead of turning to Treasurys or the dollar, the traditional havens in times of stress, investors dumped them alongside equities. International equities surged, at one point outperforming US stocks by as much as 17%, according to Winthrop Capital. That gap has since narrowed to closer to 10%.
“What you saw in the spring was a move that just went too far,” said Adam Coons, chief investment officer at Winthrop. “International stocks are still up, but the delta between them and the US has collapsed. The bet that the gap would close is working out.”
Meanwhile, price-to-earnings ratios are making the stocks of US companies more compelling.
“It all comes down to tech,” Truist's Lerner said. “When you look at these developed international markets, they don’t have a lot of tech. And that’s why investors have cooled a little bit there.”
Policy has also played a role. Europe’s stimulus helped drive international markets earlier this year, but the US now has the edge as the Fed cuts interest rates, recession worries ease, and new clarity on fiscal stimulus in Washington adds to "a more supportive backdrop," Lerner said.
The dollar, meanwhile, has steadied after its sharp spring slide. While it remains weaker than at the start of the year, the greenback’s stability has blunted one of the biggest tailwinds for international equities, since currency gains accounted for much of their early 2025 rally.
For now, Lerner said Truist remains “Team USA,” even if the firm has added some international exposure as a hedge. “We don’t want to give up on the underlying trend where we think the fundamental case is still strong — which is still the US,” he said.
Alright, it's Friday, time to go over what happened in US markets and I read these two excellent articles above and posted them here.
I would say this week we saw some end-of-quarter rebalancing, investors took profits on their winners and shed their losers. Always be wary about a week before the quarter ends, volatility picks up.
There were however some big moves worth noting.
For example, Pfizer (PFE) acquired Metsera (MTSR) for a potential transaction value of more than $7 billion sending its shares soaring:
Despite this news, I am sticking with my call that Viking Therapeutics (VKTX) has the best GLP-1 oral and injectable drug and if Metsera which was nowhere near where Viking is got $7.3 billion, Viking will likely fetch over $10 billion once acquired (at this point, it might just enter into a strategic partnership).
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Silverlake and Saudi Arabia’s Public Investment Fund are some of the investors involved in what will reportedly be the largest leveraged buyout ever.
And Intel shares keep climbing higher on all sorts of deals and investments, now up 46% over the past month and clearly breaking out on the 5-year weekly chart:
I spoke about Intel when I went over top funds' activity in Q2 2025, stating David Tepper bought it and I liked the chart.
We shall see if it continues making new highs but any dip at this point is a buy for me.
Here are some other US large cap stocks that performed well this week (full list available here):
You should also scan the list of US large cap stocks making new highs and lows here.
Alright, let me wrap it up there and wish everyone a nice weekend.
Below,Tom Lee, Fundstrat Head of Research, joins CNBC's Closing Bell (Thursday) to discuss the market's current standing, if the market's making too many bets on what might happen in the future and much more.
Next, CNBC’s “Closing Bell Overtime” team discusses the AI trade and what may be next for tech stocks with Jose Rasco, chief investment officer of Americas with HSBC.
Third, CNBC’s “Closing Bell Overtime” team discusses what to watch next week with Adam Crisafulli of Vital Knowledge.
Fourth, Dan Niles, Niles Investment Management founder and portfolio manager, joins 'Power Lunch' to discuss if the hope around AI spend are overdone.
Lastly, from Blackstone's 2025 CIO Symposium: Jon Gray distills the macro environment, AI as "The Main Thing," and the outlook for alternatives. In this keynote, he explores the forces driving growth and opportunities shaping the future of private equity, real estate, credit, infrastructure and more.
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