Markets Hover Through a Tense Week as Key Risks Loom

This week in the stock market was marked by a tug-of-war between optimism about rate cuts and caution sparked by strong economic data and political risk. Major indexes briefly flirted with new highs, but volatility crept back in as investors weighed mixed signals.

Rally Fueled by AI Pushes Markets to Records

Early in the week, markets charged higher after news broke of a massive investment deal between Nvidia and OpenAI. Nvidia pledged up to $100 billion toward AI-data center expansion, sending the stock up ~3.9% and lifting other tech names. The S&P 500 and Nasdaq both nudged fresh record territory. Wall Street Journal

The broader narrative: investors remain bullish on the potential earnings tailwinds from AI, even as macro risks bubble under the surface. The Australian+1

Pullback and Choppy Trading Set In

That euphoria cooled midweek. The S&P 500, Nasdaq, and Dow all slipped over two consecutive trading days — the first multi-day dip in September. Still, relative to typical September norms (a historically weak month), markets are holding up better than expected. Barron’s

Friday brought a rebound: the S&P jumped ~0.6%, the Dow rose nearly 0.7%, and Nasdaq added ~0.4%. Support came from an inflation report showing August CPI rose 2.7%, broadly in line with forecasts and easing fears of aggressive rate tightening from the Fed. AP News

Still, the week ended with the indexes posting a weekly loss, snapping what had been a run of gains. Reuters+1

Data, Fed Speak, and the Shutdown Threat

Several undercurrents dominated investor focus:

• Strong economic data pushed back on expectations for steep Fed cuts. Durable goods, GDP revisions, and surprises in activity metrics stoked doubts about how soon and how aggressively the Fed will ease. Reuters+4Reuters+4Investopedia+4

• Still, expectations for rate cuts in 2025 linger. Some Fed officials have signaled openness to easing, especially given signs of labor market softening. Financial Times+2Investopedia+2

• A looming U.S. government shutdown added a dose of uncertainty. If Congress fails to pass funding by September 30, delays in economic data releases or disruptions to federal operations could exacerbate market volatility. Barron’s+2MarketWatch+2

• Earnings and macro calendar: Key earnings—Nike, Tesla, Carnival—and the September jobs report will be crucial catalysts in coming days. Investopedia+1

Outlook: Cautious Optimism with Watchful Eyes

Heading into next week and October, investors are navigating a tricky balance. The AI-driven narrative remains powerful, offering a structural tailwind. But the timing and magnitude of Fed cuts are now under more scrutiny.

If economic data continues to surprise on the upside, hopes for large near-term easing could fade. On the flip side, signs of weakening labor market or consumer stress could reignite dovish positioning. The threat of a government shutdown adds a wildcard.

In short: the path forward could be choppy, but for now the bulls and bears seem to be in a stalemate — waiting for the next signal.

By: Montana Newsroom staff