More Red Flags Have Appeared

* Analyzing the markets with Richie Naso, a Wall Street veteran of over 40 years and former member of the NYSE.

DJIA 52-wk: +9.69% | YTD: +2.45% | Wkly: -2.92%

S&P 500 52-wk: +16.67% | YTD: +6.06% | Wkly: -2.36%

NASDAQ 52-wk: +23.09% | YTD: +6.94% | Wkly: -2.17%

Utilities Select Sector SPDR ETF 52-wk: +15.60% | YTD: +13.36% | Wkly: +1.51%

Biggest Red Week for SPX Since May 19th.

Market Summary: July 28 – August 1, 2025

Monday, July 28: All-Time Highs

The S&P 500 closed at a record high for the sixth straight session, rising about 0.02% to 6,389.77. The Nasdaq Composite also notched a record close with a +0.3% gain, while the Dow Jones slipped 0.14%. Market Beat

Market optimism was fueled by trade optimism: the US and EU agreed on a framework to reduce EU import tariffs to 15%, easing geopolitical fears. Reuters

Equities enjoyed strong momentum on robust Q2 earnings: most major companies beat estimates, with the blended earnings growth now around 10.3%, up from roughly 6.5% last week. FactSet

Jobless claims dropped and retail sales came in stronger than expected. Investor sentiment was buoyed further by easing tariff concerns ahead of the August 1 deadline. Investopedia

Friday, August 1: Sudden Reversal

The market dropped sharply as only 73,000 jobs were added in July, well below forecasts, and prior months’ data was revised down significantly. NY Post

President Trump announced broad new tariffs across ~69 countries, pushing effective U.S. tariff rates close to 18–20%, triggering investor anxiety. Reuters

America’s biggest companies are racing full speed ahead, but the economy could be headed for trouble. That’s not a great mix for the stock market, which suffered its worst week since May.

A news-heavy week ended with the S&P 500 (SPX-1.60%) down 2.4%, the Dow Jones Industrial Average

(DJIA-1.23%) off 2.9%, and the Nasdaq Composite (COMP-2.24%) 2.2% in the red. The decline was particularly surprising because the largest U.S. companies, including Microsoft (MSFT-1.76%), Meta Platforms (META-3.03%), and Apple, all posted blowout second-quarter earnings —enough, under normal conditions, to single-handedly lift the broader market.

But lately, those stocks are looking more like outliers than bellwethers. “What is good for the Magnificent Seven names is not necessarily good for the rest of the equity market,” wrote Michael O’Rourke, chief market strategist at JonesTrading.

The bigger problem for everyone outside of Big Tech is that the economy is looking shaky. U.S. payrolls grew by an anemic 73,000 in July, and the government revised the prior two months down by a total of 258,000 jobs. Fewer jobs were added over the past three months than in any three-month period since June 2020, in the midst of the Covid crash. Following the release of the report, President Donald Trump ordered the firing of the commissioner of the Bureau of Labor Statistics lately, those stocks are looking more like outliers than bellwethers. “What is good for the Magnificent Seven names is not necessarily good for the rest of the equity market,” wrote Michael O’Rourke, chief market strategist at JonesTrading.

“The July jobs report officially confirms that the labor market has kicked into a lower gear,” said Jeff Schulze, head of economic and market strategy at ClearBridge Investments.

Outside of healthcare and education, the private sector added just 4,000 jobs in July, Evercore strategists noted. They expect more weakness ahead, as layoffs accelerate for federal workers following a Supreme Court decision that sided with Trump.

The positive thing about weak jobs reports like this one tends to be that they convince the Federal Reserve to cut interest rates to stimulate economic growth. Traders made big bets on Friday that a rate cut will come in September. In the past, this same dynamic has led to stock market gains on expectations that bad news from the jobs report would lead to good news from the Fed. That might not be the case this time thanks to Trump’s trade policy.

“Today’s release is best characterized as ‘bad news is bad news’ in our view,” Schulze wrote. “With job creation at stall speed levels and the tariff headwind lying ahead, there’s a strong possibility of a negative payroll print in the coming months, which may conjure up fears of a recession.”

Trump announced additional tariffs on several countries during the week, including 50% levies on some products from Brazil, 39% on Switzerland, and 35% on Canada. “Bottom line, let’s be honest here, volatile and costly trade policy has stalled decision-making on the part of companies with many hitting the pause button on hiring,” wrote Peter Boockvar, an independent economist and market strategist.

2 Utilities That Stand to Gain from Big Tech’s Power Play

Utility stocks have been on a tear for the past year, rising 17% as they benefit from surging power demand from artificial-intelligence data centers. Now the industry is facing a tricky balancing act—how to provide affordable service to its regular customers while also meeting the needs of technology companies.

Utilities like the data-center deals for the boost they give to earnings. Regulators and politicians, however, are worried that rising demand from Big Tech will cause electricity prices to spike for regular customers, like small businesses and homeowners. Research groups like Wood Mackenzie say that consumers are likely to foot much of the bill to expand the electricity grid to power data centers.

Already this year, utilities have asked regulators for a record $29 billion in rate increases, according to the nonprofit Powerlines. Consumer bills are poised to jump, after already rising more than 20% between 2021 and 2024. A political backlash against data centers has been growing.

A few utilities, however, have found a sweet spot—they’re making money from data centers while pushing much of the cost of new generation and transmission onto the tech companies rather than their normal customers. Two of the standouts in that area are Ohio-based American Electric Power (AEP+0.39%) and Louisiana’s Entergy (ETR-0.84%), both of which reported better-than-expected earnings on Wednesday and saw their stocks rise. The companies have inked major deals with tech companies to set up data centers in their service areas.

Entergy, at a recent $90, is planning to power one of the largest data-center campuses in the world for Meta (META-3.03%)

Platforms in Louisiana, building three massive natural-gas power plants. Meta agreed to pay to reserve natural-gas equipment, fund transmission costs, and make minimum monthly payments to cover generation costs for 15 years, regulatory documents show. Entergy also has a deal with Amazon.com (AMZN-8.27%) for a major data center campus in Mississippi.

On Wednesday, it lifted its annual industrial sales growth rate, which includes data centers, to 13% for the next four years—a big growth rate for a company in a supposedly sleepy sector. “They’ve certainly been one of the data-center darlings out there, and a name we continue to like,” said David Grumhaus, chief investment officer at investment firm Duff & Phelps.

AEP is in a similar position. It operates in 11 states, including Ohio and Texas, and has seen booming demand from tech companies hoping to operate data centers in its service territory, enough to double total electricity load in central Ohio by 2030.

To accommodate those customers—without piling costs onto existing electricity users—AEP convinced the Ohio public utilities commission to sign off on a special rate structure. Data-center operators would need to pay for at least 85% of the energy they’re expected to use, even if they don’t use it in a given month. That would help fund the transmission lines and other infrastructure that AEP needs to build.

AEP’s special rate “provides clarity to go to the negotiating table with these data centers” and “mitigate concerns of who’s paying,” said Morningstar analyst Andrew Bischof. Other utilities are now working on similar arrangements.

For now, though, AEP, at a recent $113, is the one that is benefiting from the flood of data-center deals that are on the way. The company boosted its expected five-year capital spending budget last year by about 25%, and said on Wednesday that it expects to add another 30% on top of that. It is on track to get paid handsomely for all these investments, with analysts expecting earnings to grow 28% by 2028.

That should pay off for shareholders too.

Key Market Drivers for This Week

1. Corporate Earnings

Expect several high-profile earnings reports, including McDonald’s, Palantir, Novo Nordisk, Berkshire Hathaway, Caterpillar, AMD, Pfizer, and Wayfair, among others. Investors will be looking for insights into corporate pricing power and economic outlooks across sectors Bloomberg.com

2. Macroeconomic Data

Monday, Aug 4: U.S. Factory Orders (shipments/orders data) and Swiss CPI.

Tuesday, Aug 5: U.S. ISM Services PMI and Trade Balance, plus China’s Caixin PMI and New Zealand labor stats.

Wednesday, Aug 6: Eurozone retail sales, and U.S. crude oil inventory from EIA.

Thursday, Aug 7: U.S. Consumer Credit, Initial & Continuing Claims, Unit Labor Costs, Productivity, and Wholesale Inventories.

Friday, Aug 8: No major U.S. events currently scheduled Schwab Brokerage

Markets may react particularly strongly to ISM services and labor cost data given their implications for inflation and Fed policy timing.

I mentioned two red flags in last week’s blog. Excessive call buying and complacency in the VIX index, which is better know as the “fear index”. Here’s are a couple of more red flags, the IWM’s weakness, SMH could be a double top and the downward action of the financial sector. I’m in a defensive frame of mind.

— Richie

This content (“Content”) is produced by Richard Naso. The Content represents only the views and opinions of Mr. Naso who is compensated by TradeZero for producing it. Mr. Naso’s trading experiences and accomplishments are unique, and your trading results may vary substantially from his. TradeZero does not endorse the Content and makes no representations or warranties with respect to the accuracy of the Content or information available through any referenced or linked third party sites. The Content has been made available for informational and educational purposes only and should not be considered trading or investment advice or a recommendation as to any security. Trading securities can involve high risk and potential loss of funds. Furthermore, trading on margin is for experienced investors whereby the loss can be greater than your initial investment. Likewise, short selling as a securities trading strategy is extremely risky and can lead to potentially unlimited losses. Options trading is not suitable for all investors as it can involve risk that may expose investors to significant losses. Please reach the Characteristics and Risks of Standardized Options, also known as the options disclosure (ODD) at OCC.

TradeZero provides self-directed brokerage accounts to customers through its operating affiliates: TradeZero America, Inc., a United States broker dealer, registered with the Securities and Exchange Commission (SEC) and member of the Financial Industry Regulatory Authority (FINRA) and the Securities Investor Protection Corporation (SIPC); TradeZero, Inc., a Bahamian broker dealer, registered with the Securities Commission of the Bahamas; and TradeZero Canada Securities ULC, a Canadian broker dealer, member firm of the Canadian Industry Regulatory Organization (CIRO) and member of the Canadian Investor Protection Fund (CIPF).