Markets enter a shortened trading week under the weight of ongoing legal disputes over U.S. tariffs, alongside anticipation for key economic data releases and corporate earnings. Investors will monitor employment figures, a series of business activity indicators, and the Federal Reserve’s “Beige Book,” while Broadcom and Salesforce are among the companies reporting results.
Ongoing legal challenges to Trump tariffs
The tariffs imposed under former President Trump’s administration continue to face legal scrutiny, with critics questioning the use of emergency executive powers to enforce the import duties.
A critical ruling from the U.S. Court of Appeals for the Federal Circuit on Friday rejected President Trump’s sweeping tariffs. The White House has until mid-October to appeal to the Supreme Court, or the decision will stand.
Reports indicate Trump officials anticipated that the Supreme Court would need to ultimately resolve the issue and remain confident that the tariffs—and the president’s authority to implement them—will eventually gain backing from the court’s conservative majority.
“Global trading partners will no doubt find it premature to be celebrating just yet, but we’ll be interested in seeing whether the Treasury market comes under any further pressure if the US has to hand back already received tariff revenues,” analysts at ING said in a note.
Employment report in focus
Friday’s payroll data is expected to shed light on the overall health of the U.S. economy and serve as a critical test for investor confidence regarding a possible Fed rate cut in September.
Last month’s softer-than-expected report on U.S. job creation strengthened expectations of lower borrowing costs, despite ongoing concerns about persistent inflation.
Fed Chair Jerome Powell also highlighted in a Wyoming symposium that labor market risks were rising. According to the CME FedWatch Tool, as of Monday morning, there was more than an 87% probability that the Fed will cut rates by 25 basis points from the current 4.25%-4.5% range during the September 16-17 meeting.
Economists project August nonfarm payrolls at 74,000, close to July’s 73,000. Previous revisions had sparked controversy, contributing to the dismissal of the Bureau of Labor Statistics commissioner.
ISM manufacturing and services readings
Investors will also watch ISM metrics for private-sector activity, providing insight into the impact of U.S. tariffs on business.
The ISM manufacturing PMI for August is forecast at 48.9, up from 48.0 in July, while the ISM services PMI is expected at 50.5, slightly above July’s 50.1. Readings below 50 indicate contraction, while above 50 suggests expansion.
The U.S. manufacturing sector, which represents roughly 10% of the economy, contracted for a fifth consecutive month in July, with factory employment falling to a five-year low. Meanwhile, services—which make up more than two-thirds of the economy—remained mostly flat, with weaker employment trends.
Beige Book preview
The Fed’s Beige Book, due Wednesday, will provide one of the last snapshots of the economy ahead of the September policy meeting.
The July Beige Book highlighted widespread concerns about cost pressures. “This would increase the likelihood that consumer prices will start to rise more rapidly by late summer,” it noted, adding that all 12 Fed districts reported impacts from Trump’s trade policies.
The report also showed that companies have delayed hiring and layoff decisions due to tariff uncertainty, signaling caution in business planning.
Earnings spotlight: Broadcom and Salesforce
Broadcom (NASDAQ:AVGO) headlines this week’s earnings. Investors will look for insights on AI-related spending, which has softened after several tech companies reported disappointing results.
Nvidia (NASDAQ:NVDA), a leading AI player, issued a cautious forecast last week, contributing to investor concerns despite sizable absolute revenue.
“While investors are pulling back from AI, they seem to be returning to software, an industry many fear could suffer displacement/disruption risk from AI,” analysts at Vital Knowledge said in a note, adding that Salesforce’s Wednesday results will be “a big test for the group.”
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