Tech-led pullback meets defensive bid to start September

Introduction#

U.S. equities head into Monday, September 1, 2025 on the back foot, with last session’s close reflecting a sharp technology-led drag and a visible rotation into defensives. According to Monexa AI market data, the S&P 500 (^SPX) finished at 6,460.26 (-0.64%), the Dow Jones Industrial Average (^DJI) at 45,544.88 (-0.20%), and the Nasdaq Composite (^IXIC) at 21,455.55 (-1.15%). Volatility firmed: the CBOE Volatility Index (^VIX) closed at 16.28 (+5.99%), while the CBOE Russell 2000 Volatility Index (^RVX) ticked up to 22.05 (+0.50%). Overnight, global markets painted a mixed picture as Asia tech weakness lingered and Europe tilted positive to start the week, while macro headlines around tariffs, rates, and Japan’s bond market kept cross-asset correlations in focus.

The immediate setup for the next U.S. session is defined by three forces. First, large-cap technology softness—dominated by semiconductors and select hardware/software names—continues to pressure benchmarks. Second, defensives, notably health insurers, staples, and select REITs, are drawing incremental flows. Third, macro expectations remain fluid as investors weigh the path of Federal Reserve policy, the impact of trade frictions and tariffs on the consumer and import-reliant retailers, and the week’s labor data. The resulting tone is defensive and selective rather than outright risk-off, with dispersion across sectors and single names likely to persist after the opening bell.

Market Overview#

Yesterday’s Close Recap#

The tape into the weekend reflected broad but uneven risk reduction. According to Monexa AI, Friday’s U.S. index closes were as follows:

Breadth was weak in mega-cap technology, with semiconductors and several hardware/software names falling sharply. Monexa AI’s heatmap analysis highlights declines in NVDA (-3.36%), AVGO (-3.65%), AMD (-3.53%), and equipment names like LRCX (-3.79%). Idiosyncratic downdrafts in ORCL (-5.90%) and DELL (-8.88%) compounded the sector drag. There were pockets of resilience—ADSK closed up +9.09% after a beat-and-raise, and ACN rose +1.48%—but the sector’s heavy index weight (~31.8% by Monexa AI’s estimate) left the broader market leaning lower.

Defensive leadership was evident. Healthcare insurers and large-cap pharma paced gains, with UNH (+2.51%), ELV (+2.65%), ABBV (+1.19%), and JNJ (+0.98%) firming. Consumer staples bid up as well—PEP (+1.14%), KO (+0.92%), and WMT (+0.91%). Energy posted modest strength led by XOM (+0.83%), CVX (+0.80%), and SLB (+0.99%). By contrast, cyclical and rate-sensitive areas such as Industrials and Utilities showed dispersion, with declines in CAT (-3.65%), DE (-2.60%), VST (-3.86%), and CEG (-3.62%), partly offset by rebounds in EIX (+2.58%) and PCG (+1.93%).

According to a Monexa AI-aggregated note on fixed income, 2025 has been solid across bonds as well: the Barclays Aggregate is up year-to-date alongside the S&P 500’s +10.72% YTD through Friday, August 29, with high yield and investment-grade spreads near cycle tights. That backdrop helps explain the rotation into quality and income in equities, particularly as tech valuations remain stretched and earnings dispersion widens.

Overnight Developments#

Monexa AI’s global wrap points to a mixed open for the week. “European markets set to start the week broadly higher” while “European stocks rise, Japan shares slide as tech selloff drags on,” suggest Europe’s carryover strength contrasts with ongoing Asia tech caution. A separate Monexa AI headline—“Japan’s surging bond yields are a headache for U.S. Treasuries”—underscores a persistent cross-border rates dynamic: if Japanese investors repatriate to chase higher domestic yields, marginal demand for U.S. duration may soften, with implications for U.S. long-end rates and growth equities.

Macro sentiment is caught between growth and policy. Monexa AI’s news feed highlights a view that “market bets on Fed rate cuts” may be overdone, even as another piece flags “Morgan Stanley thinks the markets aren’t taking risks of a real slowdown seriously enough.” Meanwhile, reopening tariff headlines resurfaced, including “Trump says the U.S. would be ‘completely destroyed’ without tariff revenue,” and ground-level effects such as “In Mexican border town, thousands of jobs lost due to Trump tariffs.” A Monexa AI note observed that Americans may be saving more in anticipation of higher prices from tariffs, a potential headwind to discretionary demand as the holiday quarter approaches. Finally, “The Week Ahead: Markets Focus on Jobs Report and Fed Outlook” places Friday’s labor data at the center of the macro calendar—a critical pivot for rate-path expectations.

Macro Analysis#

Economic Indicators to Watch#

The calendar’s focal point this week is employment. As Monexa AI’s aggregated preview notes, markets will key on Friday’s monthly jobs report for direction on labor tightness, wage growth, and participation. Any upside surprise in payrolls or average hourly earnings would risk firming yields and challenging growth-stock multiples; conversely, softer prints could reinforce expectations for a September policy pivot and revive duration-sensitive equity leadership. With the S&P 500 ^SPX already showing year-to-date gains of +10.72% through August 29 per Monexa AI, positioning around the report is especially consequential for momentum strategies.

Interest-rate expectations remain fluid. Monexa AI’s feed points to debate over whether the market is overpricing cuts, even as some on Wall Street warn that growth could undershoot. The divergence matters for equity style leadership: a steeper path of easing would typically comfort longer-duration assets—software, internet platforms, biotech—but the tech tape is currently wrestling with valuation normalization and fundamental recalibration in AI hardware spending. The interplay between rate expectations and earnings revisions will therefore dominate early-September factor rotation.

Credit markets continue to send a calm signal. Monexa AI relays that high yield and investment-grade spreads sit near cycle tights, implying that while equities are rotating defensively, stress signaling from credit is limited. That said, tight spreads at this stage can be a double-edged sword—offering benign funding conditions, but leaving little buffer should growth data disappoint or policy uncertainties escalate.

Global/Geopolitical Factors#

Trade and tariffs have re-emerged as tangible drivers of corporate margins and consumer behavior. Monexa AI reports tariff-linked job losses in Mexican border manufacturing and notes that U.S. consumers may be saving more in anticipation of tariff-induced price increases. For import-reliant retailers and brands, this translates into a mix of higher input costs, potential markdown hesitancy, and elasticity risk at the shelf. That sensitivity is already showing in results from firms like GPS, which cited higher tariffs in its commentary.

Japan’s bond market is a potential swing factor for U.S. duration. As noted in Monexa AI’s roundup, higher Japanese government bond yields could entice domestic investors to reduce exposure to U.S. Treasuries, lifting U.S. long-end rates at the margin. Such a move would typically pressure high-duration equities and further reinforce the rotation into defensives unless offset by an easing Fed narrative.

Finally, China’s technology and AI narrative remains a counterweight to U.S.-centric AI concerns. Monexa AI highlights a powerful rally in Hong Kong-listed BABA on optimism around its cloud and AI roadmap, even as U.S. tech sold off. That divergence underscores that AI remains a key growth vector—execution and geography now matter more than blanket exposure.

Sector Analysis#

Monexa AI’s sector breadth framework shows a market in rotation: defensives and cash-generative cyclicals outperformed, while high-beta tech, certain industrials, and consumer discretionary names lagged. Where relevant, we note numerical discrepancies between the sector performance tape (which captures end-of-day percentage moves) and the heatmap’s cap-weighted observations; we prioritize the sector performance table for the aggregate numbers and use the heatmap to frame leadership within sectors.

The table above, sourced from Monexa AI’s sector performance data, indicates modest relative resilience in Healthcare and Real Estate compared to broader weakness. The heatmap adds detail: within Technology, semiconductors and select software/hardware names led declines (notably NVDA -3.36%, AVGO -3.65%, AMD -3.53%, ORCL -5.90%, DELL -8.88%), partially offset by ADSK +9.09%. In Communication Services, search modestly supported the group (GOOGL/GOOG about +0.60%) as social/streaming lagged (META -1.65%, NFLX -1.88%). Financials saw stable gains in payments and diversifieds (MA +0.81%, V +0.55%, BRK-B +0.62%, AXP +1.31%), with crypto-adjacent fintech weaker (COIN -1.27%).

Consumer Cyclical was led lower by mega-cap retail and mobility weakness (AMZN -1.12%, TSLA -3.50%), compounded by a steep drop in beauty retail (ULTA -7.14%). By contrast, select services and QSR names found sponsorship. Industrials were pressured by heavy equipment (CAT -3.65%, DE -2.60%) with some logistics/services resilience (ODFL +0.85%, CTAS +0.82%). Consumer Defensive showed a clear bid into staples (WMT +0.91%, PEP +1.14%, KO +0.92%), though discount retailers lagged (DLTR -2.96%). Energy’s modest gains were broad-based among the majors and services (XOM +0.83%, CVX +0.80%, SLB +0.99%). Utilities and Real Estate were mixed, with sharp single-name moves defining the day (VST -3.86%, CEG -3.62% vs. EIX +2.58%, PCG +1.93%; REITs like PLD +1.01%, CCI +1.43%, AMT +0.64%). Basic Materials was flat-to-mixed with chemicals and gold-related names diverging (EMN +3.17%, NEM +1.96% vs. LIN -0.80%).

The takeaway is that sector-level moves conceal substantial dispersion. With volatility climbing and credit still calm, investors are selectively paying for earnings visibility and cash flow while selling expensive, crowded AI-adjacent exposures that lack near-term catalysts.

Company-Specific Insights#

Earnings and Key Movers#

Despite supportive prints from a handful of companies, stock-level reactions skewed negative in richly valued cohorts. According to Monexa AI’s earnings roundup:

ADSK rallied +9.09% after the company beat fiscal Q2 estimates and raised guidance. EPS of $2.62 topped $2.45 consensus, revenue grew 17% year over year to $1.76 billion, and the AECO segment advanced 23%. Billings climbed 36% and free cash flow more than doubled to $451 million, prompting a full-year revenue lift to a $7.025–$7.075 billion range and higher EPS guidance. The move aligns with the tape’s preference for software with infrastructure tailwinds and rising cash conversion.

AFRM surged more than +20% after reporting adjusted EPS of $0.20 vs. $0.12 consensus and 33% revenue growth to $876.4 million. Gross merchandise volume expanded 43% to $10.4 billion, with 0% APR installment loans up 93% and Affirm Card usage up 132%. Active consumers rose 24% to 23 million as transaction frequency improved. The market rewarded operating profitability and momentum into the holiday season, even as macro uncertainty around consumer spending lingers.

DELL fell -8.88% as a softer-than-expected Q3 EPS outlook overshadowed a solid Q2. Adjusted EPS of $2.32 on $29.78 billion revenue beat estimates, but Q3 EPS guidance of $2.45 trailed the $2.55 consensus, signaling margin pressure in PC and enterprise hardware despite top-line resilience. The guide pressured peer sentiment across hardware and semis given the sector’s concentration in AI narratives.

ULTA dropped -7.14% despite a Q2 beat and higher full-year outlook. EPS of $5.78 beat $4.99 consensus and net sales rose 9.3% to $2.79 billion with comparable sales up 6.7%, aided by lower inventory shrink and improved merchandise margins. However, operating margin compressed to 12.4% from 12.9% on higher payroll and incentives, and the stock’s multiple reset amid concerns about sustainability of comps and cost inflation.

S gained +6.00% after posting adjusted EPS of $0.04 on $242.2 million revenue, surpassing $1 billion in annual recurring revenue. Management raised Q3 and FY26 revenue outlooks; an analyst upgrade and chatter around strategic interest supported the bid. Cybersecurity demand remains resilient with ARR milestones now attracting incremental long-only interest.

GPS delivered mixed Q2 results with EPS of $0.57 topping $0.55 consensus on $3.73 billion revenue that slightly missed. Gross margin contracted 130 bps to 41.2%, and management flagged early tariff impacts on imported products. Weakness at Athleta (comparable sales -9%) was offset by positive comps at Old Navy, Gap, and Banana Republic. The stock’s path is now sensitive to policy headlines and inventory discipline into holiday.

Elsewhere, payments and diversified financials offered stability: MA (+0.81%), V (+0.55%), and BRK-B (+0.62%) helped anchor Financials. In Communication Services, GOOGL/GOOG closed modestly higher near +0.60%, offsetting social/streaming softness from META (-1.65%) and NFLX (-1.88%). In Consumer Cyclical, mega-caps AMZN (-1.12%) and TSLA (-3.50%) weighed, while DPZ and select services names showed relative strength.

Overseas, Monexa AI highlighted a sharp rally in Hong Kong-listed BABA on AI and cloud enthusiasm, with reports of accelerating cloud division growth and investment in AI silicon helping sentiment even as U.S. tech corrected. The divergence emphasizes that AI remains a durable multi-year spend cycle, though U.S. equity risk remains concentrated in a narrow set of names with elevated expectations.

Extended Analysis#

The week opens with a classic late-cycle puzzle: spreads are tight, equities are still up strongly year to date, and yet leadership is narrowing while single-stock dispersion spikes. Monexa AI’s heatmap characterizes the immediate mood as “neutral-to-cautiously negative,” a fair read given the combination of rising volatility and defensive rotation without a confirmed macro shock.

Two tensions define the path forward. First, the AI hardware complex is working through an expectations reset. Multiple Monexa AI-linked headlines around NVDA suggest a strong quarter and guidance, but a tougher grading curve given valuation, China export uncertainty, and questions about the sustainability of recent capex trajectories. Short-term, this leaves richly priced AI-semiconductor and AI-server beneficiaries vulnerable to downticks in cloud or enterprise spend. Yet the longer-run pipeline remains formidable: Monexa AI’s news feed references continued expansion in hyperscaler capex and enterprise AI adoption, keeping the secular demand story intact even if growth rates normalize from extraordinary levels.

Second, policy and politics are bleeding into margins and savings behavior. Tariff commentary is appearing in corporate transcripts again—GPS cited rising import costs—and Monexa AI notes consumers may be saving more in anticipation of higher prices. If that behavior persists, discretionary categories could see pressure into holiday, favoring essentials and trade-down. That dynamic underpins the bid in staples and select value/growth hybrids with durable cash flows.

On the rates front, the debate is as much about the slope as the destination. Monexa AI’s curation flags one camp warning that markets have overbaked rate cuts and another arguing the opposite. This tug-of-war will continue until Friday’s jobs report refines the labor narrative. For equities, the more important linkage is how rate expectations interact with earnings revisions. In the last session, stocks sold off where estimates or guidance failed to clear an increasingly high bar (DELL, ULTA and rallied where free cash flow and visibility improved (ADSK, S, AFRM. That reaction function should persist at the open.

Positioning into the day breaks down into two pragmatic playbooks. For risk-averse investors, the path of least resistance has been into high-quality defensives—large-cap Healthcare services/insurers, staples, and income-oriented REITs—where pricing power and cash flow visibility can buffer factor volatility. For investors seeking selective beta, Energy and specific industrials with pricing and order book support offer more favorable risk/reward than broad tech exposure while the AI-compute tape normalizes. In Technology, the skew is toward idiosyncratic winners with fundamental upgrades rather than index-level beta.

Conclusion#

Morning Recap and Outlook#

The U.S. market enters Monday with a defensive tilt and elevated single-stock dispersion. According to Monexa AI, the S&P 500 closed at 6,460.26 (-0.64%), the Nasdaq at 21,455.55 (-1.15%), and the Dow at 45,544.88 (-0.20%); volatility rose, with the VIX at 16.28 (+5.99%). Sector performance data shows Healthcare and Real Estate holding up best at the margin, while Technology, Industrials, Consumer Cyclical, and Utilities led declines. Within Technology, semiconductors and select hardware/software names took the brunt, though names with clear catalysts or improving cash dynamics outperformed.

The primary catalysts into the next session are straightforward. First, watch the evolving rates narrative in the run-up to Friday’s jobs report. Second, monitor the AI complex for incremental signals on capex pacing, export dynamics, and product cycles; price sensitivity remains acute for richly valued names. Third, track tariff headlines and consumer-saving signals for read-throughs to discretionary pricing power and inventory planning. Over the day, expect defensives to remain supported unless data or guidance meaningfully shifts the growth/rates balance.

For portfolio construction, that implies maintaining a barbell. On one side, quality defensives with strong free cash flow and dividend support; on the other, idiosyncratic growth stories with improving fundamentals and visible catalysts. Within Financials, payments leaders like MA and V continue to reflect healthy consumer volumes and may serve as ballast. In Technology, lean into clear beat-and-raise stories (ADSK and exercise caution around names with fresh guide-downs or sensitive end-demand (DELL. In Consumer, respect the divergence between staples strength and discretionary volatility, particularly where tariff pass-through is non-trivial (GPS, DLTR.

The bottom line: until either rates or earnings expectations shift decisively, the market will likely reward visibility, balance-sheet strength, and stock-specific catalysts over broad factor beta. That’s a trader’s market at the open—disciplined sizing, tighter risk controls, and a focus on fundamentals over narratives.

Key Takeaways#

• According to Monexa AI, the S&P 500 closed at 6,460.26 (-0.64%), the Dow at 45,544.88 (-0.20%), and the Nasdaq at 21,455.55 (-1.15%); the VIX rose to 16.28 (+5.99%).
• Technology weakness—especially in semiconductors and select hardware/software—drove the decline; notable moves included NVDA (-3.36%), AVGO (-3.65%), AMD (-3.53%), ORCL (-5.90%), DELL (-8.88%), partially offset by ADSK (+9.09%).
• Defensives outperformed at the margin; health insurers and staples showed leadership (UNH +2.51%, ELV +2.65%, PEP +1.14%, KO +0.92%).
• Earnings reactions were polarized: upside for AFRM and S, downside for ULTA and DELL. GPS flagged tariff headwinds on imports.
• Macro watch: Friday’s jobs report, tariff rhetoric, and Japan’s rising yields versus U.S. Treasuries are key swing variables for rates and sector leadership at the open.