S&P 500 Pushes to Fresh Highs as UK Banks Slump
Source: Connect Weekly | Week ending August 30, 2025
US equities drifted higher through the week, with the S&P 500 posting back-to-back record closes despite pressure in some of the market’s largest names. A pullback to start the week quickly gave way to renewed strength, as resilient earnings, supportive sector rotation, and dip-buying helped extend the rally. In contrast, UK banks slumped late in the week after fresh windfall tax fears resurfaced, dragging the FTSE 100 lower.
What drove markets this week?
Monday brought the broadest selloff in over a month, with defensives like staples, health care, and utilities hit hardest. But sentiment stabilised Tuesday as investors brushed off political noise surrounding the Fed and rotated into industrials. By Wednesday, the S&P 500 was setting new records, only briefly dented by a negative reaction to Nvidia’s earnings. Even a modest post-report dip in the AI bellwether couldn’t derail momentum, with the benchmark and Nasdaq 100 both closing at fresh highs on Thursday.
Nvidia cools, but tech leadership holds
Nvidia’s Q2 update, solid but short of the fireworks investors had hoped for, saw the stock slip slightly, yet the broader tech complex shrugged it off. Sector-level gains in software and semis helped keep the Nasdaq 100 in record territory, underscoring that tech leadership remains intact even as expectations for AI-linked mega-caps reset.
UK banks under pressure
In the UK, bank shares tumbled Friday after the IPPR think tank suggested Chancellor Rachel Reeves could raise as much as £8bn annually by imposing a windfall tax on lenders. NatWest and Lloyds fell over 4%, Barclays shed more than 3%, and even HSBC and Standard Chartered dropped around 1.5%. The proposals rattled sentiment around the sector, highlighting the policy risks facing financials as Reeves prepares her first autumn budget.
Looking ahead
The S&P 500 now sits at record highs heading into September, historically a tougher month for equities. With AI earnings out of the way and valuations stretched, attention will turn to next week’s PCE inflation print and ISM manufacturing data for confirmation that Powell’s Jackson Hole pivot is underpinned by fundamentals.
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