The Dow Jones Industrial Average (Dow) added 3.0 percent, the Standard & Poor’s 500 Index (S&P 500) gained 3.6 percent, and the Nasdaq Composite Index (Nasdaq) finished up 5.2 percent for the week ending Aug. 7. Sector breadth was positive with eight of the 11 S&P sector groups closing higher. The technology sector (7.2 percent) was the best performer while energy (-3.3 percent) was the weakest.

*See below for Index Definitions

Market Observations: 8.3.2026–8.7.2026

The S&P 500 finished the week higher and at a new all-time high, reflecting a rebound in the technology sector, strong earnings reports, and a weaker than expected monthly payroll report that tempered expectations around a near-term hike in interest rates by the Federal Reserve (Fed). Adding to the positive tone was pullback on oil prices on signs of progress toward a potential peace deal, which in turn helped ease inflation worries and pushed Treasury yields lower.

Q2 Earnings: Through Friday Aug. 7, 442 companies in the S&P 500 have released second quarter results, with over 87 percent beating expectations, which is well above the 10-year average of 76 percent, according to FactSet. With just under 90 percent of the companies reporting, aggregate earnings for this group are up 51 percent from a year ago, solidly ahead of the 24 percent projected growth rate at the end of June. On the sector level, consumer discretionary and communication services have posted the biggest upside surprises, while energy and consumer discretionary delivered the strongest growth rates. Full-year expectations call for S&P 500 earnings to grow by 27.3 percent this year, followed by 16.7 percent in 2027.

Fed Speak: Last week’s group of Fed speakers had an overall hawkish tone, with most suggesting that higher rates are needed to tamp down inflation. St. Louis Fed President Musalem said that with inflation running above the central bank’s 2 percent target, policymakers cannot afford to tolerate higher inflation while they wait for the possibility of stronger productivity growth. Fed Governor Cook repeated a message that she is ready to raise interest rates if inflation doesn’t slow, warning that policymakers may not have the luxury of waiting before inflation returns to their 2 percent target. San Francisco Fed President Daly said she supported the central bank’s decision to keep interest rates on hold last week but warned of the possibility that high inflation is a broader problem that could require more aggressive action from policymakers. Minneapolis Fed President Kashkari said the U.S. central bank should start to raise interest rates incrementally right now to curb inflation that remains too high. Kashkari was one of three Fed officials who dissented from the decision to hold interest rates steady at the recent policy meeting, preferring instead to raise them by a quarter percentage point. Kansas City Fed President Schmid suggested higher interest rates are needed to achieve the Fed’s price stability goals and reiterated that inflation is his primary concern.

Payroll Report: The closely watched monthly payroll data showed total nonfarm payroll growth slowing in July and prior data was revised lower. The July report showed a decline of 23,000 jobs for the month, well short of consensus forecast, which called for net monthly job gains of 80,000. The unemployment rate ticked down to 4.1 percent versus expectations for it to remain steady at 4.2 percent. The headline nonfarm payroll number caught economists by surprise, with none out of 75 economists surveyed by Bloomberg calling for a contraction in job growth. Payrolls over the past two months were revised lower, with the three-month average rate of change now sitting at just 20,000. The report seemed to relieve near-term pressure on the Fed to turn more hawkish. The odds of a Fed rate hike at the September meeting fell to 44 percent according to Bloomberg’s World Interest Rate Probability tool, down from nearly 57 percent prior to the report.

Economic Roundup: The U.S. manufacturing sector remained in expansion territory for a seventh straight month in July, with the ISM Manufacturing PMI registering a reading of 55.6, the highest level since May 2022. On the labor front, initial jobless claims remained low, rising by just 1,000 to 199,000 during the week ended Aug. 1 and consistent with a stable job market. The U.S. services sector remained firmly in expansion territory for the 25th consecutive month in July with the Services Purchasing Managers Index (PMI) registering a reading of 54.1 (readings above 50 signal expansion). Business activity, new orders, and inventories all rose in a broad-based expansion, with most categories remaining solidly in growth territory. Mortgage rates rose last week to the highest level in a year, curbing demand for home loans in an already subdued housing market. The contract rate on a 30-year mortgage rose 5 basis points to 6.81 percent in the week ended July 31, according to Mortgage Bankers Association.

Outlook: While the outlook through the end of the year remains favorable, we wouldn’t be surprised to see market turbulence through the remainder of the summer. In the near term, worries over the AI buildout, tech stock valuations, and headline risk around Iran are likely to keep volatility elevated. Even so, based on what we feel is still a favorable macroeconomic environment, we believe the market offers a solid risk/reward profile for longer-term investors, especially on pullbacks. Our focus remains on the building blocks of equity investments—earnings, the economy, and interest rates—all of which we believe will remain supportive in the quarters ahead.

The Week Ahead: Inflation will be the focal point of this week’s data calendar with the Consumer Price Index report for July due on Wednesday, followed by the Producer Price Index on Thursday. Other data highlights for the week include the July retail sales report and the August preliminary University of Michigan consumer survey on Friday. In corporate earnings, with nearly 90 percent of S&P 500 already releasing results, the second quarter earnings season will enter the final stretch. This week just 10 members of the S&P 500 are scheduled to release results, including technology companies Cisco Systems and Applied Materials. The Fed speaking calendar will be on the light side with just three Fed officials scheduled to give speeches.

— By Michael Schwager, Chief Market Strategist, Managing Director

The Dow Jones Industrial Average is a price-weighted average of 30 blue chip stocks that are generally defined as the leaders in their industry. It has been a widely followed indicator of the stock market since Oct. 1, 1928.

Standard and Poor’s 500 Index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The Nasdaq Composite Index is a broad-based capitalization-weighted index of stocks in all three Nasdaq tiers: Global Select, Global Market and Capital Market. The index was developed with a base level of 100 as of Feb. 5, 1971.

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