The Dow Jones Industrial Average (Dow) fell 0.6 percent, the Standard & Poor’s 500 Index (S&P 500) gained 0.4 percent, and the Nasdaq Composite Index (Nasdaq) finished up 0.1 percent for the week ending Aug. 14. Sector breadth was positive with eight of the 11 S&P sector groups closing higher. The energy sector (7.3 percent) was the best performer while consumer discretionary (-2.0 percent) was the weakest.

*See below for Index Definitions

Market Observations: 8.10.2026–8.14.2026

The S&P 500 finished higher for a third consecutive week as benign inflation data and weaker-than-expected consumer spending reduced the odds of a September rate hike and reinforced the view that policymakers are likely to remain on the sidelines while they wait for more data. On Thursday, the S&P 500 closed at a new all-time but edged lower on Friday following the much weaker than expected retail sales report. Trading volumes were relatively light all week, with mid-August tends a popular vacation time for investors ahead of the back-to-school rush. The week ahead will contain few market moving events and many investors may stay close to the sidelines ahead of tech-bellwether Nvidia’s earnings report on Wednesday August 26 and the Fed’s closely watched Jackson Hole Summit on Friday August 28.

Q2 Earnings: Through Friday Aug. 14, 455 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 over 90 percent of the companies reporting, aggregate earnings for this group are up nearly 51 percent from a year ago, solidly ahead of the 24 percent projected growth rate at the end of June. Earnings growth has been broad-based with ten of the 11 S&P sector groups posting positive growth. The energy sector (+148 percent) leads the charge followed by communication services (+119 percent) and consumer discretionary (+110 percent). Healthcare was the sole laggard with year-over year earnings falling by 7.1 percent. Full-year expectations call for S&P 500 earnings to grow by 27.6 percent this year, followed by 16.6 percent in 2027.

Fed Speak – Mixed Signals:  Chicago Fed President Goolsbee said that while inflation remains high, recent data has been better. “For a couple of months, we’ve been getting a little bit better readings, and hopefully that will continue,” Goolsbee said. Richmond Fed President Barkin laid out an argument to hold interest rates steady in light of signs that inflation is declining but also acknowledged the risk that some price pressures could become embedded, eventually forcing officials to tighten policy. Cleveland Fed President Hammack said she still believes the central bank needs to move swiftly to bring down price growth. “I think that we need to act now, because I think we need to bring inflation back down to that 2 percent objective, faster than what a longer-term glide path would say with interest rates at this level.” Boston Fed President Collins told the Financial Times that businesses and households in the US northeast were being squeezed by inflation, as the Iran war has worsened cost-of-living strains. Collins, who does not currently hold a vote on the Federal Open Market Committee, supported leaving rates unchanged in July, arguing that they were “mildly restrictive” and “would have me expecting disinflation gradually to be sustained.”

Economic Roundup: Underlying US inflation was subdued in July, with the consumer price index, excluding food and energy, rising 0.2 percent from a month earlier, according to the Bureau of Labor Statistics. On an annual basis, it advanced 2.5 percent, matching the slowest pace since March 2021. The report seemed to ease pressure on the Fed to act when it meets next in September. Separately, the Labor Department reported that producers price index was flat from the prior month, below the consensus forecast for growth of 0.2 percent. On the labor front, initial jobless claims rose 9,000 to 209,000 for the week ended August 8, above the consensus forecast of 202k, but below the year ago level. Elsewhere, the closely watched monthly retail sales report showed sales falling by 0.6 percent from a month ago, the largest drop in more than a year as consumer spending appeared to lose momentum. On a year-over-year basis, retail sales rose 5.0 percent, a pace that is below the recent trend. US small-business optimism rose in July to the highest level in almost a year as firms ramped up hiring plans and inflation pressures eased. Lastly, existing home sales fell 1.7 percent in July to a 4.06 million annualized pace, broadly in line with the 4.05 million consensus forecast.

The Week Ahead: The focal point of this week’s data calendar will be the August S&P manufacturing and services purchasing managers’ indices (PMIs) on Friday. Other activity indicators of interest include industrial production, July housing starts, and pending home sales. The Fed speaking calendar will be quiet, although investors are expected to pay close attention to the release of the minutes from the July 29 FOMC meeting on Wednesday. Rounding out with corporate earnings, 12 members of the S&P 500 are scheduled to release results with the spotlight on retailers Home Depot, Target, TJX, and Walmart to gauge the health of the US consumer.

— 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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