The Dow Jones Industrial Average (Dow) rose 0.5 percent, the Standard & Poor’s 500 Index (S&P 500) gained 0.5 percent, and the Nasdaq Composite Index (Nasdaq) finished up 0.9 percent for the week ending Aug. 28. Sector breadth was negative with seven of the 11 S&P sector groups closing lower. The technology sector (1.8 percent) was the best performer while the healthcare sector (-2.0 percent) was the weakest

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Market Observations: 8.24.2026–8.28.2026

The S&P 500 finished the week higher and has now gained in four of the past five weeks. Despite the gain, trading was volatile as investors weighed a hawkish speech from Federal Reserve (Fed) Chair Warsh against a very bullish demand forecast from tech bellwether Nvidia, an update from Salesforce demonstrating that software can actually monetize AI, no big surprise in the July personal consumption and expenditures (PCE) data, and signs of progress on flows through the Strait of Hormuz.

Q2 Earnings–That’s a Wrap: With 97 percent of the S&P 500 members reporting, the second quarter earnings season has come to an end. Overall, the quarter was very strong with nearly 88 percent of companies beating expectations—well above the 10-year average of 76 percent, according to FactSet. Aggregate earnings for this group rose by over 52 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 10 of the 11 S&P sector groups posting positive growth. The energy sector (148 percent) has led the charge followed by communication services (119 percent) and consumer discretionary (91 percent). Healthcare was the sole laggard with year-over-year earnings falling by 6.9 percent. Full-year expectations call for S&P 500 earnings to grow by 28.1 percent this year, followed by 18.3 percent in 2027 and 15.3 percent in 2028.

Jackson Hole Meeting: Fed Chair Warsh’s speech at the Jackson Hole Symposium leaned hawkish, with the Fed chief saying that inflation numbers were concerning. Warsh noted that measures from the consumer price index (CPI) as well as both the core measures of PCE and CPI inflation remain elevated, adding that none of these measures are perfect, but they all tell a similar story: inflation is running above the Fed’s 2 percent target. Following Warsh’s update, the odds of a quarter point rate hike at the September Fed meeting rose to 58 percent from 35 percent the day before, according to Bloomberg’s World Interest Rate Probability tool.

Fed Speak: Kansas City Fed President Schmid said that inflation is still too high, though he stopped short of calling for an interest rate hike. Speaking from the central bank’s annual symposium, Schmid said that inflation has proven resilient and wasn’t sure if the current rate target was restrictive. He also voiced support for an idea that Warsh raised to reduce the number of Fed meetings per year. Separately, Chicago Fed President Goolsbee said that political pressure on the Fed puts him “on edge” and suggested that interference on central banks generally leads to higher inflation. Cleveland Fed President Hammack indicated that she is worried that inflationary mindsets are starting to form and that now is the time to act given the persistent of inflation. Boston Fed President Collins said there’s still evidence the central bank’s current policy setting is restraining the U.S. economy and helping to slow inflation. Richmond Fed President Barkin said there will eventually be a “reckoning” if U.S. debt continues to rise, but it’s difficult to know when that might happen.

Economic Roundup: Initial jobless claims declined 4,000 to 203,000 in the week ended Aug. 22, below the consensus forecast of 208,000 and near historical lows. The U.S. economy expanded at an unrevised 1.5 percent pace in the second quarter, though underlying details showed stronger consumer spending and business investment than initially reported. Consumer spending, which comprises more than two-thirds of economic activity, increased an annualized 3.4 percent, stronger than the initially estimated 3.2 percent gain. Meanwhile, U.S. consumer confidence fell in August to the lowest level since the start of the year on a deteriorating outlook for business conditions and the labor market. The Conference Board’s gauge of confidence decreased 0.8 points to 89.4 after a downward revision to the prior month. A measure of expectations for the next six months fell to the lowest level since January, even as an indicator of present conditions rose to a four-month high. The report suggests high gasoline prices and broader cost of living pressures alongside a slowdown in hiring continued to weigh on American households this month. Elsewhere, new home sales declined in July to a six-month low, indicating higher mortgage rates are curbing demand even as builders’ trim prices and offer incentives. Contract signings on new single family homes decreased 10.5 percent last month to a 607,000 annual rate. The median sales price fell 0.9 percent from a year earlier to $393,800. Sales have now fallen in three of the last four months.

The Week Ahead: The August payroll data will be the focal point of this week’s data calendar. According to Bloomberg, Friday’s report is expected to show that nonfarm payrolls rose by 55,000 after falling by 23,000 during July. The unemployment rate is forecast to hold steady at 4.1 percent. Other highlights on the economic calendar include the ISM indices, the July JOLTS report, and the Fed’s Beige Book. It will be a quiet week in terms of Fed speeches, with just Governor Waller slated to speak on Thursday. On the earnings front, investors will keep an eye on earnings from tech concerns Broadcom, Palo Alto Networks, Dell, and Snowflake.

— 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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