The Dow Jones Industrial Average (Dow) fell 0.9 percent, the Standard & Poor’s 500 Index (S&P 500) lost 1.4 percent, and the Nasdaq Composite Index (Nasdaq) finished off 2.1 percent for the week ending Aug. 21. Sector breadth was negative with eight of the 11 S&P sector groups closing lower. The healthcare sector (4.3 percent) was the best performer while the utilities sector (-3.6 percent) was the weakest.

*See below for Index Definitions

Market Observations: 8.17.2026–8.21.2026

The S&P 500 finished the week lower, breaking a three-week winning streak, as an uptick in government bond yields and a lack of visible progress in the Middle East weighed on investor sentiment. Caution ahead of an earnings update this Wednesday from A.I. bellwether Nvidia and the kickoff to the Fed’s Jackson Hole Summit on Friday also kept investors close to the sidelines.

Q2 Earnings: Through Friday Aug. 21, 467 companies in the S&P 500 have released second quarter results, with over 87 percent beating expectations—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 50 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) has led the charge followed by communication services (+119 percent) and consumer discretionary (+92 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 27.8 percent this year, followed by 16.6 percent in 2027 and 14.6 percent in 2028.

Fed Speak: San Francisco Fed President Daly suggested the US Treasury market is signaling that monetary policy is in a good place right now. “There’s a lot of discussion about our credibility there. I don’t see our credibility at risk,” Daly said. “I also hear a lot about, should we be making preemptive hikes? And I don’t see a lot of evidence that that’s an urgent problem to solve.” Daly said she was supportive of the July hold. Separately, St. Louis Fed President Musalem said a selloff in the bond market is being driven by government borrowing and increased financing for the build-out of artificial intelligence, not questions of the U.S. central bank’s credibility. He believes inflation won’t likely return to the Fed’s 2 percent target within 18 months without higher interest rates.

FOMC Meeting Minutes: The minutes from the July meeting showed several Fed officials favoring an interest-rate hike with many indicating that policy tightening would be necessary if inflation didn’t decline. At the meeting Fed officials voted 9-3 to hold the benchmark federal funds rate in a range of 3.5 percent to 3.75 percent. Fed Presidents Logan, Hammack and Kashkari dissented in favor of raising rates by a quarter percentage point. Two other regional presidents who didn’t vote in July—Schmid and Musalem—have since signaled they would have supported an increase at the meeting. Much of the policy debate at the July gathering centered on the varying outlooks for inflation. “Most participants anticipated that inflation would step down over the rest of the year as the effects of tariffs and earlier energy price increases wane, but many participants noted the possibility that inflation might be more persistently elevated,” the minutes said. The record also showed participants’ inflation outlooks were “highly uncertain” and the re-escalation of the Iran war “clouded the inflation outlook.” The minutes also showed Warsh raised the idea of reducing the committee’s annual number of policy meetings from eight to six.

Economic Roundup: Jobless claims fell 6,000 to 206,000 during the week ended August 15 according to Labor Department data. The median estimate had projected claims to come in at 210,000. The prior week claims were also revised up to 212,000 from 209,000. Elsewhere, manufacturing momentum continued to build in August, with the Philadelphia Fed Manufacturing Business Outlook Survey showing the strongest business conditions in five years. The survey’s main diffusion index rose to 47.4 in August, its highest level since April 2021. On the housing front, new residential construction declined in July as single-family starts slid to the slowest pace since 2022. Overall housing starts fell 12.4 percent to an annualized rate of 1.24 million, well short of the 1.35 million pace expected by economists. Meanwhile, July industrial production rose 0.2 percent month-over-month while capacity utilization remained fairly steady at 76.3 percent. Separately, the New York Fed’s Empire State manufacturing index rose to 20.6 in August from 15.6 in July, compared with an expected decline to 10.0 in a Bloomberg-compiled survey.

The Week Ahead: The focal event this week will be the Jackson Hole economic policy symposium taking place on August 27-29 and its theme this year is “Financial Innovation: Implications for Payments and Policy.” Investors will be lasered focused on a speech from Fed Chair Warsh on Friday morning, his first keynote as chair which comes roughly three weeks before the September 16 FOMC decision. On the data front, the key report will be the July PCE report on Wednesday, alongside personal income, spending and durable goods orders data. Other reports of interest include July new home sales and the August reading on consumer confidence from the Conference Board. In terms of the earnings calendar, all eyes will be on Wednesday’s earnings report from Nvidia to get signals about the state of AI demand. Other technology names reporting include CrowdStrike, Salesforce, Synopsys, Marvell, Autodesk and Workday.

— 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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