Weekly Wrap

The major averages finished higher this week, but the gains were concentrated in mega-cap growth and software stocks as the broader market struggled. The S&P 500 and DJIA each gained 0.5%, while the Nasdaq Composite rose 0.9%. In contrast, the Russell 2000 fell 1.5% and the S&P Mid Cap 400 declined 1.3%.

Technology provided the week's primary source of support, though performance within the sector was sharply divided. The information technology sector gained 1.8%, led by a 5.9% surge in the iShares Expanded Tech-Software ETF following a string of strong earnings reactions. NVIDIA also rallied sharply after its earnings report on Thursday, but semiconductor stocks remained volatile and the PHLX Semiconductor Index ultimately fell 2.3% for the week. That divergence allowed software strength to offset continued pressure across chips and helped keep the technology sector firmly higher.

Mega-cap stocks provided another important source of support, with the Vanguard Mega Cap Growth ETF gaining 1.3%. Strength in several of the market's largest technology and communication services names helped the communication services sector rise 1.6%, while the financials sector (+1.1%) was the only other sector to gain more than 1.0%. The concentrated leadership was especially apparent Thursday, when the S&P 500 gained 0.7% despite ten of its 11 sectors finishing lower.

The disparity between large-cap growth and the broader market became more pronounced as the week progressed. The health care (-2.0%), energy (-2.0%), industrials (-1.7%), and real estate (-1.3%) sectors were among the main laggards, while small- and mid-cap stocks substantially underperformed. WTI crude fell roughly 4.3% for the week amid several swings tied to developments involving Iran and the Strait of Hormuz.

Monetary policy returned to the forefront on Friday after Fed Chair Kevin Warsh used his Jackson Hole address to emphasize that inflation remains above the Fed's 2% target and that price stability should remain the central bank's predominant focus. The remarks drove the probability of a September rate hike sharply higher and triggered a pronounced rise in Treasury yields, with the 2-year note yield jumping 12 basis points on Friday alone to 4.35%. The move added to pressure on small- and mid-cap stocks and contributed to a modest pullback in the major averages to end the week.

Overall, the week's positive index performance masked a considerably weaker showing beneath the surface. Strong software earnings and gains across mega-cap growth stocks allowed the S&P 500 and Nasdaq to overcome continued semiconductor weakness, while small- and mid-cap stocks and most S&P 500 sectors finished lower. Friday's hawkish shift in rate expectations added another source of uncertainty heading into the new week, but the concentrated strength in large-cap growth was enough to leave all three major averages with weekly gains.

• Nasdaq Composite: +1.9% week-to-date
• DJIA: +0.5% week-to-date
• S&P 500: +0.5% week-to-date
• S&P Mid Cap 400: -1.3% week-to-date
• Russell 2000: -1.5% week-to-date

Monday:

Stocks finished mixed on Monday as another sharp retreat across semiconductor stocks weighed on the technology-heavy averages, while strength across much of the broader market helped the DJIA (+0.3%) buck the negative trend. The S&P 500 (-0.3%) posted a modest loss, while the Nasdaq Composite (-0.8%) underperformed.

Semiconductors remained at the center of the weakness throughout the session. The PHLX Semiconductor Index fell 2.7%, extending its recent pullback and leaving the information technology sector (-1.6%) at the bottom of the sector standings. Memory and semiconductor-component stocks were among the laggards following another weak showing in Asian markets, while NVIDIA (NVDA 208.46, -6.26, -2.92%) remained under pressure ahead of its earnings report Wednesday after the close, extending its losing streak to seven consecutive sessions.

Related weakness spilled into the industrials sector (-0.7%), where electronic equipment names remained under pressure alongside the semiconductor trade. Caterpillar (CAT 811.02, -16.88, -2.04%) and Boeing (BA 210.46, -3.74, -1.75%) were additional drags, while aerospace and defense stocks also struggled.

The losses in those areas contrasted with a considerably firmer showing across most of the market. Eight S&P 500 sectors finished higher, allowing the S&P 500 Equal Weighted Index (+0.1%) to outperform its market-cap-weighted counterpart.

The consumer staples sector (+1.8%) led the way as Walmart (WMT 106.49, +2.79, +2.69%) rebounded from its post-earnings weakness, while the financials sector (+1.2%) also posted a solid gain, with major banking and payment names contributing to the DJIA's outperformance.

Strength in Alphabet (GOOG 344.59, +2.84, +0.83%) and Meta Platforms (META 559.02, +9.12, +1.66%) helped the communication services sector (+1.0%) outperform as well.

Another decline in oil prices provided a favorable backdrop for many consumer and other oil-sensitive stocks. WTI crude settled $2.09 lower (-2.4%) at $84.98 per barrel, leaving the energy sector (-0.8%) among the relatively few groups to finish lower. Treasury yields also declined, providing additional relief for rate-sensitive areas following the recent volatility in longer-term rates. The afternoon brought the formal launch of the Trump administration's new economic pressure campaign against Iran, dubbed "Operation Economic Outcast." Treasury Secretary Scott Bessent outlined plans targeting Iran-linked entities, brokerage networks, shadow-fleet vessels, and several critical sectors, while also warning of potential consequences for countries that continue cooperating with Iran. Bessent characterized the initial measures as a "warning shot," but stocks and oil prices showed little reaction to the announcement.

Despite the more constructive backdrop from lower oil prices and Treasury yields, strength did not extend evenly across the market. The Russell 2000 (-0.8%) and S&P MidCap 400 (-0.8%) underperformed the large-cap benchmarks.

Monday's session ultimately reflected a sharp divide between continued weakness in semiconductor-related stocks and a much firmer showing elsewhere. Selling in chips was substantial enough to keep the S&P 500 lower and weigh heavily on the Nasdaq, but gains across eight S&P 500 sectors, along with lower oil prices and Treasury yields, helped limit the broader damage and allowed the DJIA to finish in positive territory.

U.S. Treasuries began the week with gains in longer tenors while the short end underperformed, finishing with a slim loss. The 2-year note yield settled up one basis point to 4.24% and the 10-year note yield settled down three basis points to 4.70%. 

There was no economic data of note today.

Tuesday:

Stocks ended Tuesday with modest gains as renewed buying interest in semiconductor stocks helped offset a mixed showing across the broader market. The Nasdaq Composite (+0.7%) led the major averages, while the S&P 500 (+0.3%) and DJIA (+0.3%) logged smaller advances during a session that otherwise featured relatively limited conviction.

Chip stocks provided the clearest source of leadership after coming under considerable pressure over the past several sessions. The PHLX Semiconductor Index gained 1.4%, lifting the information technology sector (+1.0%) to the top of the sector standings. NVIDIA (NVDA 212.95, +4.47, +2.14%) broke a seven-session losing streak ahead of its earnings report Wednesday after the close, while Super Micro Computer (SMCI 38.45, +3.28, +9.33%) ranked among the best-performing S&P 500 components after Cisco (CSCO 111.11, +0.88, +0.80%) expanded its NVIDIA AI partnership to include Supermicro rack-scale systems in its Secure AI Factory.

Strength among large chipmakers also helped the Vanguard Mega Cap Growth ETF rise 0.6%, although performance among mega-cap stocks outside of the semiconductor trade was less consistent. SpaceX (SPCX 137.97, +2.97, +2.20%) was a notable standout after confirming that construction of its Starbase launch facility in Louisiana will begin in 2027, while Meta Platforms (META 570.05, +11.03, +1.97%) provided support for the communication services sector (+0.5%).

The health care sector (+0.3%) also edged higher, with Moderna (MRNA 158.83, +19.94, +14.36%) again standing out. The stock continued its volatile stretch following last week's triple-digit surge on positive melanoma vaccine results, rebounding sharply after some recent profit-taking.

The positive finish for the major averages contrasted with weakness across several areas that had performed better recently. Retail stocks generally struggled, contributing to a 0.9% decline in the consumer staples sector and a 0.3% loss in the consumer discretionary sector. Athletic apparel stocks were a particularly weak pocket following Dick's Sporting Good's (DKS 124.31, -55.02, -30.68%) earnings report, which featured disappointing results from Foot Locker. NIKE (NKE 39.48, -1.28, -3.13%) finished as the worst-performing DJIA component, while Deckers Outdoor (DECK 88.74, -3.34, -3.63%) and lululemon athletica (LULU 118.33, -4.45, -3.62%) were also notable S&P 500 laggards as the results weighed on sentiment across the group.

Oil provided another notable crosscurrent. Crude oil futures settled $2.69 lower (-3.2%) at $82.29 per barrel amid a relatively quiet day of geopolitical headlines, sending the energy sector (-1.7%) to the bottom of the sector standings. The decline in crude was more constructive for oil-sensitive areas of the market, while Treasury yields also moved lower across the curve.

Ultimately, Tuesday's advance was driven more by a return to semiconductor stocks than by broad-based buying. The rebound in chips was enough to lift the major averages and give the Nasdaq a clear edge, while broader participation was mixed. The subdued overall tone came ahead of a potentially more consequential Wednesday, when the July Personal Income and Spending report will provide an update on the Fed's preferred inflation gauge before NVIDIA reports earnings after the close.

U.S. Treasuries had a solid outing on Tuesday, adding to their gains from the start of the week with some help from falling energy prices. The U.S. Treasury kicked off this week's note auction slate with a good $69 billion 2-year note offering ahead of tomorrow's $70 billion 5-year note sale. The 2-year note yield settled down four basis points to 4.20%, and the 10-year note settled down seven basis points to 4.64%.

• Russell 2000: +21.3% YTD
• S&P Mid Cap 400: +15.0% YTD
• Nasdaq Composite: +12.5% YTD
• S&P 500: +12.2% YTD
• DJIA: +11.5% YTD

Wednesday: 

Stocks finished little changed on Wednesday after recovering from their afternoon lows, with a relatively balanced showing beneath the surface despite some weakness among the major averages. The S&P 500 finished flat, while the Nasdaq Composite (-0.1%) and DJIA (-0.2%) logged slim declines ahead of NVIDIA's (NVDA 209.95, -3.10, -1.46%) highly anticipated earnings report after the close.

The July Personal Income and Spending report did little to meaningfully alter the inflation picture, with the year-over-year headline and core PCE rates unchanged from June at 3.7% and 3.3%, respectively. Rate expectations initially shifted modestly in response, with the CME FedWatch Tool briefly raising the probability of a 25-basis-point rate hike at the September FOMC meeting to 40% from 36%, but those odds returned to 36% by the close.

Despite the muted index-level performance, participation was relatively balanced. Four S&P 500 sectors finished higher, breadth was nearly even on the NYSE, and the S&P 500 Equal Weighted Index (+0.3%) outperformed its market-cap-weighted counterpart. Decliners held a roughly 7-to-5 advantage over advancers on the Nasdaq.

The industrials sector (+1.1%) stood out on relatively broad strength within the group. Courier stocks were particularly strong, with C.H. Robinson (CHRW 151.73, +8.07, +5.62%) ranking among the top-performing S&P 500 components.

The information technology sector (+0.4%) also provided support despite weakness in NVIDIA (NVDA 209.95, -3.10, -1.46%) ahead of its earnings report. The PHLX Semiconductor Index (+0.2%) eked out a small gain following a choppy session, while software stocks were a relative bright spot despite post-earnings weakness in Intuit (INTU 345.88, -11.58, -3.24%).

Several company-specific developments remained influential elsewhere. The communication services sector (-0.7%) was among the laggards even as Meta Platforms (META 576.14, +6.09, +1.07%) finished higher following a volatile session.

The stock fluctuated after the company reached a proposed settlement with a bipartisan coalition of state attorneys general over claims that Facebook and Instagram harmed younger users. The consumer discretionary sector (-0.6%) also finished lower as NIKE (NKE 38.59, -0.89, -2.25%) and other athletic apparel stocks extended their retreat following Dick's Sporting Goods' (DKS 129.71, +5.40, +4.34%) disappointing earnings report Tuesday.

There was a notable exception outside the S&P 500, as Abercrombie & Fitch (ANF 147.68, +38.78, +35.61%) surged following its Q2 beat, with encouraging underlying sales trends beyond a sizable tariff-refund benefit providing some support to other retail and apparel names.

Meanwhile, the health care sector (-1.0%) finished at the bottom of the sector standings as Moderna (MRNA 149.66, -9.17, -5.77%) gave back more of its gains following last week's triple-digit surge on positive melanoma vaccine results, while Eli Lilly (LLY 1190.03, -43.63, -3.54%) was also a laggard. 

Oil prices generated some afternoon volatility but ultimately finished little changed. WTI crude had traded near $80 per barrel before the open before reversing sharply higher following reports that Iran and Oman agreed on a revenue-sharing arrangement for traffic through the Strait of Hormuz, although an IRGC spokesperson said the U.S. was still preventing the strait from reopening. The spike in crude coincided with the stock market's move to session lows, but oil subsequently surrendered the advance and settled $0.04 lower (-0.1%) at $82.25 per barrel. The energy sector (+0.3%) nevertheless finished with a modest gain.

Ultimately, Wednesday's session reflected a relatively balanced market awaiting its next major catalyst. The morning's inflation data produced little lasting change in rate expectations, while company-specific developments and swings in oil drove much of the intraday action. Attention now turns squarely to NVIDiA's earnings report after the close, which could set the tone for the semiconductor trade and broader technology sector on Thursday.

U.S. Treasuries retreated on Wednesday, pulling back from two days of solid gains in longer tenors. The U.S. Treasury sold $70 billion in 5-year notes to softer demand than what was seen at yesterday's 2-year note offering. The 2-year note yield settled up two basis points to 4.22%, and the 10-year note yield settled up three basis points to 4.66%. 

Reviewing today's data: 

• Weekly MBA Mortgage Applications Index -1.0%; Prior -0.4%
• July Personal Income 0.4% (Briefing.com consensus 0.2%); Prior 0.2%, July Personal Spending 0.2% (Briefing.com consensus 0.2%); Prior 0.3%, July PCE Prices 0.2% (Briefing.com consensus 0.1%); Prior -0.1%, July PCE Prices - Core 0.2% (Briefing.com consensus 0.2%); Prior 0.1%
  • The key takeaway from the report is that year-over-year rates for the PCE Price Index (3.7%) and the core-PCE Price Index (3.3%) remained at levels from June, so the report did little to alter the market's view of the latest income and spending trends, aside from an improvement in the personal savings rate.
• Q2 GDP - Second Estimate 1.5% (Briefing.com consensus 1.5%); Prior 1.5%, Q2 GDP Deflator - Second Estimate 6.4% (Briefing.com consensus 6.3%); Prior 6.3%
  • The key takeaway from the report is that the overall growth reading held steady as an upward revision to real final sales to private domestic purchasers (to 4.2% from 3.9%) offset a higher drag from imports.
• July Durable Orders 1.1% (Briefing.com consensus 0.5%); Prior was revised to 0.5% from 0.3%, July Durable Goods - ex transportation 0.4% (Briefing.com consensus 0.5%); Prior was revised to 1.1% from 0.6%
  • The key takeaway from the report is that the headline beat was driven by a 12.7% jump in orders for nondefense aircraft and parts while growth in orders excluding transportation undershot expectations slightly due in part to a pullback in new orders for computers and electronic products (-1.1%). However, these orders are still up a healthy 14.3% year-over-year.

Thursday:

Technology stocks powered the major averages higher on Thursday, with another round of strong earnings reactions allowing the Nasdaq Composite (+1.6%) to outperform the S&P 500 (+0.7%) and DJIA (+0.2%). The gains returned all three major averages to positive territory for the week, although the strength at the index level masked a notably weaker showing across most of the market.

The information technology sector (+3.4%) was the only S&P 500 sector to finish higher, supported by substantial gains across both semiconductor and software stocks. NVIDIA (NVDA 227.91, +18.25, +8.70%) surged after another strong earnings report and bullish commentary surrounding the AI buildout, putting further distance between the stock and its 50-day moving average following its recent seven-session losing streak. The PHLX Semiconductor Index (+2.3%) finished firmly higher.

Software stocks provided even stronger leadership, sending the iShares Expanded Tech-Software Sector ETF up 7.7%. Salesforce (CRM 252.10, +46.48, +22.60%) led both the S&P 500 and DJIA after its results featured encouraging forward demand indicators and expectations for accelerating organic revenue growth in the second half. CrowdStrike (CRWD 227.96, +38.78, +20.50%) was another major post-earnings winner, adding to the broad strength across software names.

The concentration of today's gains was evident in the S&P 500 Equal Weighted Index (-0.3%), which finished lower despite the solid advance for its market-cap-weighted counterpart. Defensive groups were among the weakest performers, with the consumer staples sector (-1.5%) finishing at the bottom of the sector standings. Hormel Foods (HRL 21.28, -2.44, -10.27%) finished as the worst-performing S&P 500 component after its earnings release. The health care sector (-1.1%) also lagged as Moderna (MRNA 142.77, -6.89, -4.60%) faced pressure again after last week's monumental surge.

Retail stocks remained another source of weakness. The consumer discretionary sector (-1.0%) finished firmly lower as disappointing earnings reactions from Best Buy (BBY 83.58, -3.86, -4.41%) and Burlington Stores (BURL 289.89, -24.10, -7.68%) weighed on the group, helping send the State Street SPDR S&P Retail ETF down 1.8%.

Oil prices provided a late-session crosscurrent after spending much of the day lower. WTI crude rallied sharply during the afternoon following a report that the White House has no intention of returning to the terms of the June memorandum of understanding with Iran, eventually settling $1.36 higher (+1.7%) at $83.61 per barrel. The move helped the energy sector (-0.4%) recover from a larger decline and finish with the narrowest loss among the ten sectors that ended lower.

Ultimately, Thursday's advance was almost entirely a technology-driven affair, as strong reactions to NVIDIA, Salesforce, CrowdStrike, and other earnings reports outweighed rotational weakness throughout the rest of the market. Attention remains on the earnings calendar after the close, with Marvell (MRVL 241.45, -3.66, -1.49%) and Workday (WDAY 193.57, +2.82, +1.48%) set to report, but the focus will shift back toward monetary policy tomorrow when Fed Chair Kevin Warsh delivers his keynote address at the Jackson Hole Symposium. With the CME FedWatch Tool assigning roughly a one-in-three probability to a September rate hike, Warsh's comments could provide the next major catalyst for rates and the broader market.

U.S. Treasuries recorded slim losses on Thursday after a sideways session concluded with a late slip to lows alongside an uptick in the price of oil. The U.S. Treasury completed this week's note auction slate with a good $44 billion 7-year note offering. The 2-year note yield settled up one basis point to 4.23%, and the 10-year note yield settled up one basis point to 4.67%.

Reviewing today's data:

• July Adv. Intl. Trade in Goods -$118.8 bln; Prior was revised to -$101.4 bln from -$101.5 bln
• July Adv. Retail Inventories 0.7%; Prior 0.0%
• July Adv. Wholesale Inventories 1.3%; Prior 0.3%
• Weekly Initial Claims 203K (Briefing.com consensus 210K); Prior was revised to 207K from 206K, Weekly Continuing Claims 1.778 mln; Prior was revised to 1.796 mln from 1.799 mln
  • The key takeaway from the report is that initial claims continue hovering just above the 200,000 mark, showing little change in overall layoff activity while continuing claims are just above their lowest level of the year.

Friday: 

The major averages finished a choppy Friday modestly lower, with the S&P 500 (-0.3%) and Nasdaq Composite (-0.5%) declining while the DJIA ended near its flatline. The market saw relatively little movement during the afternoon after an eventful morning shaped by Fed Chair Kevin Warsh's Jackson Hole address, rising Treasury yields, and a sharp retreat in semiconductor stocks. Despite today's losses, all three major averages secured gains for the week.

Warsh's remarks were the main driver of the session. The Fed Chair emphasized that inflation remains above the central bank's 2% target and said price stability should be its predominant focus at this point. His comments prompted a significant repricing of near-term policy expectations, with the probability of a 25-basis-point rate hike at the September FOMC meeting rising sharply to 57.5% from 35.4% yesterday.

Treasury yields climbed in response, with the pressure particularly pronounced at the shorter end of the curve. The move weighed more heavily on smaller stocks, leaving the Russell 2000 (-1.4%) and S&P Mid Cap 400 (-1.2%) with considerably wider losses than the major averages.

The major averages initially took the hawkish policy shift in stride, rallying to session highs during the morning behind strength in non-semiconductor mega-cap stocks. Those gains moderated as the session progressed, but remained enough to lift the consumer discretionary (+1.7%) and communication services (+1.6%) sectors to the top of the sector standings behind solid gains in Amazon (AMZN 266.43, +10.17, +3.97%) and Alphabet (GOOG 342.88, +5.17, +1.53%) .

Apple (AAPL 319.70, +5.12, +1.63%) and Microsoft (MSFT 513.53, +8.47, +1.68%) also advanced, providing some support for the major averages despite weakness elsewhere in the information technology sector (-1.3%).

Semiconductor stocks were the largest source of pressure, sending the PHLX Semiconductor Index down 3.5%. NVIDIA (NVDA 217.48, -10.50, -4.61%) gave back a sizable portion of yesterday's post-earnings surge, while Marvell (MRVL 216.62, -24.83, -10.28%) was a notable laggard following its quarterly report.

Software stocks also surrendered some of yesterday's earnings-driven gains, although the selling was considerably less pronounced. The iShares Expanded Tech-Software Sector ETF declined 0.7%, with Workday (WDAY 204.72, +11.15, +5.76%) standing out on the upside following its earnings report.

Six S&P 500 sectors ultimately finished lower. In addition to the information technology sector, the utilities (-1.1%) and industrials (-1.0%) sectors were among the main laggards.

While the financial sector (+0.3%) notched a modest gain, PayPal (PYPL 53.66, -7.81, -12.71%) finished as the worst-performing S&P 500 component after Bloomberg reported that the Advent/Stripe consortium abandoned its planned leveraged buyout valued at more than $50 billion, although the companies could resume discussions at a later date.

Ultimately, Fed Chair Warsh's Jackson Hole address set the tone for Friday's session, driving a hawkish repricing of September policy expectations and pushing Treasury yields higher, particularly at the shorter end of the curve. Strength in several non-semiconductor mega-cap stocks helped limit the damage at the headline-index level, but weakness in semiconductors and smaller stocks left the broader market under pressure. Even so, the major averages held onto enough of their earlier weekly gains to finish the week in positive territory.

U.S. Treasuries had a rough finish to the week with yields on 3-year and 5-year note yields hitting fresh highs for the year while the long bond outperformed but could not secure a higher finish. The 2-year note yield settled up 12 basis points to 4.35% (+12 basis points this week), and the 10-year note yield settled up five bais points to 4.72% (-2 basis points this week). 

Reviewing today's data:

• August Chicago PMI 47.1 (Briefing.com consensus 57.0); Prior 57.6
• August Univ. of Michigan Consumer Sentiment - Final 51.7 (Briefing.com consensus 51.0); Prior 51.0
  • The key takeaway from the report is that persistent inflation concerns are undercutting consumer sentiment.