Weekly Wrap

The equity market finished the week with a modest risk-on tone, supported by small- and mid-cap strength and optimism across select cyclical sectors. The Russell 2000 surged 3.3% week-to-date and the S&P Mid Cap 400 climbed 2.6%, signaling broad support for domestically oriented stocks, while the DJIA rose 1.5%, finishing the week with fresh record highs, and the S&P 500 added 0.3%. The Nasdaq Composite lagged slightly, retreating 0.6% week-to-date, reflecting ongoing headwinds for mega-cap technology.

Investor attention remained on Fed policy, with markets digesting a mix of dovish and hawkish signals. Markets surged on Friday after Fed Chair Powell’s Jackson Hole remarks hinted at a willingness to adjust policy if conditions warrant, while Cleveland Fed President Beth Hammack (non-voting FOMC member) emphasized that inflation remains elevated. The probability of a 25-basis-point rate cut at the September FOMC meeting fluctuated during the week but finished elevated, providing a cautiously supportive backdrop for equities.

Small-cap and cyclical sectors led the advance. The iShares U.S. Home Construction ETF gained 3.0%, while consumer discretionary rose 1.3%, underscoring interest in sectors positioned to benefit from a potentially more accommodative policy stance. The financials (+2.1%), industrials (+1.8%), materials (+2.1%), and energy (+2.8%)  sectors also contributed meaningfully to the week’s gains.

Conversely, defensive and large-cap technology names lagged. The information technology sector fell 1.6%, the communication services sector retreated 0.9%, and the Vanguard Mega Cap Growth ETF closed the week down 1.1%, reflecting continued rotation away from mega-cap and tech-heavy indices toward smaller and more cyclical stocks.

Treasuries moved with the Fed-driven sentiment, as the 2-year note yield fell to 3.69% and the 10-year note settled to 4.26% by Friday, balancing elevated rate cut expectations against ongoing inflation concerns.

Overall, the week underscored a market navigating between optimism for potential Fed easing and caution over inflationary pressures. Mid- and small-cap stocks, along with homebuilders and cyclical sectors, drove the gains, while mega-cap technology and defensive names underperformed. With month-end approaching, focus will likely shift to upcoming earnings, economic data, and any further Fed signals as traders position for the final stretch of August.

• Russell 2000 + 3.3% for the week/ +5.9% YTD
• S&P Mid Cap 400 + 2.6% for the week/ + 4.3% YTD
• DJIA +1.5% for the week/ +7.3% YTD
• S&P 500 + 0.3% for the week/ +10.0% YTD
• Nasdaq Composite -0.6 for the week / +13.3% YTD

Monday: 

The stock market drifted sideways throughout the entirety of today's session as a light batch of headlines and the anticipation of key drivers later in the week culminated in a palpable lack of conviction. The S&P 500 (flat), Nasdaq Composite (flat), and DJIA (-0.1%) traded in a tight range, never staying decidedly above or below their flatlines and failing to challenge record high levels from the previous week.

The market is awaiting the Fed’s Jackson Hole Symposium that kicks off on Thursday, with Fed Chair Jerome Powell's Friday address arguably the most anticipated development of the week. There is currently an 83.2% probability of a 25-basis point cut at the September FOMC meeting, according to the CME FedWatch Tool. Market participants will be listening closely to see if Mr. Powell plays into the market’s prevailing view or tries to temper it.

President Trump's Friday meeting with Russia's President Putin did not produce any immediate agreements, but it led to more talks in Washington, this time with European leaders, including the Ukrainian president. The hope is now that a trilateral meeting between leaders from the U.S., Ukraine, and Russia will take place soon.

Today's action, or lack thereof, reflected an uncertainty in the market's direction as it relates to economic policy, with little corporate or earnings news to stimulate excitement.

Breadth figures were relatively even throughout the session, with advancers outpacing decliners by a roughly 5-to-4 margin on the NYSE and a roughly 11-to-9 clip on the Nasdaq.

Five S&P 500 sectors finished in positive territory, led by the industrials sector (+0.4%), which saw a substantial gain in one of its smaller components, Dayforce (DAY 66.62, +13.74, +25.98%), after Bloomberg reported that Thomas Bravo is in talks to acquire the company.

The consumer discretionary sector (+0.4%) also captured a nice gain as Tesla (TSLA 335.16, +4.60, +1.39%) was the best-performing mega-cap stock on an otherwise lackluster day for the Magnificent 7.

The information technology (+0.1%), financials (+0.1%), and consumer staples (+0.1%) sectors rounded out the five advancing sectors. The real estate (-1.0%), communication services (-0.7%), energy (-0.6%), materials (-0.6%), utilities (-0.5%), and health care (-0.2%) sectors closed with losses.

The communication services sector spent the entirety of the session among the worst-performing sectors, nursing a loss in Meta Platforms (META 767.37, -17.86, -2.27%) that saw the Vanguard Mega Cap Growth ETF (-0.1%) close with a modest loss.

The health care sector spent most of the day at the top of the leaderboard in what at the time appeared to be a continuation of last week's trend, but lost its momentum.

CVS Health (CVS 70.16, +1.57, +2.29%) traded higher after UBS upgraded the stock to Buy from Neutral with a target of $79. While not in the S&P 500, Novo Nordisk A/S (NVO 53.78, +1.36, +2.60%) generated some early buzz after its Wegovy drug was approved for the treatment of noncirrhotic MASH with moderate to advanced liver fibrosis. The company also announced it will offer its GLP-1 drugs, Ozempic (for diabetes) and Wegovy (for weight loss), at a cash price of $499 per month to self-paying patients through GoodRx (GDRX 5.12, +1.39, +37.27%).

Despite the broader market losing much of last week's momentum, smaller-cap stocks continued their trend of outperformance. The Russell 2000 advanced 0.4% today, and the S&P Mid Cap 400 gained 0.2%.

Retailers also traded generally higher today in anticipation of some key names reporting earnings this week, including Walmart (WMT 100.68, +0.68, +0.68%), Costco (COST 979.35, +7.31, +0.75%), Home Depot (HD 394.70, -4.68, -1.17%), and Target (TGT 104.97, +1.95, +1.89%). The SPDR S&P Retail ETF finished with a gain of 0.9%.

U.S. Treasuries started the week on a slightly lower, but generally quiet, note. The 2-year note yield settled up one basis point to 3.77% and the 10-year note yield settled up one basis point to 4.34%.

Reviewing today's data:

• The NAHB Housing Market Index fell to 32 in August (Briefing.com consensus 34) from 33 in July.

Tuesday:

The stock market pulled back today as sharp losses in mega-cap and technology names outweighed strength in blue-chip stocks, which had briefly lifted the DJIA (flat) to a record high of 45,207.39 before retreating. The S&P 500 (-0.6%) also retreated today after a brief stint above its baseline, and the tech-heavy Nasdaq Composite (-1.5%) never saw positive territory.

Losses today were not particularly widespread. The information technology (-1.8%), communication services (-1.2%), consumer discretionary (-0.4%), and energy (-0.2%) sectors were the only sectors that retreated, but a clear trend of mega-cap underperformance had an outsized effect on the market.

The technology sector finished as the worst-performing S&P 500 sector, facing significant pressure in its largest chipmaker components, NVIDIA (NVDA 175.64, -6.37, -3.50%) and Broadcom (AVGO 294.91, -10.85, -3.55%), while Microsoft (MSFT 509.77, -7.33, -1.42%) and Apple (AAPL 230.56, -0.33, -0.14%) also lost ground. Today's losses trimmed the sector's month-to-date gains to a meager 0.2%.

A strong showing from Intel (INTC 25.31, +1.65, +6.97%), after news that Softbank Group made a $2 billion investment in the company, was not enough to markedly improve the technology sector or the PHLX Semiconductor Index, which finished with a 1.6% loss.

Weakness in Meta Platforms (META 751.48, -15.89, -2.07%) and Alphabet (GOOG 202.49, -1.80, -0.88%) kept the communication services sector below its baseline for the entirety of the session, while Tesla (TSLA 329.31, -5.85, -1.75%) and Amazon (AMZN 228.01, -3.48, -1.50%) erased an early gain in the consumer discretionary sector.

The Vanguard Mega Cap Growth ETF retreated 1.6%. Meanwhile, the S&P 500 Equal Weighted Index (+0.4%) outpaced the market-weighted S&P 500 (-0.6%).

Separately, the energy sector saw a modest loss as crude oil futures settled 1.6% lower at $61.77 per barrel.

While the major averages closed with losses after a steady retreat, a solid performances across several other sectors mitigated some of the pressure the mega-caps created. The real estate (+1.8%), utilities (+1.0%), consumer staples (+1.0%), health care (+0.4%), materials (+0.5%), financials (+0.2%), and industrials (+0.2%) sectors closed with gains.

Sector performance indicates a rotation in play. Money was taken off the table, but not all of it left the room. Investors turned to more defensive stocks ahead of Fed Chair Powell's Friday address at the Jackson Hole Symposium.

A proclivity to protect against risk today also left small-cap stocks overlooked, with the Russell 2000 retreating 0.9%.

Additionally, the DJIA (flat) outperformed the S&P 500 (-0.6%) and Nasdaq Composite (-1.5%), aided by the positive response to Home Depot's (HD 407.14, +12.44, +3.15%) earnings report, which featured an earnings miss but a reaffirmation of the fiscal year outlook. Lowe's (LOW 256.36, +5.47, +2.18%), Target (TGT 105.36, +0.41, +0.39%), and TJX (TJX 134.62, +1.56, +1.17%) are set to report their earnings before the open tomorrow.

On the geopolitical front, Politico reported that the White House is planning a trilateral meeting between Presidents Trump, Putin, and Zelensky in Budapest, though the market has still largely ignored developments on this topic.

U.S. Treasuries climbed on Tuesday, reclaiming their modest losses from the start of the week. The 2-year note yield settled down two basis points to 3.75%, and the 10-year note yield settled down four basis points to 4.30%.

Reviewing today's data:

• Housing starts increased 5.2% month-over-month in July to a seasonally adjusted annual rate of 1.428 million units (Briefing.com consensus: 1.311 million), with single-unit starts up 2.8% and multi-unit starts up 9.9%. Building permits decreased 2.8% month-over-month to a seasonally adjusted annual rate of 1.354 million units (Briefing.com consensus: 1.390 million), with single-unit permits up 0.5% and multi-unit permits down 8.2%.
  
  • The key takeaway from the report is that there wasn't much strength in single-unit starts or permits, which is relatively disappointing in the context of a housing market that needs more affordable, single-family homes for sale. In fact, single-unit starts were down in all regions except the South (+13.2%).

Wednesday:

The stock market opened with mega-cap stocks and tech names suffering some notable losses, though steady improvement from morning lows saw the major averages finish significantly improved as those losses narrowed. The tech-heavy Nasdaq Composite (-0.6%) spent the entirety of the session in negative territory and closed with the biggest loss, while the S&P 500 (-0.1%) finished with a more modest loss. The DJIA (flat) made a push back to its baseline late in the session.

The consumer discretionary (-1.0%), information technology (-0.8%), and communication services (-0.5%) sectors closed in negative territory. The weakness in their mega-cap constituents weighed down the S&P 500 and Nasdaq Composite. The industrials sector (-0.1%) also finished just below its flatline.

At midday, Microsoft (MSFT 505.72, -4.05, -0.79%) was the only "Magnificent 7" name with a loss less than 1.0%. Meta Platforms (META 747.50, -3.98, -0.53%), and NVIDIA (NVDA 175.40, -0.24, -0.14%) would eventually see their losses pared, while Tesla (TSLA 323.90, -5.41, -1.64%), Apple (AAPL 226.01, -4.55, -1.97%), Alphabet (GOOG 200.19, -2.30, -1.14%), and Amazon (AMZN 223.81, -4.20, -1.84%) lagged.

NVIDIA's move was particularly impressive considering the stock was down as much as 3.5% in the late morning. At that point, the information technology sector was down 2.0%, and the PHLX Semiconductor Index (-0.7%) held a 3.0% loss.

Though much improved from earlier in the session, semiconductors still underperformed. Intel (INTC 23.54, -1.77, -6.99%) was the worst-performing stock in the S&P 500 after CNBC reported that the company is in conversations with investors, seeking to offer equity stakes for a discounted price.

The consumer staples (+0.8%) and health care (+0.6%) sectors were among the top-performing S&P 500 sectors, only bested by the energy sector (+0.9%), which was supported by crude oil futures settling $0.93 higher (+1.5%) at $62.70 per barrel.

The Vanguard Mega Cap Growth ETF retreated 0.7%, worse than its smaller-cap counterparts. The Russell 2000 (-0.3%) and S&P Mid Cap 400 (-0.3%) were down 0.3% and 0.4%, respectively, but also managed to work their way back from larger losses.

Relative strength in blue-chip stocks has helped the DJIA (flat week-to-date) outperform the S&P 500 (-0.8% week-to-date) and Nasdaq Composite (-2.1% week-to-date) so far this week.

Today's earnings reports resulted in stock-specific moves but had little effect on the broader market. TJX (TJX 138.24, +3.62, +2.69%) and Lowe's (LOW 257.10, +0.74, +0.29%) traded higher, while Target (TGT 98.69, -6.67, -6.33%) disappointed investors after posting a modest EPS beat but naming an in-house candidate, COO Michael Fiddelke, as the new CEO.

While mega-caps and semiconductors underperformed, defensive stocks once again advanced, and value stocks exhibited relative strength versus growth stocks in front of Fed Chair Powell’s speech on Friday at the Jackson Hole Symposium.

Markets will be closely watching Fed Chair Powell's speech for any hint of a shift toward a more accommodative rate stance. Still, with another CPI and PPI report due ahead of the FOMC meeting, Powell may choose to remain cautious until that data are fully digested.

While stocks improved steadily throughout the afternoon, there was not much immediate reaction to the 14:00 ET release of the July FOMC minutes, which showed broad support for keeping the fed funds rate unchanged at 4.25% to 4.50%. Participants highlighted both inflation and employment risks, though most viewed upside inflation risk as more pressing.

Treasuries had their gains trimmed in response to the minutes, edging slightly higher for the day with shorter tenors leading the advance alongside the poor showing from stocks. The 2-year note yield settled down one basis point to 3.74%, and the 10-year note yield settled down one basis point to 4.30%.

Reviewing today's data:

• The weekly MBA Mortgage Index fell 1.4% to follow last week's 10.9% jump. The Refinance Index fell 3.2% while the Purchase Index ticked up 0.1%.

Thursday:

The S&P 500 (-0.4%) closed lower for the fifth consecutive session today, and the Nasdaq Composite's (-0.3%) loss marks five retreats out of the past six sessions. While the DJIA (-0.3%) has weathered this week's mega-cap weakness better than its counterparts, it closed with a similar loss today, as losses were more broad-based.

The stock market retreated following some hawkish Fed speak that chipped away at rate cut expectations, while this morning's earnings reports and economic data also disappointed.

Kansas City Fed President Schmid (voting FOMC member) said in a CNBC interview that he is not in a hurry to cut rates, citing several key inflation readings that will come out between now and the September FOMC meeting. Cleveland Fed President Beth Hammack (non-voting FOMC member) stated in a Yahoo! Finance interview that she sees no imminent case for rate cuts, as inflation remains too high.

Today's economic data further stoked inflation concerns.

The Philadelphia Manufacturing Business Outlook Survey dropped to -0.3 in August (Briefing.com consensus: 9.0) from 15.9 in July, while the indexes for prices paid (66.8 from 58.8) and prices received (36.1 from 34.8) both went up versus July, reflecting an acceleration of price increases.

While the preliminary S&P U.S. Global Manufacturing PMI (53.3 from 49.8) showed a return to growth and the Services PMI (55.4 from 55.7) showed only a modest slowdown in the pace of expansion, it is worth noting that both PMI reports showed a sharp increase in input prices, which was attributed to tariffs.

Coupled with the rise in initial jobless claims (235,000 vs. Briefing.com consensus of 222,000) and continuing claims (up 30,000 to 1.972 million), today's data, in aggregate, tipped toward a stagflation environment.

The jump in initial and continuing claims is apt to keep economists' nonfarm payroll estimates in a soft growth zone, which could possibly lead to a more dovish tone in Fed Chair Powell's speech at Jackson Hole tomorrow, the market's most anticipated happening this week. However, with the July core CPI and July core PPI moving away from the Fed's two percent inflation target, and more inflation and employment data to come before the next FOMC meeting, Powell is likely to reiterate his "wait-and-see approach."

As it stands now, the probability of a 25-basis point rate cut at the September FOMC meeting is 73.6%, down from 82.4% yesterday and 92.1% a week ago, according to the CME FedWatch tool.

Today's retreat was broad-based, with nine S&P 500 sectors finishing in negative territory.

The consumer staples sector (-1.2%) posted the widest loss as Walmart's (WMT 97.96, -4.62, -4.50%) first earnings miss since May 2022 had a rippling effect throughout the sector. Walmart missed EPS expectations by $0.05 despite in-line revenues, citing increasing costs as the company replenishes inventory at post-tariff prices.

Mega-cap stocks faced pressure again today, though the declines were less severe than yesterday. Weakness in their largest components pulled the consumer discretionary (-0.7%), information technology (-0.4%), and communication services (-0.4%) sectors lower. The Vanguard Mega Cap Growth ETF (-0.4%) finished identically to the S&P 500 (-0.4%) and the S&P 500 Equal Weighted Index (-0.4%).

The Russell 2000 (+0.2%) outperformed, and the S&P Mid Cap 400 (-0.2) saw a modest loss

Meanwhile, the energy sector (+0.7%) was the top performer today, benefitting from oil futures settling the session $0.80 higher (+1.3%) at $63.50 per barrel. The materials sector (+0.3%) also captured a modest gain.

U.S. Treasuries retreated on Thursday, lifting yields toward their highest levels of the week. The 2-year note yield settled up five basis points to 3.79%, and the 10-year note yield settled up three basis points to 4.33%.

Reviewing today's data:

• Weekly Initial Claims 235K (Briefing.com consensus 222K); Prior 224K, Weekly Continuing Claims 1.972 mln; Prior was revised to 1.942 mln from 1.956 mln
  
  • The key takeaway from the report is that it covers the period in which the survey for the August employment report is completed. The jump in initial and continuing claims is apt to keep economists' nonfarm payroll estimates in a soft growth zone.
• August Philadelphia Fed Index -0.3 (Briefing.com consensus 9.0); Prior 15.9
• August S&P Global U.S. Manufacturing PMI - Prelim 53.3; Prior 49.8
• August S&P Global U.S. Services PMI - Prelim 55.4; Prior 55.7
• July Existing Homes Sales 4.01 mln (Briefing.com consensus 3.92 mln); Prior 3.93 mln
  
  • The key takeaway from the report is that a moderation in selling prices, coupled with an increase in inventory (the highest since May 2020), helped boost sales despite the persistence of higher mortgage rates.
• July Leading Indicators -0.1% (Briefing.com consensus -0.1%); Prior -0.3%

Friday:

The stock market rallied today after Fed Chair Powell's speech at the Jackson Hole symposium bolstered the probability of a September rate cut, resulting in broad-based gains that largely made up for a previously challenging week.

The DJIA (+1.9%) soared past its record high levels, posting a new record intraday (45,757.84) and closing high (45,631.74). Meanwhile, the S&P 500 (+1.5%) came within three points of its own all-time high level before finishing just shy of its record close. The tech-heavy Nasdaq Composite (+1.8%) still has some ground to cover before it goes record hunting again due to losses incurred earlier in the week.

In particular, the market was enthused by Mr. Powell's line noting that "with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance," which the market took as an open-mindedness to easing.

The probability of a 25-basis point rate cut at the September FOMC meeting now stands at 83.1%, up from 75.0% yesterday, according to the CME FedWatch tool.

It is worth noting that this probability did decrease somewhat from a probability in the low 90s earlier in the day, as there are still lingering inflation concerns that could stifle a rate cut.

Cleveland Fed President Beth Hammack (non-voting FOMC member) expressed a more hawkish view in a CNBC interview, in which she stressed that while she is open-minded heading into September, her focus remains on inflation, where she feels the Fed is still missing badly on its mandate.

However, this did little to thwart the stock market off its strong upward course.

Small-cap stocks, with their greater domestic focus and higher sensitivity to borrowing costs, performed exceptionally well.

The Russell 2000 advanced 3.8% today, making it the top performer among the major averages for the week after starting the session with a modest week-to-date loss.

Homebuilders also excelled with the prospect of a friendlier rate environment, with the iShares U.S. Home Construction ETF posting a 5.6% gain.

The S&P Mid Cap 400, for its part, added 2.7%.

The Invesco S&P 500 High Beta ETF added 3.3% today, reinforcing the market's strong risk-on sentiment.

While the Vanguard Mega Cap Growth ETF (+1.5%) performed more in line with the broader market, mega-cap gains were a welcome sight after a tough week that saw the mega-cap index finish with a 1.1% week-to-date loss.

Tesla (TSLA 340.02, +19.91, +6.22%) was a notable standout among the cohort, surging past its 200-day moving average (328.40) and helping the consumer discretionary sector (+3.2%) capture the widest gain today.

In total, ten S&P 500 sectors finished with gains, with the energy (+2.0%), communication services (+1.9%), materials (+1.7%), and financials (+1.7%) sectors among the best performers.

The PHLX Semiconductor Index advanced 2.7% after several choppy previous sessions, getting back to its unchanged level for the week.

Only the defensive consumer staples sector (-0.4%) saw a modest loss.

Breadth figures denote the scope of today's rally, with advancers outpacing decliners by a nearly 10-to-1 margin on the NYSE and a greater than 5-to-1 clip on the NASDAQ.

Today's rally reinforces investor optimism for potential policy easing and sets a positive tone as traders position for the final stretch of August.

U.S. Treasuries enjoyed a strong Friday outing that lifted the 10-year note and shorter tenors into positive territory for the week while the long bond added to this week's gain.

The 2-year note yield settled down ten basis points to 3.69%, the 10-year note yield settled down seven basis points to 4.26%, and the 30-year note yield settled down four basis points to 4.88%.

There was no economic data of note today.