Weekly Market Recap: Records, Rallies, and Reasons to Cheer
Last week was a banner one on Wall Street! After a choppy start, the S&P 500 and NASDAQ indices danced to new all-time highs by the week’s end. The Dow Jones Industrial Average kept its rally hat on as well and is now within arm’s reach of making its own all-time highs, while stocks outside of the US posted even better gains than those at home.
The momentum didn’t exactly spill over to the lesser-known companies as the small-cap Russell 2000 and the mid-cap S&P 400 both traded in a sideways fashion for the week as they are attempting to make new year-to-date highs but are still a bit behind their records set last year.
So, what’s fueling all this current market optimism? There’s been a streak of positive headlines recently:
- A surprisingly strong employment report from a few weeks back, helped set a positive tone.
- Inflation readings, which have been “sticky” came in even better than expected, calming investor nerves.
- The Federal Reserve signaled not just one, but two anticipated rate cuts this year.
- Corporate earnings are once again beating Wall Street’s expectations.
- New trade deals are seemingly being announced daily, which may be giving investors more confidence to make future predictions, and the government is collecting these new revenues in stride, which could help with our budget issues.
- Longer term interest rates and credit spreads have signaled complacency amongst bond investors, aka “smart money”.
On the trade front, last week delivered in spades. The U.S. and Japan finally inked a long-awaited agreement. This is a significant deal given Japan is America’s fifth largest trading partner. Hopes immediately turned toward the E.U., and sure enough, just as the week wrapped, word came that the U.S. and the European Union would strike “A very powerful deal” (President Trump’s own words). The tariff news sent fresh waves of optimism through the markets and may be what fueled the midweek rally. There’s now growing expectation that deals with Canada and Mexico could soon follow.
In other markets, Oil, Gold, and industrial metals like Copper were relatively stable as the US Dollar and Treasury Yields barely budged on the week when all was said and done.
Source: stockcharts.com
On Deck this week: Earnings, Earnings, and a Sprinkle of Fed
Investors are gearing up for the busiest earnings week of the season, with Microsoft, Apple, Amazon, Meta (Facebook), and more set to report quarterly results. The Fed’s monetary policy decision and a slate of key economic data will also be in focus.
From a data perspective, its “Employment Week” with the JOLTS (Job Openings and Labor Turnover) report kicking things off Tuesday morning, followed by the most important labor report of the month on Friday via Non-Farm Payrolls. We want to see stability in these reports but nothing too hot or too cold. This week we also get a look at growth via GDP on Wednesday and Inflation via the Fed’s preferred metric (Core PCE Price Index) on Thursday.
I can’t think of a busier week of potential catalysts on the calendar this year, so we may see some fireworks as we move through all the data.
Big Picture in Simple Terms
Markets have been basking in a wave of optimism this summer, with major indexes notching fresh record highs and investors encouraged by resilient consumer spending, solid corporate profits, and hints that the Federal Reserve may cut rates before the year is out. Even cautious CFOs have recently expressed a positive mood about their companies’ health, and recent strength in market breadth means more stocks are participating in the rally instead of a handful of big names calling the shots. Participation remains broad: the S&P 500, Nasdaq, and even the NYSE Composite have all seen strong “advance/decline” lines, a classic signal that confidence is contagious across much of the market.
But it’s important to keep those party hats within reach, though not glued on. History shows that strong first-half markets often face rougher seas as summer turns to fall, and we’re already seeing some hints of caution. Inflation, while mostly under control, is getting sticky in certain areas, especially due to tariffs potentially driving up the cost of goods. Some business leaders and economists are flagging classic indicators of slowdowns: hiring has cooled, there’s a soft patch in retail sales, and both consumer confidence and housing activity are seemingly no longer on a tear. With uncertainty surrounding global trade policy and the Fed’s stance on interest rates, many observers believe the economy is somewhere near the late stages of the current business cycle, where risk and reward often hang in delicate balance.
All in all, it’s a hopeful, yet “watchful” market environment. The breadth of the rally suggests underlying strength, yet historical slowdown signs remind us not to get complacent. Enjoy the good times but stay alert. History teaches that markets can surprise us when everyone is feeling their most optimistic.
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