Good morning,
The major equity indices broke out early last week—a move that was perhaps overdue given that we are now two-thirds of the way through an explosive earnings season.
The back half of the week delivered a different surprise in the form of a shocking employment report: payrolls declined, average hourly earnings slowed, and the labor force continued to shrink. On balance, the results suggest the Fed was right to remain on hold last week. Treasury yields moved sharply lower in response, returning to levels—the 10-year Treasury at 4.64%—that are far more comfortable for equities.
For the week:
- S&P 500: +3.59%, reaching a fresh all-time high
- Nasdaq Composite: +5.19%
- Russell 2000: +3.54%
- International Developed Markets: +2.26%
- Emerging Markets: -0.42%—the only blemish on an otherwise stellar week for the major indices
Not to rain on last week’s parade, but it is worth noting that the new highs in several indices still lack broad confirmation. We have yet to see corresponding new highs across a wide range of sectors and individual stocks, the Advance/Decline lines remain below their previous highs, and the High-Low Logic Index continues to lag.
We will be watching closely for those confirmations in the weeks ahead, particularly as we approach the more challenging portion of the calendar beginning in September.
This week starts quietly today, with little in the way of economic data or earnings. Activity will pick up as the week progresses, however, with the monthly inflation reports—CPI and PPI—and several important earnings announcements from the AI complex, including AMAT, CSCO, CRWV, LITE, and NBIS.
It appears Risk-On momentum grabbed the baton from Risk-Off last week. Let’s see how long it can carry it.
Have a good week—see you Monday.
Be well,
Mike