Major Index Performance (August 4-8)
- S&P 500: Indicating a broad market surge, the S&P 500 rose from 6,271.71 to 6,389.45, a substantial increase of 117.74 points (+1.88%). This performance was driven by strong gains in the technology and communication sectors, reflecting positive earnings results.
- Nasdaq: The technology-heavy Nasdaq demonstrated a robust rebound, starting at 20,853.91 and ending the week at 21,450.02. Its impressive gain of 596.11 points (+2.86%) was led by strong performances from AI and mega-cap stocks.
- Dow Jones: The index, which focuses on large-cap stocks, started the week at 43,724.02 and closed at 44,175.61, marking a gain of 451.59 points (+1.03%). This stable recovery reflects a renewed economic optimism and an ability to overcome concerns related to tariff policies.
- Russell 2000: The small-cap index also participated in the rally, recovering from 2,177.10 to 2,218.42, a gain of 41.32 points (+1.90%). This indicates a positive market-wide momentum and growing confidence in the domestic economy.
- VIX (Volatility Index): The VIX volatility index saw a significant decline, dropping from 19.56 to 15.15, a decrease of 4.41 points (-22.55%). This suggests that market anxiety has subsided, and investors have become more confident in the market’s stability after absorbing recent risks related to employment data and tariffs.
Federal Reserve (FED) and Market Reaction
The week’s market narrative was dominated by a re-evaluation of the disappointing July jobs report.
- Rate Cut Expectations Soar: What was initially perceived as a negative indicator (73,000 new jobs, with massive downward revisions totaling 258,000 for the prior two months) was reinterpreted as a strong catalyst for a Fed rate cut. The CME FedWatch Tool showed the probability of a September rate cut soaring from 37% before the report to 95% by the end of the week.
- Analyst Outlooks Shift:
- Goldman Sachs maintained its forecast for three 25bp cuts (September, October, December) but added that a 50bp cut in September could be on the table if the August jobs report shows a further rise in the unemployment rate.
- Bank of America initially held its view that the Fed would not cut rates this year. However, it added an alternative scenario, suggesting the Fed could be compelled to implement “serious rate cuts of at least 25bp per meeting” if the labor market seriously deteriorates, signaling a potential shift in its hawkish stance.
- Trump’s Political Pressure: Trump’s announcement to appoint a successor to departing Fed Governor Adriana Kugler and a new head of the Bureau of Labor Statistics was viewed as a positive sign by the market, as it increases the likelihood of a more dovish Fed and more favorable economic data in the future.
Russia-Ukraine War Peace Talks
- Swiss Peace Summit: A peace summit was held in Switzerland, but without Russian participation. Ukraine and key Western allies agreed on peace principles, maintaining pressure on Moscow.
- Impact on Oil: Separately, the oil market reacted negatively to an OPEC+ decision to reduce production cuts more than expected. This increased supply outlook caused WTI crude oil prices to fall by 1.62% over the week.
Key Corporate Earnings and Performance
- Tesla (TSLA): The stock rallied after a shareholder meeting approved a $30 billion stock bonus for CEO Elon Musk, with the board citing the need for his leadership in AI and robotics.
- Palantir (PLTR): The company reported strong Q2 results, with revenue and profit surpassing Wall Street estimates. It crossed the $1 billion quarterly revenue mark for the first time and raised its annual revenue guidance to $4.14-$4.15 billion, positively impacting its stock.
- Berkshire Hathaway (BRK.A/B): The company’s Q2 operating profit decreased by 4%, and net income was down by half. It warned that tariffs could have a negative impact on all business segments, contributing to a decline in its stock price.
- AT&T (T): During its earnings call, AT&T revealed it expects to save $1.5 to $2 billion this year alone due to the Trump tax cuts. This shows how fiscal policies can help corporations mitigate the negative effects of tariffs.
- Big Tech: Companies like Microsoft (MSFT), Apple (AAPL), and Amazon (AMZN) continued to show strength. Despite some concerns over AWS growth rates, the overall positive performance in AI and cloud services boosted market confidence.
Other Major Developments
- Trump’s Trade Policy: Rumors emerged from the New York Times that Trump might visit China, with Commerce Secretary Wilbur Ross recruiting a delegation of CEOs. The administration’s approval for Nvidia to sell its H2 chips to China was interpreted as a positive sign of potential de-escalation. However, the U.S. Trade Representative stated that current high tariffs on countries like India and Brazil were not expected to be significantly reduced, indicating a continued hardline stance.
- Market Outlooks: Major firms presented divergent views. Morgan Stanley‘s Mike Wilson, while optimistic for the long term, warned of a potential 7-15% correction in Q3 due to seasonal weakness and tariff impacts. Conversely, others believed that Friday’s sell-off was a temporary blip, and the current strong corporate earnings and AI adoption would continue to drive the market higher.
Important Notice: This content is for informational purposes only and does not constitute financial advice. Stock market investing carries significant risks. Past performance is not indicative of future results. Conduct your own research and consult a qualified advisor.