Updated 8/31/2026

Our Perspective on the Markets Last Week

Equity markets finished modestly higher last week as investors weighed several major technology earnings reports, firm inflation data, and renewed uncertainty surrounding interest rates. The price change of select U.S. indexes for the week was: S&P 500 (+0.49%), Dow Jones Industrial Average (+0.53%), and Nasdaq (+0.85%). The yield on the 10-year Treasury note declined 0.01 percentage points to 4.73%.

Monday and Tuesday: Technology and semiconductor stocks initially came under pressure ahead of Nvidia’s earnings, while rising tensions between the United States and Iran pushed oil prices higher. Stocks rebounded Tuesday as oil prices and Treasury yields declined. Consumer confidence fell to a seven-month low, while new-home sales declined 10.5% to their weakest pace since January.

Wednesday: Markets were mostly unchanged following another firm inflation report. Headline PCE inflation was 3.7% from a year earlier, while core inflation measured 3.3%. Second-quarter economic growth was revised to 1.5%, and durable-goods orders rose 1.1%.

Thursday: Nvidia delivered exceptional results after the market closed on Wednesday, with quarterly revenue increasing 106% from a year earlier to $96.2 billion. Management projected approximately $108 billion in revenue for the current quarter, helping Nvidia shares gain 8.74%.

The strongest reactions came from software. Salesforce surged 22.6% and CrowdStrike gained 20.5% following their own earnings reports and favorable outlooks. The software group rose 7.74% for the day, helping technology lift the major indexes despite mixed results across the broader market.

Friday: Stocks reversed course after Federal Reserve Chair Kevin Warsh indicated that inflation remained too high and further rate increases could be necessary. Nvidia declined 4.57%, surrendering approximately 57% of Thursday’s post-earnings gain.

The week’s leadership remained highly concentrated. The Magnificent Seven ETF gained 2.66%, led by Microsoft, Meta, Apple, and Amazon. Microsoft, Meta, Apple, Amazon, and Nvidia contributed an estimated 0.90 percentage points to the S&P 500’s return, nearly twice the index’s actual 0.49% gain. Weakness elsewhere offset approximately half of their contribution.

Eight of the eleven major sectors of the S&P 500 declined with the equal-weighted large caps (-0.44%), the small caps (-1.40%), and the midcaps (-1.32%) all ending the week lower. Communication services, technology, and financials were the only sectors to advance, while health care, industrials, and energy were the weakest performers.

Semiconductors declined 1.30% for the week, while memory stocks fell 3.21%. Nvidia finished only 1.32% higher despite its outstanding report and Thursday’s 8.74% surge. That muted follow-through reinforced the broader message of the week: the major indexes were supported by a handful of mega-cap stocks, but investors showed little conviction beyond that narrow group.

Looking Ahead

Attention now turns to Friday’s August employment report. Economists expect payrolls to increase by approximately 55,000 to 60,000 following July’s decline, with the unemployment rate holding near 4.1% and wages rising 0.3%. Investors will also be watching labor-force participation and revisions to prior months. A stronger employment or wage reading could support another interest-rate increase, while another weak payroll report would raise concerns about the underlying economy.

Other economic releases include job openings, private-sector employment, weekly unemployment claims, and the ISM manufacturing and services indexes. Broadcom headlines an active earnings calendar that also includes Dell Technologies, Palo Alto Networks, Hewlett Packard Enterprise, Snowflake, Lululemon, and Zscaler. These reports should provide additional insight into AI infrastructure spending, cybersecurity demand, and consumer activity.

Outside of earnings, renewed fighting between the United States and Iran has pushed oil prices above $90 per barrel. Markets will be watching for further escalation, additional disruptions to tanker traffic through the Strait of Hormuz, or signs of progress in diplomatic efforts to reopen the waterway. Further restrictions on oil flows could add to inflation concerns and place upward pressure on Treasury yields.

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Probability of an interest rate change at next FOMC meeting:

DECREASE -25 bps
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No Change
%
INCREASE +25 bps
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Current Target Rate is 3.50% - 3.75%

Select Economic Data Releases

*Colored icon denotes a new data release.
Gross Domestic Product

The first revision to second-quarter GDP left growth unchanged at a 1.5% annualized rate, down from 2.1% in the first quarter, as stronger consumer spending was offset by higher imports.  First-quarter GDP was revised higher to an annualized 2.1%, although the increase was driven primarily by lower imports while consumer spending was revised down sharply, pointing to softer underlying economic momentum..  The final revision to fourth quarter GDP showed growth of just 0.5%, reflecting a notable slowdown in economic momentum.  For the full year 2025, GDP grew by 2.1%.  U.S. GDP grew at a strong 4.4% annualized rate in the third quarter of 2025, marking the fastest pace of growth in about two years, led by solid consumer spending, exports, investment, and government outlays.  The final estimate of Q2 GDP came in at an annualized rate of 3.8%, well above the initial 3.0% estimate.  The final revision showed gross domestic product shrank at a revised -0.5% annual rate in the first quarter.  More than the previous revision of -0.2%.  The final revision of Q4 2024 GDP was raised a tenth of a percent to a 2.4% annualized pace.  Q3 GDP showed the U.S. economy expanded at a frothy 3.1% annual pace in the third quarter, revised up from 2.8%.  Q2 GDP grew at a 3.0% annual pace.  Q1 2024GDP grew at a 1.4% pace due largely to much slower growth in consumer spending.  The final revision of Q4 GDP rose to 3.4%.  U.S. GDP grew at 4.9% annual pace in the third quarter.  

Employment Data

The August employment report comes this week.  The economy lost 23K jobs in July, while May was revised down to 129K jobs gained and June payroll gains were revised down to 57K. Although unemployment declined to 4.1%, the drop largely reflected workers leaving the labor force, providing further evidence that labor-market momentum has weakened. The April employment report came in stronger than expected, with nonfarm payrolls increasing by 115K and the unemployment rate holding steady at 4.3%.  In addition, March payrolls were revised higher, reinforcing the view that the labor market remains resilient despite signs of broader economic moderation.  The March nonfarm job gains were revised up to 185K from 178K.  The unemployment rate held near 4.3%, suggesting the labor market remains stable overall.  The U.S. labor market showed modest weakness in February, with nonfarm payrolls declining by 92K jobs, while the unemployment rate edged up to 4.4%. Despite the softer headline, average hourly earnings rose 0.4% for the month and 3.8% from a year earlier, indicating wage growth remains relatively firm.  The U.S. added 130K jobs in January, while the unemployment rate held steady at 4.3%, indicating continued but moderate labor market growth.  The economy added approximately 50K jobs in December, noticeably less than the anticipated addition of 60K, but the unemployment rate unexpectedly decreased to 4.4%, suggesting that while hiring has slowed, labor conditions remain relatively stable.  The November U.S. nonfarm payrolls report showed a modest rebound in hiring with about 64K jobs added, beating expectations after an unusually large October decline of -105K, primarily driven by steep federal government job losses tied to the prolonged government shutdown.  The unemployment rate ticked up to around 4.6%, its highest in several years, signaling continued cooling in the labor market. The September nonfarm payrolls increased by 119K, while the unemployment rate rose to 4.4%, signaling modest job gains amid a cooling labor market.  Employers added a mere 22K jobs in August.  July nonfarm payrolls rose just 73K while June and May were revised significantly lower.  

Retail Data

Retail sales fell 0.6% in July, their first monthly decline in nine months, while the closely watched control group decreased 0.4%. Some of the weakness reflected Amazon moving Prime Day from July to June, making the monthly decline less concerning than the headline suggested, although the report still pointed to some moderation in consumer spending. June retail sales rose a modest 0.2% from May and 6.7% from a year earlier, while sales excluding automobiles and gasoline increased 0.4%, pointing to continued but uneven consumer spending.  Retail sales rose a stronger-than-expected 0.9% in May, while sales excluding automobiles increased 0.7%, indicating that consumer spending remains resilient despite persistent inflation concerns.   Retail receipts rose by a seasonally adjusted 0.5% in April, but mostly due to increased spending on gas.  Retail sales surged 1.7% in March 2026, exceeding forecasts, driven heavily by a 15.5% spike in gasoline prices due to the Iran conflict.  Retail sales rose modestly in February, increasing approximately 0.6% and coming in generally in line with expectations after falling -0.2% in January.  U.S. retail sales were flat in December (0.0% month-over-month), missing expectations and signaling softer consumer demand as households pulled back on big-ticket purchases. Year-over-year sales were up about 2.4%.  November retail sales rose about 0.6 % month-over-month, rebounding from a revised dip in October and topping forecasts.  Retail sales in the US flattened in October from September 2025, following a downwardly revised 0.1% rise in the previous period.  August retail sales rose 0.6% from July, exceeding expectations and underscoring consumer resilience.  Omitting autos and gasoline sales, a better way to measure trends in retail spending, rose an even stronger 0.7%.  

Housing Data

New-home sales fell 10.5% in July to an annualized rate of 607,000, their lowest level since January, as elevated mortgage rates weighed on demand. The supply of unsold homes increased to 9.6 months, while the median new-home price declined 2.3% from June and the broader FHFA House Price Index rose a modest 2.1% from a year earlier.  Housing starts in June jumped 19.0% largely because of increased multifamily construction, while building permits fell 3.0%.  New home sales unexpectedly declined 7.3% in May to an annualized rate of 580,000, while the supply of homes for sale increased to 496,000.  Existing home sales rose 3.2% in May to an annualized pace of 4.17M units, the fastest pace since December, while the median home price increased 1.3% from a year earlier to a record $429,300 for the month of May.  New home sales fell 6.9% in April to an annualized rate of 635K units, reflecting some cooling in housing demand as higher mortgage rates and affordability challenges continued to weigh on buyers.  Existing-home sales increased by 0.2% in April.  Despite higher mortgage rates, new home sales rose in March to a seasonally adjusted annual rate of 682K, increasing 7.4% from the prior month and slightly above year-ago levels.  New home sales rose 1.6% in February to an annualized pace of roughly ~662K units, while pending home sales declined about -0.8%.   Existing-home sales increased by 1.7% in February 2026. For the month, sales rose in the Midwest, South and West, but fell in the Northeast.  Year-over-year sales rose in the South and declined in the Northeast, Midwest and West.  December pending home sales report showed a notable pullback in the U.S. housing market, with the National Association of Realtors’ Pending Home Sales Index sliding 9.3% month-over-month to an index level of 71.8, the largest drop in contract activity since early 2020, and down about 3% from a year ago. New single-family home sales were essentially flat in October at about 737K units annualized, just a touch below September’s 738K but still roughly 19% higher than a year ago, suggesting steady builder demand even as closings level off.  Existing-home sales climbed about 5% to roughly 4.35M units, highlighting stronger resale market activity alongside cautious new construction. 

Leading Indicators

The Conference Board’s Leading Economic Index rose 0.2% in July, its fourth gain in six months, lifting its six-month growth rate into positive territory for the first time in more than four years.  The Conference Board's LEI declined 0.1% in June, signaling moderation in economic activity.  The Conference Board's Leading Economic Index (LEI) rose 0.2% in May.  The Conference Board’s Leading Economic Index rose slightly by 0.1% in April 2026 to 97.4 (2016=100), following a 0.6% decline in March. The LEI rose 0.3% in February.  The U.S. Leading Economic Index (LEI) fell by -0.2% in December, following the -0.3% decline in November.  The U.S. Leading Economic Index (LEI) fell by -0.5% in August.  The Conference Board Leading Economic Index (LEI) for the US was revised up to a 0.1% increase in July 2025 to 98.7 (2016=100), after declining by -0.3% in June.  The LEI fell by -2.7% over the six months between January and July 2025, a faster rate of decline than its –1.0% contraction over the previous six-month period (July 2024 to January 2025).  The Conference Board Leading Economic Index® (LEI) for the US ticked down by -0.1% in May 2025 to 99.0 (2016=100), after declining by -1.4% in April (revised downward from –1.0% originally reported).  The Leading Economic Index (LEI) for the U.S. declined by -0.7% in March to 100.5 (2016=100). The LEI in February fell by -0.2% after an upward revision in January from -0.3% to -0.2%.  The Leading Economic Indicators index rose 0.1% in December 2024 (upwardly revised from an initially estimated decline of 0.1%).  November LEI was revised up +0.4% in November. The LEI declined by -1.3% over the second half of 2024, slightly less than its -1.7% decline over the first half of 2024.  The leading index dropped -0.3% in October, largely because of higher jobless claims, fewer building permits and a decline in manufacturing orders.  

Inflation

The PCE Price Index rose 0.2% in July and 3.7% from a year earlier, while core PCE increased 0.2% for the month and 3.3% year over year. With both annual measures still well above the Federal Reserve’s 2% target, the report showed little progress toward lower inflation.  Consumer prices rose 0.1% in July and 3.4% from a year earlier, while core inflation increased 0.2% for the month and 2.5% year over year. Producer prices were unchanged at the headline level, largely validating the CPI report and easing concerns about an immediate interest-rate increase, although wholesale inflation remained 4.7% above its year-earlier level.  The PCE inflation index increased 3.7% from one year earlier in June, while core PCE inflation rose 3.3%.  Inflation data was encouraging in June, as consumer prices fell 0.4% and core prices were unchanged, while producer prices declined 0.3% and the underlying measure excluding food, energy, and trade services rose just 0.1%.  The Federal Reserve's preferred inflation measure, the Personal Consumption Expenditures (PCE) Price Index, rose 0.4% in May and 4.1% from a year earlier, while core PCE increased 0.3% for the month and 3.4% year-over-year, indicating inflation remains above the Fed's long-term target.  Consumer prices rose 0.5% in May and 4.2% from a year earlier, though core inflation remained relatively contained at 0.2% and 2.9%, respectively.  Meanwhile, producer prices increased 0.4% in May and 3.8% over the prior year, as higher energy costs continued to pressure businesses.  The PCE Index, rose 0.4% in April, pushing the annual inflation rate to 3.6%, the highest level in nearly three years. The report reinforced concerns that inflation remains a significant risk and may be trending higher again.  U.S. inflation rate leaped to a nearly three-year high of 3.8% in April and the producer price index jumped 1.4%, mostly due to higher oil prices.  The Federal Reserve’s preferred inflation measure, the core PCE index, rose approximately 0.3% in March and 3.5% year-over-year, indicating that inflation remains elevated and above the Fed’s 2.0% target.  Producer prices rose 0.5% in March due to surging oil prices tied to the Iran war, but aside from energy, the increases in the cost of other goods and services were surprisingly tame.  March inflation data was mixed but remained elevated, with core PCE rising 0.4% month-over-month and CPI increasing 0.9% for the month. The Producer Price Index report showed wholesale prices rising 0.6% in February, a stronger-than-expected increase that reinforced concerns that inflation progress may remain uneven. The February Consumer Price Index (CPI) rose 0.4% on the month and 3.2% from a year earlier, while core CPI increased 0.3% month-over-month and 3.8% year-over-year, indicating inflation pressures remain persistent.  Similarly, the latest Personal Consumption Expenditures (PCE) price index showed headline prices rising 0.3% for the month and 2.5% year-over-year, with core PCE up 0.4% on the month and 2.8% annually, reinforcing expectations that Federal Reserve rate cuts may be more gradual.  

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