The Dow Jones Industrial Average rose 0.5% last week, but the gain rested almost entirely on megacap stocks led by Microsoft. Small-caps, gold, bitcoin and biotech stocks all retreated, while Treasury yields jumped Friday after Fed Chair Kevin Warsh's Jackson Hole speech pushed the odds of a rate hike sharply higher.
Megacaps carry the Dow
The Dow Jones Industrial Average rose 0.5% last week, even after Friday's broad losses cut into the week's gains. The S&P 500 index matched that 0.5% advance, while the Nasdaq composite climbed 0.85%. Nearly all of the advance traces back to megacap stocks: every Magnificent Seven company except Tesla rose, led by Microsoft, which was among the many stocks clearing a buy point alongside Palantir Technologies.
Software names were the week's standout group, buoyed by strong earnings from CrowdStrike, Salesforce, Okta, Elastic and Workday. Nvidia broke out Thursday on booming earnings and guidance, but slumped Friday, giving back some of its weekly gain without lifting the broader chip and AI-hardware group.
Small-caps, gold and bitcoin retreat
Small-cap stocks underperformed the megacap-led rally. The Russell 2000 fell out of favor with investors, and it slid 1.5% for the week and dropped below its 50-day moving average for the first time in a month, almost all of the decline coming on Friday.
Gold miners sold off the same day as the metal itself retreated, cutting much of the past two weeks' gains, while bitcoin sank Friday though it held onto most of its recent spike. Biotech and drug stocks also had a rough week, with Eli Lilly moving from a buy zone into a sell zone.
Warsh's Jackson Hole speech lifts rate-hike odds
The 10-year Treasury yield fell two basis points for the week to 4.72%, then popped five basis points on Friday as Fed Chair Kevin Warsh's Jackson Hole speech restored his credibility. That shift also raised the odds of a Fed rate hike. The odds of a hike jumped to roughly 58% from about 35% on Thursday, while the two-year Treasury yield, more closely tied to the Fed's rate path, spiked nearly 12 basis points on the day and for the week to 4.35%.
Overnight, the U.S. attacked two Iranian launchers set to send mines into the Strait of Hormuz, the first known American strikes inside Iran since late July. Dow Jones futures resume trading Sunday evening, along with S&P 500 and Nasdaq futures.
Source: Investor's Business Daily
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