The S&P 500 heads into a week built around the July jobs report and a wave of corporate earnings, sitting 1.6% below its June 2 record high after the Federal Reserve's Wednesday decision to hold rates steady. Investors are weighing contrasting megacap results and a fresh inflation reading against payrolls data due August 7.
The S&P 500 gained for the week despite sizable daily swings and remains up over 9% in 2026. Strong corporate profit growth has supported the index, but concerns that some areas of the AI trade have become overheated have weighed on semiconductor shares, which retreated in July. A re-escalation in the U.S. war with Iran has added pressure, pushing oil prices and Treasury yields higher on renewed inflation worries.
Fed's hawkish hold leaves rate path unclear
Three of the Federal Reserve's 12 policymakers dissented from Wednesday's vote in favor of a rate hike, and new Fed Chair Kevin Warsh's press conference — his second as chair — left investors uncertain about how he intends to bring inflation down to 2%. Data released Thursday showed the core PCE Price Index rising 3.3% year on year in June.
Jim Baird, chief investment officer with Plante Moran Financial Advisors, described the new leadership as a meaningful shift in mindset around forward guidance and communication, adding that key economic releases would likely see the potential for a little bit more volatility because there is now a little less clarity about where policy is heading. Fed funds futures as of Friday pointed to a 64% chance of a rate increase at the Fed's September meeting, according to LSEG data.
Megacap earnings split the AI trade
Microsoft shares posted their biggest single-day percentage jump since 2008 after an upbeat cloud-growth forecast, while Meta Platforms tumbled after reporting a plunge in cash flow. Art Hogan, chief market strategist at B. Riley Wealth, said: "The market has kind of been held hostage to the price of oil", with the 10-year Treasury yield also climbing recently.
More than one-quarter of the S&P 500 is due to report next week, including Eli Lilly, Advanced Micro Devices, Caterpillar, Palantir and Merck. SpaceX posts its first quarterly report as a public company on Tuesday. Including firms that have already reported, S&P 500 earnings are on pace to rise 29.3% from a year ago on an adjusted basis, according to LSEG IBES data.
Payrolls report looms over rate bets
The nonfarm payrolls report for July is expected to show an increase of 83,000 jobs and an unemployment rate of 4.3%, according to a Reuters poll. A significantly higher reading could stoke concern about an overheated economy and firm up bets on further tightening, given the Fed's inflation focus.
Source: Investing.com
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