Economic Update 8-04-2026

Economic data for the week included the U.S. Federal Reserve keeping interest rates on hold, U.S. GDP for Q2 growing at a pace slightly below trend, as well as moderate gains in personal income and spending, durable goods orders, and home prices. Consumer sentiment remained mixed.

Equities saw gains globally, with decent earnings and lack of Middle East escalation. Bonds were mixed, as yields rose. Commodities fell along with oil prices, coupled with a fading in Middle East tensions early in the week.

U.S. stocks rose for the week, with a continued focus on the Middle East, artificial intelligence investment, as well as the outcome and tone of the second Fed meeting under Kevin Warsh. The Nasdaq 100 had declined to just beyond the -10% correction territory, from a high point in early June, with the positive semiconductor momentum having reversed rather sharply, although the index recovered a bit later in the week.

By sector, gains were led by consumer discretionary up 6% (led by Amazon’s 17% rise), followed by communications (driven by Alphabet/Google and Comcast), financials, and consumer staples. On the other hand, utilities saw a decline of -4% for the week. Real estate also lost a few percent in keeping with rising interest rates.

The highest-profile week of earnings season was highlighted by closely-watched reports from hyperscalers and Mag 7 members Amazon, Apple, Meta, and Microsoft, each with divergent results. Meta fell sharply upon lower free cash flow and higher capex spending, while Microsoft was celebrated (up 17%) for cutting capex spending expectations but also robust growth from the Azure cloud business. Apple was punished by investors, despite decent results, following comments of higher memory costs accompanying weaker global inventories. While high demand for compute continues, there still remains a good deal of uncertainty about how much continued capex is appropriate or desirable when dipping that deeply into free cash flow.

With over 60% of S&P 500 firms now having reported Q2 earnings, per FactSet, blended year-over-year earnings growth lies at an eye-popping 47.4%, well above initial expectations for the mid-20s. Revenue growth remains markedly strong as well, at 14.1%. Leadership has come from energy, communications, and consumer discretionary, with the top 5 contributors to index results being Micron Technology, Alphabet, Chevron, Amazon, and Nvidia. After removing the ‘other income’ from equity investments, such as for Alphabet, Amazon and Microsoft, growth is still pegged at around 26%, with growth for the median S&P stock at 12%.

Foreign stocks saw gains of a few percent last week, in both developed and emerging markets, helped by a weaker U.S. dollar. Helpful were stronger-than-expected European earnings and GDP growth coming in a bit better than expected (quoted at 0.4% quarter over quarter, which annualizes to just above the U.S. GDP reading last week when measured on comparable terms). The Bank of England and Bank of Japan both met last week, and kept rates unchanged, although there some hints of later hikes if inflation pressures persist. This has moved key central banks more towards consensus, as all are battling inflation expectations, as opposed to less similar economic growth conditions. In EM, Chinese stocks gained as a ‘national team’ of state-sponsored investors added buying support in the midst of recent struggles and goals to enhance tech investment broadly. South Korea and Taiwan sold off sharply due to some apparent deleveraging and profit-taking following a sharply strong recent run, with some possible concerns over Chinese competition in the chip space.

Bonds ended mixed, with little-change for U.S. governments and investment-grade corporates in intermediate maturities, although long-term U.S. Treasuries sold off upon seeing their highest yields in two decades (e.g., 5.3% for the 30-year). Unhedged foreign bonds fared positively, with a selloff in the U.S. dollar.

Commodities fell back for the week, led by energy and precious metals, which offset a small gain in industrial metals. Crude oil fell by nearly -7% on net last week to $85/barrel, with an early drop on Monday with U.S.-Iran hostilities being paused continued through mid-week, after which prices inched back up a bit again.

Sources:  LSA Portfolio Analytics, American Association for Individual Investors (AAII), Associated Press, Barclays Capital, Bloomberg, Deutsche Bank, FactSet, Financial Times, Goldman Sachs, JPMorgan Asset Management, Kiplinger’s, Marketfield Asset Management, Minyanville, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, Payden & Rygel, PIMCO, Rafferty Capital Markets, LLC, Schroder’s, Standard & Poor’s, The Conference Board, Thomson Reuters, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wells Capital Management, Yahoo!, Zacks Investment Research.  Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return/excluding dividends.  Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.

The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness.  All information and opinions expressed are subject to change without notice.  Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product.