Economic data included increases in ISM manufacturing and services indexes. The monthly employment situation report disappointed, with far slower growth than expected, although the unemployment rate also declined.

Equities rose globally last week, helped by decent economic data and better news from the Middle East. Bonds gained as yields fell back globally. Commodities were mixed, with gains in precious metals offset by a decline in energy.

U.S. stocks rose strongly all week, with renewed signs of Middle East de-escalation and Hormuz reopening, sentiment improving again for AI, decent economic data and earnings reports, as well as Friday’s jobs report. The latter showed negative payroll growth, implying a lower probability of more hawkish Fed policy, in another example of a negative turned into a positive. By sector, a strong rebound in technology (7%, across a variety of firms but largely Palantir, up 40%) led the way, followed by materials (6%), industrials, and consumer discretionary, while energy lagged (down -3%) along with a pullback in energy prices. Real estate was little-changed for the week.

Per FactSet, 88% of S&P 500 firms have now reported Q2 earnings, 86% of which represented a positive earnings surprise, and 76% a positive revenue surprise. The blended earnings growth rate year-over-year has reached 50.4%, roughly double the growth rate expected as recently as June 30. Revenue growth has also reached 15.0%, well above the 10-year growth rate of 6.6%. Of course, the earnings growth pace has been driven by Alphabet and Amazon, without which, the rate would be 32.0%, still impressive by any standard. While early yet, Q3 earnings growth is expected to remain robust, at 27.4%, led by energy, communications, and technology.

Foreign stocks fared positively as well last week, with Japan outperforming the U.S. and leading all regions, followed by Europe and emerging markets. European economic data exceeded expectations, while, in Japan, more information has come out about the substantial intervention to strengthen the yen the prior week. That was strongest action since the 2011 Fukushima disaster, and done by both Japanese officials, as well as the U.S., which was unique in itself but also being done in a manner of not involving the dollar but selling euro in favor of yen. In EM, technology-related gains in Taiwan and China were only eclipsed by South Africa, up 10% in line with gold mining sentiment. The South Korean market in particular has experienced an exceptional bout of volatility, down -35% from highs on Jun. 22 through Jul. 29, before rebounding in the double-digits again since. Those stocks are obviously tech-heavy, driven by perceived supply shortages in light of changing expectations from AI token usage and demand. The Korean market has been notoriously volatile in recent decades, not unrelated to its concentration, 50% of which is tied to memory companies, which is a volatile and cyclical sub-sector in its own right, and prone to sharp changes in sentiment toward supply/demand balances. Competition from open-source Chinese AI models is the latest potential threat to the need for compute, which is the most recent wrinkle adding uncertainty to the length of the trend.

Bonds gained across the board, as U.S. Treasury yields fell, with hopes for an ease of inflation and a weaker jobs report keeping the Fed on hold, with corporates outperforming governments slightly. Foreign bonds saw higher gains, helped on the unhedged side by a slightly weaker U.S. dollar.

Commodities were mixed last week, with sharp gains in precious metals as gold saw an uptick in demand, followed by positive returns in agriculture and industrial metals, offset by a sharp drop in energy. Crude oil prices declined by -9% last week to $77/barrel, along with the easing of Middle East tensions, and serving as a continuation of the recent news-driven trading range of roughly $70-100.

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.