The Rally Rolls On

Last Week

Let the good times roll! It was an across-the-board rally in the financial markets, with the benchmark S&P 500 adding 3.6%, the Nasdaq Composite surging 5.2%, and the Russell 2000 gaining 3.5%. Bond investors also enjoyed the week, as the yield on the 10-year Treasury slipped 9 basis points to 4.66%. Strong earnings reports and a soft employment number provided the backdrop for the rally. Tensions in the Middle East remained high, but with no escalation of attacks, the price of crude oil retreated over 6% to close under $80 per barrel. Oil & Gas sector stocks slid 3.2%, while most other sectors performed well and advancing issues outnumbered declining issues by a factor of 1.7-1. The Dollar was flat, while Gold jumped 7%.

On the earnings reports, the blended S&P 500 year-over-year earnings growth increased to 50.4%! Much of the spike has come from non-operating gains from Alphabet and Amazon, but even excluding those gains, the growth rate would be 34.0%. As Eric Kuby recently told Reuters, “Corporate profits have been spectacular,” with earnings growth “explosive in mega-cap technology and specific sectors, but it’s strong across the board.” SpaceX (SPCX) captured headlines and saw its share price jump by over 20% after reporting results that easily exceeded forecasts.

The employment report provided a boost to our bond market as U.S. nonfarm payrolls declined by 23K in July, missing the +88K consensus and erasing the 20K increase in June. The odds of a September interest rate increase diminished following that report.

On the Chicago Sports Scene, both the White Sox and Cubs would make the MLB playoffs if the season ended today. Bear Down! The Monsters of the Midway will kick off the NFL season this weekend with their preseason opener against the Browns at Soldier Field.

This Week

Inflation data will be in focus with the Consumer Price Index for July coming out on Wednesday, and the Producer Price Index on Thursday. Economists expect core CPI inflation to ease to 2.5%, while the reports will offer investors fresh clues on the Federal Reserve’s policy path after the stronger-than-expected July jobs report.

Earnings season will reach its global innings with Applied Materials (AMAT) reporting Thursday, providing investors with additional color on semiconductor equipment demand and AI-related capital spending.

The stocks mentioned above may be holdings in our mutual funds. For more information, please visit www.nsinvest.com.