Tariff Relief, Dovish Fed, and Tech Strength Power Markets Higher

Market Overview

U.S. equities rebounded in the first full week of August, erasing last week’s losses with solid gains across large caps (S&P 500 +2.4%) and small caps (Russell 2000 +2.3%). Dip buying, dovish Federal Reserve commentary, and targeted tariff carve-outs for U.S.-based semiconductor investments fueled optimism. Technology led the S&P 500 sectors (+4.3%), with value and growth styles both advancing in large caps. . Apple’s $100 billion U.S. manufacturing pledge and Palantir’s upbeat revenue guidance boosted the tech and AI trade. Internationally, European stocks rallied on Ukraine ceasefire hopes and resilient economic data, while Japanese equities surged on reduced U.S. auto tariffs. The U.S. dollar weakened, gold rose, and crude oil fell on easing supply concerns.

Federal Reserve Insights and Economic Roundup

Federal Reserve officials struck a dovish tone, strengthening market expectations for rate cuts despite mixed economic data. The ISM services report showed slowing activity, persistent price pressures, and softening employment trends. Treasury yields moved higher, with weak demand across 3-, 10-, and 30-year auctions highlighting investor hesitancy at current levels. Abroad, the Bank of England cut rates to 4% amid a divided committee, citing a weakening job market and persistent inflation risks — a dynamic echoing U.S. stagflation concerns. In U.S. labor data, continuing claims hit their highest level since mid-2021.

The Week Ahead

Monday – No major economic releases scheduled.

Tuesday – NFIB Small Business Optimism (Jul), Real Average Earnings (Jul), Headline & Core CPI (Jul), Federal Budget Balance (Jul).

Wednesday – MBA Mortgage Applications (Aug 8).

Thursday – Headline & Core PPI (Jul), Initial Jobless Claims (Aug 9), Continuing Claims (Aug 2).

Friday – Retail Sales (Jul), Empire Manufacturing (Aug), Import & Export Price Indexes (Jul), Industrial & Manufacturing Production (Jul), Capacity Utilization (Jul), Business Inventories (Jun), University of Michigan Consumer Sentiment (Aug prelim), Net Long-term & Total Net TIC Flows (Jun).