Week of Market Whiplash

What a ride this week with neck snapping market whiplash. From the Federal Reserve’s carefully watched decision to a softer GDP print and a bruising stretch for tech stocks, investors barely had time to catch their breath. Geopolitical swings in oil prices added extra drama, turning what might have been a quiet late-July period into something far more memorable. Since lase Friday’s close the S&P 500 gained 78 points or 1.05%; the NASDAQ advanced 398 points or 1.59%, while the DOW added 538 points or 1.04%. With all of the major averages finishing in the black after opening on Monday to bruising losses. Here’s a look at the five biggest story lines that shaped trading from Monday through Friday.

Interest Rates

The Federal Reserve delivered its July decision on interest rates Wednesday and chose to hold the federal funds rate steady in the 3.50% to 3.75% range. The 9-3 vote stood out because three officials preferred a quarter-point hike, the most hawkish dissent in years. Chair Kevin Warsh emphasized the need to bring inflation back to 2% while noting that market yields were already doing some of the tightening work. Bond traders responded by pushing the 10-year Treasury yield higher and lifting the 30-year to levels not seen since 2007. It was a classic case of the Fed saying “we’re patient” while the bond market essentially replied, “we’ll handle this ourselves.”

Real GDP

Thursday brought the advance estimate for second-quarter real GDP, and the number landed softer than many expected after the PCE deflator came in hot at 6.3%. Real GDP grew at a 1.5% annualized rate, down from 2.1% in the first quarter and below the roughly 2.1% consensus forecast. Despite the anemic figure consumer spending was a solid 3.2%, final sales advanced 3.9%, while private fixed investment surged 7%. Other noteworthy items include a small reduction in the debt to GDP ratio. The report painted a picture of an economy that is expanding but not exactly sprinting.

Tech Stocks Snatched Victory

Tech stocks snatched victory after a rough start. With the NASDAQ finishing the week with a decent gain. Despite the strong finish, questions remain. Rising yields, near-term returns on heavy artificial-intelligence spending, and some forced selling from leveraged positions all piled on. After months of strong leadership from the biggest names in technology, the group suddenly looked tired. Profit-taking after earlier highs is one thing; a full-on rotation away from the former favorites feels like something else entirely.

War With Iran Heated Up

Oil prices swung hard after the war with Iran heated up yet again. Early in the week, hopes of a pause in hostilities sent crude tumbling, with Brent briefly settling near multi-week lows. Later reports of intercepted attacks and ongoing uncertainty around the Strait of Hormuz pushed prices higher again. Energy markets rarely stay quiet when headlines out of the Middle East heat up, and this week proved no exception. Traders spent the period trying to decide whether the geopolitical premium was shrinking or merely taking a temporary break.

Show Me The Money Q2

Despite the volatility and lingering questions regarding the sustainability of AI capex. The latest show me the money Q2 earnings and revenue update from FactSet. Revels some very positive data. With 68% of S&P 500 companies having reported so far a very solid 68% have beaten the earnings number. Earnings growth is running 31.4% above estimates and looking to shatter the old record of 23.2% set Q2 2020. The earnings growth rate is running a very impressive 47.4%. A second consecutive quarter of earnings growth above 20% and the seventh consecutive quarter of double-digit earnings growth for the index. Revenues are equally solid with growth running 14.1% so far this quarter.

What A Week Of Market Whiplash

By Friday the dust had not fully settled, but the week left a clear impression: policy caution, growth that is decent but not spectacular, red hot earnings and a technology sector that finally took a breather. Markets rarely move in a straight line, and this particular stretch served as a useful reminder that even summer can deliver plenty of action.

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