By Panos Mourdoukoutas
U.S. stocks roared back after retreating for a week. The S&P 500 Index edged closer to a record closing this week, while the Nasdaq hit a new high, driven by bargain hunting, hopes for interest rate cuts following last week’s weak labor market data, and relief over the expiration of the tariff deadline.
Meanwhile, positive corporate headlines and a couple of Initial Public Offerings (IPOs) kept traders and investors excited throughout the week.
It was another great summer week for the bulls, as bears headed for the hills.
The S&P 500 closed at 6,389 on Aug. 8, up by 2.43 percent for the week, near the high of the day, and shy of a record.
The Dow Jones Industrial Average gained 1.35 percent to end at 44,175.
The technology-heavy Nasdaq Composite Index fared the best, soaring by 3.87 percent to 21,450, to a new record, while the Russell 2000 was up by 2.38 percent.
Market volatility, as measured by the CBOE Volatility Index (VIX), dropped by 25.6 percent, a sharp reversal from the previous week’s 36 percent jump.
Stocks opened higher on Aug. 4, rebounding from the previous week’s sell-off amid hopes of a Federal Reserve interest rate cut following the weak June labor market report and sharp revisions to data from the past two months.
Once again, bad news turned into good news as bond yields stabilized and bargain hunters stepped in, scooping up shares that had sold off the previous week.
Meanwhile, news that CommScope would sell its connectivity and cable solutions business to Amphenol for $10.5 billion boosted the stocks of both companies.
The positive sentiment carried over to Aug. 5, lifted by solid earnings from Palantir, which rose by 8 percent in early trading.
McDonald’s also reported solid earnings, with same-store sales jumping by 3.8 percent and beating analyst estimates, indicating strong spending among low-income families.
However, early gains gave way to losses following a disappointing reading on the service sector of the economy.
The ISM services PMI unexpectedly fell to 50.1 in July from 50.8 in June, missing forecasts of 51.5, because of weakness in business activity and production, as well as a slowdown in new orders and inventory building.
A reading close to 50 is a sign that the service sector, which accounts for nearly two-thirds of the economy, is stagnating, adding to concerns about the direction of the economy.
Bargain hunters returned on Aug. 6, driving major indexes higher, led by Apple following news of a Sept. 9 iPhone 17 launch, and a $100 billion investment in the United States to produce certain iPhone parts.
The positive sentiment carried throughout the rest of the week, boosted by strong earnings from Expedia and DoorDash, and the expiration of the tariff deadline on Aug. 7, which marked the end of an uncertain period for trade and the economy.
Meanwhile, the debut of Firefly Aerospace on the Nasdaq, which ended the week well above its IPO price, also buoyed the market bulls.
Still, a few popular stocks missed out on the rally and moved in the opposite direction.
One was Eli Lilly, which fell by 17.93 percent for the week following its GLP-1 trial results, giving back some of the gains it had made over the past five years.
Another was Trading Desk, which fell by 37 percent for the week after disappointing earnings and the surprising departure of its chief financial officer.
A third loser was Twilio, which plummeted 18.56 percent on disappointing earnings.
Looking ahead to next week, markets will meet a host of key data on the economy.
The Bureau of Labor Statistics will release the Consumer Price Index (CPI), a measure of consumer inflation, on Aug. 12, and the Producer Price Index (PPI), a measure of wholesale inflation, on Aug. 14.
In addition, the Census Bureau will release data on retail sales, a gauge of consumer spending, which accounts for nearly two-thirds of GDP.
Traders and investors are closely watching these reports, as they could provide some clarity on the impact of tariffs on the economy and set the pace for the next move by the Federal Reserve in its September meeting.
