Week in Review: August 7, 2026

August 10, 2026

Recap & Commentary

Markets ended the week with the S&P 500 at a new record high, propelled by a general “risk on” attitude which prevailed for most of the week as investors focused on corporate earnings and Middle East developments. A pullback in energy prices and the weak June employment report reduced pressure on interest rates, which saw the 10-year Treasury yield end the week at 4.65%, down ~0.1% from the prior week.

In the Middle East, news emerged that Iran and Oman, which border the Strait of Hormuz, were working on a deal to reopen the vital passage. Though full details have not yet been released, it appears the two countries have agreed ships will enter the Strait on the Iranian side and exit on the Omani side. Still unclear is whether Iran plans to levy a toll on incoming ships or bar entry to US ships, as reported. Though the US is not participating directly in the talks, it has said the deal must be without any impediments. Oil fell by $8 per barrel over the course of the week on the news.

Investor sentiment surrounding AI-related stocks recovered, helped by multiple companies reporting strong quarterly results while providing encouraging forward guidance. Though the AI “trade” now extends far beyond the Mag 7 stocks, they remain a good measure of AI sentiment. For the week, the Mag 7 gained 4.7%.

Through Friday, 88% of S&P 500 companies had reported second quarter earnings, with 86% beating their consensus estimate. According to industry group FactSet, consolidated earnings growth is currently expected to be 50%, which would be the strongest since 2Q21. Excluding Alphabet and Amazon, whose earnings benefitted from large unrealized gains on equity securities, consolidated earnings growth is forecasted to be 32%.

Economic Commentary

Employment unexpectedly declined in July as nonfarm payrolls shed 23K jobs vs. the consensus forecast of 85K job additions. May and June figures were revised down by a combined 103K, suggesting labor markets faltered heading into the summer. Despite the job losses, unemployment fell from 4.2% to 4.1%, aided by a decline in the labor force participation rate, which fell to its lowest level since February 2021. Controlling for the decline, unemployment would have remained unchanged at 4.2%. In another sign of cooling labor market conditions, average hourly earnings growth slowed from 3.4% to 3.2%, the slowest pace since May 2021. In addition, job openings in June fell nearly 200K to 7.36M, a three-month low. On a positive note, job openings at firms with less than 50 employees increased 13% from a year ago.

Manufacturing activity grew at its fastest pace since May 2022, according to industry group Institute for Supply Management (ISM), benefitting from the AI buildout and demand in aerospace and defense. In a sign of increasing demand, new orders rose to a seven-month high. Hiring improved as companies responded to growing demand, with payrolls expanding at their fastest pace since August 2022.

The service sector also continued to expand, aided by strong new orders. Despite the growth, ISM said concerns still exist regarding mortgage and inflation rates, along with pricing impacts due to higher energy prices. Employment unexpectedly contracted in July after increasing in June for the first time in four months.

On Note

Water levels in parts of the US and Europe have reached critical levels. In the US, Lake Mead fell to its lowest level since the 1930s, threatening water supplies to millions. In Europe, key rivers have reached record lows, restricting cargo transportation, disrupting supply chains, and limiting electricity generation.

Market Indices (As of 08/7/2026)

• July Employment Report​

• JOLTs Job Openings​

• ISM Manufacturing​

• ISM Services​

• Trade Balance​

• Initial Jobless Claims​