Stocks Break Out to New Highs as a Soft Jobs Report Cools Rate-Hike Fears

Stocks Break Out to New Highs as a Soft Jobs Report Cools Rate-Hike Fears

Stocks rallied sharply last week, with the S&P 500 climbing 3.6% to a record close of 7,757.64, its first close above 7,700. The Nasdaq Composite jumped 5.2% to 26,690.62 as chip stocks bounced back, and the Dow added 3.0% to 54,036.93. It was the second straight weekly gain and the S&P 500’s first new high after a roughly six-week consolidation.

Jobs Report

The catalyst was Friday’s July jobs report, which showed the economy lost 23,000 jobs against expectations for a gain of 80,000, while unemployment ticked down as people left the workforce. Markets read the weak print as reducing the odds the Federal Reserve will need to raise rates in the near term, a notable shift after three Fed officials had dissented in favor of a hike just weeks earlier.

Treasury Yields

Treasury yields fell as rate-hike expectations receded: the 10-year yield eased to 4.65% from 4.75% at the end of July, and the 30-year slipped to 5.19% from 5.27%. The U.S. Dollar Index softened, while the Euro touched a seven-week high. Oil prices continued to retreat, with WTI down 7.7% and Brent down 7.3% on the month.

Sector Performance

Technology led sector performance, up 7.2% for the week, followed by Materials and Industrials, while Energy lagged despite remaining the strongest sector year-to-date, up 30.4%. Internationally, developed markets in the MSCI EAFE Index gained 2.2% for the week, while emerging markets slipped 0.4%.

July Performance

This rebound follows a genuinely turbulent July. Corporate earnings raised fresh questions about whether hundreds of billions in AI infrastructure spending by hyperscalers will translate into profits, contributing to a 24% pullback in South Korea’s KOSPI 200 as global semiconductor names corrected. A new open-weight model from China’s Moonshot AI, alongside a Fitch report flagging major credit risk across the AI financing ecosystem, added to the uncertainty.

July also saw the 30-year Treasury yield touch a 19-year high near 5.28% and Brent crude briefly top $100 as the Iran conflict expanded to threaten shipping through both the Strait of Hormuz and the Bab al-Mandeb Strait. The Fed held rates steady at 3.50%-3.75% in a divided 9-3 vote, and new tariffs under a different legal authority kept trade policy in flux after the Supreme Court struck down last year’s approach.

The past two weeks are a useful reminder that markets can move quickly in both directions on a single data point, whether a jobs report or an AI earnings call. Staying diversified across sectors and asset classes, rather than reacting to any one headline, remains the more reliable path to long-term goals.The chart below shows the federal funds rate over the past two decades, including where markets now expect policy to head after last week’s weak jobs report reduced the odds of a near-term hike.

As Always

We’d like to leave you with the final line we’ve used since we started these commentaries back at the very height of market volatility in March 2020. Always remember that we create financial/investment plans not for the easy times, but to prepare for the tough ones.