The main equity indexes rebounded from Thursday’s sharp sell-off, but all three were down for the week. The trend for Treasury yields across the maturity spectrum reflects growing concerns about persistent inflation, government debt and how the Federal Reserve will respond.
At the closing bell on Friday, the blue-chip Dow Jones Industrial Average had added 1.0% to 53,277, but still finished the week lower by 0.8%. The tech-heavy Nasdaq Composite was up 0.4% to 26,180, narrowing its weekly decline to 2.1%. The S&P 500 rose 0.4% to 7,674, though the broad-based index lost 1.4% this week.
“It’s not surprising that the S&P 500 pulled back modestly after its early-August breakout to new record highs,” observes Daniel Skelly, head of research and strategy for Morgan Stanley Wealth Management. “But the move may have taken on additional significance in some circles, given the role tech softness played.”
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Skelly notes that although we may see more volatility in the near term due to seasonal factors, “the longer-term AI capex story remains positive.”
Meanwhile, the bond market continues to adjust to a Treasury Department plan announced on Wednesday to increase buybacks of longer-dated debt.
The yield on the 2-year Treasury was up to 4.232% vs 4.185% on Thursday. The 2-year was at 4.171% last Friday. The 10-year Treasury ticked up to 4.736% from 4.698% on Thursday and 4.696% a week ago. The 30-year Treasury climbed to 5.274%, up from 5.237% yesterday and 5.266% at the end of last week.
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Fed Chair Kevin Warsh will deliver the keynote address at the Kansas City Fed’s annual Jackson Hole Economic Symposium on Friday, August 28, the highlight of next week’s economic calendar.
According to University of Pennsylvania Wharton School Professor Patrick Harker, a former president of the Philadelphia Fed, “Warsh is going to have to address the elephant in the room, which is inflation.”
Nvidia’s growth is about supply and demand
Nvidia (NVDA, -1.0%) will offer fresh evidence for Skelly and others who see more support for stocks from AI capex when the chipmaker takes another turn on the earnings calendar after the closing bell next Wednesday.
Wall Street expects management to report year-over-year earnings growth of 99.0% on annual revenue growth of 97.0%. “Notably,” Susquehanna analyst Christopher Rolland writes in a preview of Nvidia’s report, “AI demand is supported by increasing hyperscale capex plans. The top five hyperscalers are now expected to nearly double capex spend in 2026.”
Rolland also highlights a constructive outlook for 2027, when capex is expected to exceed $1 trillion. “We still view Nvidia as having one of the largest opportunity sets ahead,” the analyst concludes.
Indeed, as Louis Navellier of Navellier & Associates writes, “Due to the anticipation of Nvidia’s spectacular quarterly results, plus the fact that the financial media will be all excited about their annual trip to Jackson Hole for the annual Kansas City Fed Conference, investor optimism is expected to be sky-high next week.”
HOOD tops the S&P 500
Robinhood Markets (HOOD, +12.9%) led S&P 500 stocks higher on Friday after President Donald Trump advocated for passage of federal legislation that would establish a regulatory framework for digital assets such as bitcoin during a White House summit on Thursday.
“We need Congress to take the next step by passing the Clarity Act — a fair version of the Clarity Act,” Trump said in remarks prepared for the event. “It’s a very, very powerful structured legislation which will keep us ahead of China, keep us ahead of everyone else, will open the door to the next wave of innovations and innovators.”
Crypto trading platform Coinbase Global (COIN, +8.2%) and bitcoin treasury company Strategy (MSTR, +6.1%) have also rallied on the president’s recent endorsement of a broad bill to support digital assets.
Moderna (MRNA, +8.9%) was the second-best performer in the S&P 500, following its 177% rise on Wednesday and 24% fall on Thursday with another dramatic move.
Merck (MRK, +2.4%), Moderna’s partner on the melanoma cancer vaccine that triggered this week’s volatility, was second only to Goldman Sachs (GS, +3.7%) among Dow Jones stocks.
