Markets In Focus: The Week That Was and What’s On Tap
THE WEEK THAT WAS
It was a wild week, fitting, perhaps, for the final stretch of a summer that has been anything but quiet. When the dust settled Friday, the S&P 500 had gained 1.0%, the Nasdaq added 1.6%, and the Russell 2000 finished roughly flat. Getting there was another matter entirely. A week this turbulent is a case study in the psychology of investing.
On Wednesday the Federal Reserve held rates steady at 3.50%–3.75% Wednesday, which was expected. What caught markets off guard was the degree of dissent as three FOMC members voted for an outright hike. Cair Warsh’s message was deliberate: the Fed is watching the direction of the data, not reacting to any single print. Bond investors heard it clearly as the 30-year Treasury yield climbed more than nine basis points on the week. With no dot plot at this meeting and the next decision not until September, Jackson Hole on August 27-29 becomes the next real opportunity for Warsh to signal where policy is headed.
The data framing that decision were counter to that message. Q2 GDP came in at 1.5% annualized, short of the 2.1% consensus and a step down from Q1’s 2.1% pace, weighed down by a surge in imports and inventory drag. The more troubling number, though, was inflationas the PCE price index accelerated to 5.1% in Q2 from 4.6% in Q1. Softer growth and hotter prices is not the mix the Fed, or investors, were hoping to see.
Corporate earnings offered a meaningful offset. According to FactSet, with 61% of S&P 500 companies now through the books, the blended Q2 earnings growth rate has climbed to 47.4%, a long way from the 23.2% consensus estimate at quarter-end. Beat rates have been exceptional, running near 87%, with average upside of 14% above consensus. Analysts are currently projecting earnings growth of 27.4% in Q3 and 25.2% in Q4, with full-year 2026 coming in at 29.1%. The forward P/E sits at 19.6x, modestly below the five-year average of 19.9x and well off the 20.4x reading at quarter-end. If earnings growth in the second half comes anywhere close to what analysts are projecting, the return profile for equities by year-end looks quite constructive.
The week’s big story, though, was the AI capex verdict. Microsoft and Amazon each surged roughly 8-10% after management teams convincingly tied heavy infrastructure spending to actual customer demand. Meta fell nearly 10% despite strong cash flow after missing earnings estimates, and Apple declined on a cautious revenue outlook. The market’s message was clear: it is no longer enough to spend big on AI . Companies need to show what they are getting for it. Alphabet’s 7% drop the prior week, even after reporting an 82% surge in cloud revenue, had already set that tone.
Woven through all of it was the ongoing U.S.-Iran conflict. Oil surged mid-week on fresh escalation before pulling back after Saudi Arabia convened a 40-plus nation coalition to protect Strait of Hormuz shipping lanes, with Brent settling near $89 per barrel. Elevated enough to keep three FOMC members in the hike camp, and elevated enough to keep the inflation conversation very much alive heading into September.
THE WEEK AHEAD
Markets enter the weel still processing a bumpy Fed decision. Chair Kevin Warsh held interest rates steady at 3.50%- 3.75%, but three Fed officials dissented in favor of a hike, the sharpest internal split in nearly a decade. That kind of disagreement signals real uncertainty about where policy goes next, and it showed up in the market’s reaction: stocks pulled back and long-term Treasury yields climbed to some of their highest levels in years. Meanwhile, renewed tension in the Middle East, particularly near the Strait of Hormuz, is keeping oil prices elevated and complicating the inflation picture. Warsh’s remarks at the Fed’s Jackson Hole symposium in late August are now the next event investors will lean on for direction.
Earnings season stays busy this week. Palantir reports Monday alongside Willdan, BWXT, and Williams Companies. Tuesday brings Caterpillar, McDonald’s, Merck, and Pfizer before the open, with AMD reporting after the close. Wednesday features Eli Lilly and Disney, plus fresh data on private-sector hiring and services-sector activity. Thursday covers weekly jobless claims. The week closes Friday with the July jobs report, a key test of whether the labor market is holding firm or beginning to soften.
AMD’s results deserve particular attention, given how closely they connect to the AI infrastructure spending story that dominated last week’s megacap tech earnings. Beyond individual names, it’s worth watching whether market gains are broadening beyond a handful of AI leaders or remaining concentrated, since that breadth often says as much about market health as the headlines themselves.
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The S&P 500 generally represents performance of 500 large companies listed on exchanges in the U. S. It is one of the most commonly followed equity indices. The Nasdaq Composite Index is a market-weighted index that measures the performance of more than 3,000 common equities listed on the Nasdaq Composite Market. The Russell 2,000 Index is a market-cap weighted index that measures the performance of approximately 2,000 of the smallest companies in the Russell 3,000 Index. The MSCI ACWI captures Large and Mid-Cap representation across 23 Developed Markets (DM) and 24 Emerging Markets (EM) countries. With 2,921 constituents, the index covers approximately 85% of the global investable equity opportunity set. FactSet Research System is a financial data and software company that provides research for Wall Street professionals and individual investors.
