COMMENTARY:
The S&P 500 gained 0.49% for the week, closing at 7,711.76, as investors balanced strong technology earnings against renewed concerns about the Federal Reserve’s inflation outlook. The week’s key developments included Nvidia’s strong earnings and outlook, which helped support technology stocks, while Federal Reserve Chair Kevin Warsh’s Jackson Hole speech pushed markets toward a more cautious view of monetary policy. Warsh emphasized that additional policy action could be necessary if inflation does not move decisively toward the Fed’s 2% target, increasing expectations for a possible September rate hike.
Communication Services was the strongest of the three leading sectors, gaining 1.40%, nearly a full percentage point above the S&P 500. Meta Platforms was a significant contributor, rising more than 5% during the week. Alphabet also gained, while investors continued to assess the substantial spending required to compete in artificial intelligence. Meta also agreed to an $18 billion settlement related to youth-usage litigation, an event that investors viewed as manageable relative to the company’s scale.
Information Technology gained 1.39%, supported by renewed enthusiasm for AI and software. Microsoft was the S&P 500’s largest individual contributor, gaining roughly 6% for the week, while Salesforce surged more than 22% following strong earnings and an expanded relationship with Anthropic. Nvidia also posted strong earnings and guidance, although its shares ultimately declined late in the week as investors took profits. Financials added 0.91%, with companies such as Visa, Mastercard and major banks helping support the sector as investors continued to show strong institutional interest in financial stocks.
Industrials fell 1.88%, making it the largest sector underperformer relative to the S&P 500 among the two laggards. Caterpillar and Boeing were notable sources of weakness, as investors weighed elevated valuations, cyclical demand and ongoing uncertainty surrounding industrial activity. Boeing did receive a major boost earlier in the week with a defense contract carrying a potential $131 billion ceiling, but that positive development was not enough to offset broader sector weakness.
Health Care declined 2.06%, the weakest-performing sector and 2.55 percentage points below the S&P 500. Eli Lilly was the largest drag on the overall index, falling about 6.5% for the week despite receiving FDA approval for an expanded cardiovascular indication for Mounjaro. The decline reflected broader pressure across pharmaceutical and biotechnology stocks, with investors also reacting to company-specific clinical developments.
Overall, the week highlighted a market increasingly divided between AI- and software-driven growth leadership and economically sensitive sectors facing higher-rate concerns. Investors now turn toward upcoming employment and inflation data for the next clues on the Fed’s policy path.
