August 3, 2026

“The first rule of compounding is never interrupt it”

Charlie Munger

What a week. US equities finished a volatile week higher after sharp swings driven by big-tech earnings, the Federal Reserve’s rate decision, and ongoing Middle East tensions. European markets were more resilient and posted weekly gains, supported by corporate results. Here are the numbers. The S&P 500: Closed at 7,489.72, up .34% for the week; roughly flat for July), the Dow Jones Industrial Average: Closed at 52,485 gaining .60%, and up +0.3% for July., the Nasdaq closed at 25,374  adding .55% and off –3.2% for July, its weakest July since 2004). Internationally, the FTSE 100 had a great week up 1.23% and approached 11,000 points, The MSCI-EAFE gained 2% on good news in European markets. The 2 -Year Treasury paid 4.262$ and the 10-Year yield was 4.718%.

So, what happened? The week featured heavy selling mid-week (especially in tech/AI names) after the Fed decision, followed by a strong rebound. Microsoft surged nearly 15–16% on strong cloud/Azure results, Amazon jumped ~15% on cloud strength, while Apple fell ~7% on weaker services revenue. Meta also faced pressure over AI spending. Energy stocks benefited from elevated oil prices. A nasty reversal of the momentum trade in the U.S. stock market in July has led to tumult under the surface of major indexes like the S&P 500, yet the equal-weighted version of the popular benchmark ended the month with a solid gain. Enthusiasm around artificial intelligence had sent some stocks surging too far, too fast this year, and to some extent, that came undone in July. But there’s also more dispersion now in AI-related stocks, including among Big Tech companies that can heavily influence the trajectory of benchmarks like the S&P 500 and Nasdaq-100, said Kevin Gordon, head of macro research and strategy at Charles Schwab

Overseas, European markets held up better than the US. The pan-European STOXX 600 gained roughly 0.7% for the week (hitting a record intraday high at one point) and posted a monthly gain. Germany’s DAX: +2.1% for the week and France’s CAC 40: +1.6%. joined the UK’s FTSE 100’s party.  Gains were supported by strong earnings (e.g., Unilever, Mercedes-Benz) and a more diversified sector mix less exposed to the US tech sell-off. Energy shares also rose with oil.

Interest Rates & Central Banks shenanigans? Federal Reserve Meeting last Wednesday (July 29), the FOMC voted 9–3 to hold the federal funds rate steady at 3.50%–3.75% (fifth consecutive hold). Three regional Fed presidents dissented in favor of a 25 bp hike. Chair Kevin Warsh emphasized commitment to bringing inflation down amid Middle East-related uncertainty and elevated energy prices. Markets continue to price in a high probability of a hike as soon as September. Following suit was the European Central Bank on July 23. The ECB kept key rates unchanged (deposit facility at 2.25%). President Christine Lagarde noted that the full inflationary impact of the energy shock from Middle East conflict has yet to play out and left the door open to a possible September move. This caused a Bond Market reaction with the 10-year US Treasury yield ended the week around 4.68%–4.75%, higher on the month amid inflation and rate-hike concerns.

Hey how about gas prices? Oil: Strong monthly gains (WTI +21%, Brent +24% in July) on Middle East shipping disruptions and conflict escalation. Prices pulled back somewhat later in the week but remained elevated (Brent around $90, WTI mid-$80s at times). So, we have seen pump prices drop then come back up a little again. It appears the President has had enough with Iran and order massive new strikes to finally cripple and destroy any remaining military or economic capabilities of Iran. Let’s see if the people of Iran are also finished with the regime.

Labor market? Earlier in the period showed resilience (very low initial jobless claims). Q2 earnings season has been solid overall, with a high percentage of positive surprises so far.

Any relief in the Housing & Mortgage Market? Nope! Mortgage rates rose for a fourth consecutive week. The average 30-year fixed rate reached 6.66% (Freddie Mac) for the week ending July 30,  the highest in about a year. Higher Treasury yields and Fed uncertainty, plus energy-driven inflation fears, pushed rates up. Housing activity remains constrained by affordability. June existing home sales fell 2.4% month-over-month to a 4.09 million annualized rate (still +2.8% year-over-year), with the median price at a record $440,600. New-home sales were changed a little. Inventory remains tight and elevated rates continue to limit buyer activity.

What are we seeing looking ahead? Focus turns to the August jobs report, continued earnings, inflation data (including PCE), and any developments in the Middle East that could further affect energy prices and central-bank policy outlooks. Markets are looking closely for signs of whether September rate hikes materialize in the US or euro area. Geopolitical risk (US-Iran/Middle East tensions) remained a key market driver via energy prices and inflation expectations. But on a positive note, the economy is chugging along, and good earnings are keeping things going.

Mike