Weekly Market Update
Week #32 — Market Update for August 3-7, 2026
Bad jobs became good news because oil fell and growth outside labor held up.
9 Aug 2026 · YK Research
Contents
Executive Summary
U.S. equities had their best kind of macro week. SPY gained 3.5%, QQQ rose 5.1%, the Dow added 2.9%, and small caps gained 3.6%. Technology led, but this was broader than one index. Equal weight rose 2.4%. Semiconductors jumped 7.6%. Nvidia gained 11.6%.
The catalyst was a clean change in the policy trade. U.S. payrolls fell by 23,000 in July, the first negative print in months. May and June were revised down by a combined 103,000. The unemployment rate still slipped to 4.1% because the labor force shrank. Markets cut the chance of a September Fed hike.
Bad labor data did not trigger a growth scare because the rest of the week looked firm. The ISM manufacturing index reached 55.6, its highest level in more than four years. Services registered 54.1. Both sectors expanded. Investors read the mix as slower hiring without a collapse in demand.
Oil did the other half of the work. WTI fell 7.7% and Brent lost 7.3% as hopes for diplomacy with Iran reduced part of the war premium. Cheaper energy lowers near-term inflation pressure and supports household spending. Energy equities fell 3.4%, the only obvious loser in an otherwise strong tape.
Global markets joined the rally. Global ex-U.S. equities gained 3.1%. Developed markets added 2.8%, emerging markets rose 2.4%, and Japan gained 4.9%. Europe's STOXX 600 ended the week at a record. China lagged, with the large-cap FXI proxy down 0.9%.
Crypto rose, but did not lead. Bitcoin gained 3.3% to about $64,900 and ether added 2.8% to roughly $1,913. That was weaker than QQQ and semiconductors. Crypto benefited from easier policy pricing, yet capital preferred assets with current earnings.
The Fed's inflation problem has not disappeared. Governor Lisa Cook said June PCE inflation was 3.7%, with core at 3.3%, and said she was prepared to act if disinflation did not resume. The 2-year Treasury yield fell 14 basis points to 4.19% this week, but the 30-year yield rose 3 basis points to 5.19%. The market reduced the next-hike risk without declaring inflation dead.
The positioning message: stay with profitable technology and broad equity exposure while oil falls and activity expands. Do not chase long duration. Next week's inflation data must confirm the jobs report's friendly policy signal. A hot CPI would put the hike debate straight back into the market.
US Stock Market
The rally had both leadership and breadth. QQQ gained 5.1%, the semiconductor ETF rose 7.6%, and XLK added 7.2%. SPY still gained 3.5%, while equal weight rose 2.4% and IWM added 3.6%. Financials gained 1.2%. Investors bought growth first, then carried the rest of the market with them.
That breadth matters. Last week's earnings market punished parts of the chip complex even while cloud platforms rose. This week semiconductors rejoined the advance. Nvidia's 11.6% gain supplied much of the torque, but both major chip ETFs rose nearly 8%.
The edge here is policy asymmetry, not cheap valuation. Profitable technology keeps its earnings growth if activity holds, while lower hike odds reduce pressure on its multiple. The trade fails if weak hiring spreads into revenue or if inflation forces higher rates despite slower employment.
Leadership Read
Rate relief amplified strong technology earnings expectations.
Chip leadership returned after the prior week's split.
The rally reached beyond the largest companies.
A lower oil price transferred value from producers to consumers.
Global Markets
Global ex-U.S. equities rose 3.1%. Developed markets gained 2.8% and emerging markets added 2.4%. Europe's STOXX 600 finished at an all-time high as earnings and lower U.S. hike expectations supported valuations. The U.K. headed for a fourth weekly gain.
Japan was the strongest major regional proxy, up 4.9%. July factory output reached a near 12-year high in the PMI survey. The yen also strengthened after joint U.S.-Japan intervention earlier in the week. Stronger activity outweighed the usual translation drag from a firmer currency.
China was the exception. FXI fell 0.9% while the rest of emerging markets rose. Global manufacturing expanded in July, but S&P Global said momentum slowed as high prices and uncertainty reduced stock building. The regional message is clear: investors paid for visible production strength in Japan and Europe, while China still needs a stronger domestic demand signal.
Cryptocurrency Market
Bitcoin gained 3.3% to about $64,900. Ether rose 2.8% to roughly $1,913. Both moved higher after the jobs report reduced rate-hike expectations. Neither kept pace with technology or semiconductors.
Read-Through
Crypto behaved like a liquidity beneficiary, not the market leader. That is a neutral signal. Easier policy pricing helps, but current earnings attracted more capital than monetary scarcity. Bitcoin needs to outperform on another week of lower yields before calling this a new crypto-led phase.
Economic Indicators, Statistics and News
United States
Nonfarm payrolls fell by 23,000 in July. The unemployment rate eased to 4.1%, but that was not a sign of strength. Labor-force participation fell as people left the workforce. May and June payrolls were revised down by 103,000 combined, and the three-month hiring average slowed to about 20,000.
Activity data moved the other way. ISM manufacturing rose to 55.6, the strongest reading in more than four years. Services came in at 54.1. Input costs remained high and services employment contracted. The economy is still producing, but businesses are becoming more careful about labor.
Federal Reserve
Governor Cook said inflation remained too high. June headline PCE was 3.7% and core PCE was 3.3%. She held rates because tariff, energy and AI-related price pressure may fade, but said she was prepared to act if disinflation did not continue. Friday's jobs report weakens the case for a September hike. It does not remove the inflation threshold.
Global
Global and Eurozone
S&P Global reported another month of global manufacturing growth in July, though the pace slowed as high prices and uncertainty limited inventory building. European equities reached records as corporate profits moved toward their fastest growth since 2022.
Japan
Japan's factory output index rose to a near 12-year high. That gave investors a fundamental reason to own Japan even as intervention strengthened the yen. The durability test is whether orders stay strong after the currency move.
China
China equities lagged a broad global rally. That follows weak official factory data in the prior week. A stronger global manufacturing cycle helps exporters, but it does not fix soft domestic demand. Price action is asking for better policy transmission or stronger consumption data.
Foreign Exchange Markets
The dollar index fell 0.2%. The euro proxy gained 0.2%, sterling was flat, and the yen proxy rose 1.0%. The largest move came from the yen after joint U.S.-Japan intervention and another lift from Friday's weak U.S. jobs data.
Intervention changed the short-term payoff for funding trades. A stronger yen can force leveraged positions to reduce risk even when global equities are rising. That did not happen broadly this week because lower oil and lower Fed-hike odds offset the funding shock. The yen now matters more than the dollar index as a warning signal.
Commodities and Energy Markets
WTI fell 7.7% and Brent lost 7.3%. U.S.-Iran diplomacy reduced part of the war premium, though prices remained sensitive to Hormuz headlines. Gold rose 7.2% to a seven-week high as weaker jobs data reduced hike expectations. Copper gained 2.1%.
Commodity Read
This was the best commodity mix for equities: lower oil, higher gold and firmer copper. Lower oil helps inflation and consumption. Gold says policy and geopolitical uncertainty remain high. Copper says investors have not priced a global demand break. If oil rebounds while gold keeps rising, that friendly mix ends quickly.
Debt and Fixed Income Markets
The Treasury curve twisted. From July 31 to August 7, the 2-year yield fell 14 basis points to 4.19% and the 10-year fell 4 basis points to 4.65%. The 30-year rose 3 basis points to 5.19%. Short maturities priced less Fed tightening after the jobs report. Long maturities still demanded compensation for inflation and fiscal risk.
Down 14 basis points as September hike odds fell.
Down 4 basis points with weaker hiring and lower oil.
Up 3 basis points. Long-end risk did not clear.
TLT gained 0.6%, investment-grade bonds rose 0.3%, and high yield was nearly flat. Credit did not price a recession. The small long-bond gain against a large front-end rally argues against a duration chase. The easier trade was profitable growth, not a large bet on falling long rates.
What to Watch Next Week
- July CPI. A soft print would validate the market's lower-hike view. Another hot reading would put the Fed's inflation mandate ahead of weak payrolls.
- July PPI and retail sales. Producer prices will show whether lower oil is reaching input costs. Retail sales will test whether weak hiring has reached household demand.
- The 2-year versus 30-year Treasury spread. More front-end relief with a sticky 30-year yield would keep the curve steep and favor equities over long bonds.
- Semiconductor follow-through. The sector gained 7.6%. Another week of broad chip strength would confirm that last week's earnings split was a reset, not a trend break.
- Oil and Iran diplomacy. The equity rally received a direct boost from the 7.7% drop in WTI. A reversal would lift inflation expectations and revive hike risk.
- The yen after intervention. Continued strength could pressure leveraged carry positions. Stability would let the market refocus on earnings and inflation.