Key Highlights
- S&P 500 declined 0.2% Friday yet managed a 0.4% weekly advance, marking three consecutive weeks of gains
- Thursday saw the benchmark index reach an all-time intraday peak at 7,816.70
- CBOE Volatility Index touched 14.28, among its most subdued readings in over three decades
- July retail sales data disappointed while August consumer sentiment deteriorated
- Probability of Fed maintaining current rates in September now stands at roughly 67%
The benchmark S&P 500 index concluded Friday’s session at 7,785.76, representing a 0.2% decline following Thursday’s record intraday peak of 7,816.70. The Dow Jones Industrial Average shed 107 points, settling at 53,732.41, down 0.2%. Meanwhile, the Nasdaq Composite retreated 0.3% to finish at 26,729.16.
Looking at the broader weekly picture, the S&P 500 managed to secure a 0.4% gain despite Friday’s pullback. This achievement extends the index’s winning streak to three consecutive weeks. The tech-heavy Nasdaq posted a modest 0.1% weekly gain, while the Dow registered a 0.6% weekly loss.
Wall Street’s primary fear indicator, the CBOE Volatility Index, declined to 14.28 on Friday, reaching remarkably subdued territory. Historical analysis dating back to 1990 reveals the VIX has traded beneath the 15 threshold only about 32% of the time, with a long-term average reading of 19.45.
This extraordinary tranquility persisted despite Brent crude oil advancing 1.7% on developments emerging from Iran. Equity markets showed minimal response to the geopolitical headlines.
Mizuho analyst Daniel O’Regan observed that market participants appear increasingly desensitized to geopolitical tensions. He drew parallels to how investors eventually stopped reacting to successive developments in the Russia-Ukraine conflict.
Consumer Metrics Signal Economic Headwinds
Friday’s economic calendar delivered underwhelming results. July’s retail sales figures fell short of economist forecasts, registering a month-over-month contraction. Additionally, August consumer confidence deteriorated, erasing improvements observed during the June and July period.
eToro market analyst Bret Kenwell emphasized that a single month of disappointing spending data doesn’t necessarily signal economic deterioration. However, he acknowledged the figures become more concerning when viewed alongside previously released weak GDP and employment statistics.
Kenwell suggested the subdued economic indicators could reduce pressure on the Federal Reserve to implement rate increases, though he cautioned that persistent economic softness presents its own set of challenges.
Market participants currently assign approximately a two-thirds probability to the Federal Reserve maintaining its current rate policy at the September policy meeting. The 2-year Treasury yield advanced to 4.17%, while the 10-year benchmark climbed near the 4.7% level.
Corporate Results and Market Outlook
Over 90% of S&P 500 constituent companies have now disclosed second-quarter financial results. According to FactSet data, aggregate earnings growth is running at approximately 50% versus the comparable year-ago quarter.
Infrastructure Capital Advisors’ Jay Hatfield shared his forecast with CNBC, projecting the S&P 500 could reach 8,100 before year-end. His scenario assumes oil prices maintain levels above $80, continued closure of the Strait of Hormuz, and the Fed keeping rates unchanged.
The upcoming week features minimal major economic data releases, shifting market focus toward retail sector earnings announcements. Major retailers including Home Depot and Walmart are scheduled to unveil quarterly results.
Market observers indicate these retail earnings reports will provide critical insights into the actual health of the American consumer.
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