Wall Street opened August on a cautious but positive note, with the S&P 500 advancing 0.7% on Friday. However, the market's underlying breadth remained weak, as decliners outnumbered advancers by a ratio of 1.3 to one. The modest uptick was driven primarily by a handful of large-cap technology names, rather than broad-based buying.
According to data from Reuters, the S&P 500 equal-weight index—which gives each constituent equal influence—gained 0.92% in July, while the standard market-cap-weighted index finished the month nearly flat. This divergence highlights a rotation away from the megacap dominance that characterized earlier in the year, as investors increasingly look to smaller and mid-sized companies for growth.
Investor attention now shifts to the upcoming July employment report, scheduled for release on Friday at 8:30 a.m. EDT. Economists surveyed by Reuters forecast a gain of 83,000 nonfarm payrolls, with the unemployment rate expected to hold at 4.3%. A stronger-than-expected number could fuel speculation about tighter Federal Reserve policy, potentially pushing Treasury yields higher and weighing on equities.
In Friday's trading, Amazon.com (NASDAQ:AMZN) surged 15.3% after reporting its fastest quarterly revenue growth in over four years, driven by robust performance in its cloud computing division. The results alleviated concerns that the company's heavy investments were speculative, according to Jake Dollarhide, CEO of Longbow Asset Management. In contrast, Apple (NASDAQ:AAPL) declined 7.4% after warning that supply shortages would impact its near-term outlook. Microsoft (NASDAQ:MSFT) added 3.0% following its strong earnings earlier in the week, while Micron Technology (NASDAQ:MU) fell 5.9% despite an initial 6.4% pop.
The broader semiconductor sector remained subdued, with the PHLX Semiconductor Index edging up just 0.07%, still more than 20% below its June 22 closing peak. Meanwhile, the 10-year Treasury yield ended around 4.71%, after touching 4.747% earlier in the session—a level not seen since January 2025. Brent crude oil settled at $87.93 per barrel.
Futures markets are currently pricing in nearly a 65% probability of a rate hike at the Federal Reserve's September meeting. Core personal consumption expenditures inflation stood at 3.3% for June, well above the Fed's 2% target, adding to the case for further tightening.
As earnings season continues, a diverse set of companies are set to report next week, including Palantir Technologies (NASDAQ:PLTR), Caterpillar (NYSE:CAT), Advanced Micro Devices (NASDAQ:AMD), Eli Lilly (NYSE:LLY), and SpaceX (NASDAQ:SPCX). These results will test various sectors, from software and semiconductors to healthcare and industrials.
Yung-Yu Ma of PNC Financial Services Group (NYSE:PNC) noted that the overall earnings picture should provide stability, with adjusted quarterly earnings running 29.3% higher than a year ago. However, risks remain, including robust payroll numbers, rising oil prices, or disappointing returns on AI investments, which could push yields higher and undermine Friday's rally.
Market breadth will be a key indicator in the coming weeks. If the index advances while most stocks decline, concentration risk may intensify. Conversely, broader participation from equal-weight and small-cap stocks would signal a more sustainable rotation away from megacaps.
