U.S. equities closed out a stellar week on Friday, with the S&P 500 notching a fresh all-time high. The benchmark index advanced 3.58% over the week, its strongest weekly performance since April. The Nasdaq Composite surged 5.19%, while the Dow Jones Industrial Average added 2.96%. The rally was broad-based, with small-cap stocks also participating, as the Russell 2000 gained 3.5%.
The catalyst came from a softer-than-expected July jobs report. Nonfarm payrolls declined by 23,000, missing forecasts for an 80,000 gain. The unemployment rate ticked down to 4.1%, partly due to a shrinking labor force. As a result, market expectations for a September interest rate hike fell sharply, with the probability dropping to 44% from 67% a week earlier. This dual boost—lower discount rates and still-robust corporate earnings—powered the rally.
"Earnings have been stellar," noted Tom Siomades of AE Wealth Management. Indeed, the earnings-beat rate for S&P 500 companies has reached 85.1% of the 436 reports so far, well above the historical average of 68%. This has helped offset valuation concerns, as the forward price-to-earnings multiple on the S&P 500 stands at 20.4 times, roughly 8% below its level at the end of 2025. Second-quarter adjusted earnings growth came in at a robust 31.1% year over year, the strongest since 2021.
However, the market's fate now hinges on upcoming inflation data. The July Consumer Price Index (CPI) is due Wednesday, with producer prices on Thursday and retail sales on Friday. Economists polled by Reuters expect headline CPI to rise 0.1% month-over-month and 3.4% year-over-year, while core CPI is projected to increase 0.3% monthly and 2.5% annually. A hotter-than-expected reading could quickly revive rate-hike bets and pressure equities, particularly rate-sensitive tech stocks.
The 10-year Treasury yield hovered around 4.64% on Friday, leaving tech valuations vulnerable to any upside surprise in inflation. Meanwhile, Friday's retail sales data will test consumer resilience. A weak number could add to signs of a cooling economy, potentially denting corporate earnings projections, while strong sales alongside sticky inflation would likely push yields higher.
Investors are also watching key earnings reports this week. CoreWeave (NASDAQ:CRWV) is scheduled to report Tuesday after the close, with revenue expected to surge 110.7% to $2.56 billion, though a per-share loss of $1.42 is anticipated. Cisco Systems (NASDAQ:CSCO) reports Wednesday, with analysts projecting a 14.7% revenue increase to $16.83 billion and earnings per share of $1.17. Applied Materials (NASDAQ:AMAT) follows Thursday, with forecasts of $9.01 billion in revenue (up 23.4%) and EPS of $3.39 (up 36.7%). Super Micro Computer (NASDAQ:SMCI) also reports Tuesday, with preliminary revenue near the low end of its $11.0–$12.5 billion range and gross margins of 15%–17%.
Analysts are particularly focused on the AI supply chain. The Philadelphia semiconductor index remains up over 70% this year, but it's still more than 15% below its late-June peak, highlighting how quickly sentiment can shift. CoreWeave's ability to address capacity concerns will be closely scrutinized. Oppenheimer analysts reiterated an Outperform rating with a $150 price target, arguing that fears of delays are overstated. UBS raised its Cisco price target to $132, citing expected growth in AI networking, while Stifel set a $650 target on Applied Materials, citing strong DRAM and advanced logic spending.
The week's economic calendar also includes existing home sales on Tuesday, with a consensus estimate of 4.01 million units. A higher-than-expected CPI reading would be the biggest risk to the rally, as it could derail hopes for a pause in rate hikes. Conversely, a moderate print would reinforce the narrative that the Fed can hold steady, supporting further gains in equities.
As the market navigates this data-heavy week, investors remain cautiously optimistic. The combination of resilient earnings and easing rate fears has created a supportive backdrop, but the path forward depends heavily on inflation and consumer spending. Any surprise could quickly alter the landscape, making this a pivotal moment for U.S. markets.
