Stock Market Is Coiled Again

*Analyzing the markets with Richie Naso, a Wall Street veteran of over 40 years and former member of the NYSE.

Market Close: Friday, 7th August, 2026.

The Dow Jones Industrial Average

The Dow had an excellent week, gaining approximately 3.0% — or 1,551.90 points — to finish Friday at 54,036.93. That was its second consecutive weekly gain and one of its strongest weeks in recent months. The index came close to its record high set Wednesday.

What drove the week

The biggest catalyst came Friday with the surprisingly weak July employment report. Employers unexpectedly cut 23,000 jobs, while previous months were revised lower by a combined 103,000. The weaker labor market pushed the 10-year Treasury yield down to 4.64% and increased market hopes that the Fed would have less reason to raise rates — particularly supportive for stocks, as weaker employment reduces pressure on the Fed to tighten monetary policy.

The S&P 500

The S&P 500 had a very strong week, gaining roughly 2.4% and finishing Friday at approximately 6,830. The index reached a new all-time high during the week, reinforcing the bullish tone of the market.

What drove the week

• Strong earnings: Corporate earnings continued to provide support, particularly from technology and growth companies.
• Lower Treasury yields: The weak July employment report increased expectations that the Fed may have room to cut rates, helping support equity valuations.
• Broadening participation: The rally was not confined to mega-cap technology. Financials, small caps, and semiconductors also participated — a healthier sign for the overall market.
• Labor market concerns: Friday’s weak employment report was a double-edged sword. It was positive for rate expectations but raised questions about the underlying strength of the economy.

The Nasdaq

The Nasdaq had the strongest performance of the major averages, rising roughly 2.6% to 2.8% and finishing near 23,000. The index pushed into record territory, reflecting continued strength in technology and growth stocks.

What drove the Nasdaq

• Semiconductors remained strong, with continued enthusiasm around AI and data-center spending.
• Technology earnings continued to support the growth trade.
• Lower Treasury yields following Friday’s weak employment report helped higher-growth stocks.
• Rate-cut expectations increased, which is particularly supportive for the Nasdaq given its higher-growth, longer-duration constituents.
• The move was not exclusively concentrated in mega-cap tech — broader participation across growth and semiconductor stocks was encouraging.

Richie’s read: Very constructive.

The Nasdaq’s outperformance confirms that investors are still willing to pay for growth, particularly in technology and semiconductors. The one caution is that the Nasdaq has moved sharply higher and is becoming short-term extended. After this week’s advance, some profit-taking and consolidation would not be surprising.

The Russell 2000

The Russell 2000 had another very strong week, continuing the impressive small-cap rotation. The index broke above 3,000 for the first time ever during the week — an important technical and psychological milestone.

What stood out

• Small caps continued to outperform. IWM was up approximately 18% year-to-date as of Friday.
• 3,000 is now an important psychological level. The ability to break through it is technically encouraging, although the market will need to demonstrate it can hold above that level.
• Lower yields helped. Friday’s weak employment report pushed Treasury yields lower and increased expectations for easier Fed policy — particularly important for small caps, which have greater sensitivity to financing costs.
• The rally is broadening. Small caps are participating alongside the Nasdaq, S&P 500, and Dow, rather than simply playing catch-up.

Richie’s read: Very constructive — and the most encouraging part of the market right now.

When the Russell 2000 breaks to new highs while the S&P 500 and Nasdaq are also making highs, it tells us that investors are willing to take on more risk beyond the mega-cap technology names. That’s exactly the type of market breadth you want to see in a sustained bull market.

The caution is that small caps have moved a long way very quickly. A pullback or consolidation around the 3,000 level would not be surprising. The key technical question now is whether 3,000 becomes support rather than resistance.

HYG — Junk Bond Watch

HYG was constructive this week, and its action is particularly important when looking at the overall market. HYG tracks U.S. high-yield corporate bonds, giving us a useful real-time read on credit appetite and risk tolerance.

What stood out

• Credit remained firm despite the market’s concerns about the weakening labor market.
• Friday’s weak jobs report pushed Treasury yields lower and increased expectations for a more accommodative Fed, helping risk assets broadly.
• HYG’s stability is encouraging — investors are still willing to own lower-quality corporate credit rather than aggressively moving toward safety.
• That fits with the strength we’re seeing in the Russell 2000, financials, and semiconductors.

Why it matters for stocks:

• When HYG is strong, it suggests investors are comfortable taking risk and credit markets remain supportive of equities.
• When HYG weakens, it often signals growing concern about economic growth, rising default risk, tighter financial conditions, or declining liquidity.

Early Q3 GDP Nowcasts Point to a Pickup in Economic Growth

Source: Seeking Alpha — “Early Q3 GDP Nowcasts Point to a Pickup in Economic Growth”, James Picerno, August 7, 2026 (subscription may be required)

Initial estimates for third-quarter GDP point to a rebound in growth following the softer-than-expected Q2 reading, based on the median of nowcasts compiled by The Capital Spectator. The current median estimate points to a real annualized 2.7% increase in output — a solid improvement over Q2’s 1.5% rise, if confirmed when official numbers are published.

These early-quarter estimates should be viewed cautiously. The Bureau of Economic Analysis is scheduled to publish its preliminary Q3 GDP report on October 29, and a great deal can change between now and then. Ongoing uncertainty in the Middle East, the resumption of U.S. tariffs, inflation’s path, and day-to-day developments in the global economy all make early nowcasts inherently imprecise.

That said, the early numbers look encouraging. All of the nowcasts reviewed are printing above Q2’s 1.5% advance, providing a reasonable near-term basis for expecting growth to pick up in the current quarter.

“An encouraging acceleration in economic growth at the start of the third quarter.” — Chris Williamson, Chief Business Economist, S&P Global Market Intelligence

One source of optimism is stronger business activity in July, based on PMI survey data from S&P Global Market Intelligence. Lower oil prices also helped, following reduced hostilities in the Middle East, though renewed fighting suggests the relative calm is fragile.

Williamson notes that some of the PMI-based rebound in July is linked to a one-time boost from the FIFA World Cup and U.S. Independence Day events — a pop in consumer-facing service spending that may not be fully repeatable. The weeks ahead will stress-test the durability of the initial Q3 numbers.

July Jobs Report — Market Analysis

Source: Richard Naso’s analysis, with research support from AI-generated data summary

The July employment report was clearly weaker than expected, and the market’s initial reaction makes sense: bad economic news, but potentially good news for stocks because it gives the Fed more room to ease.

The Headline Numbers

• Nonfarm payrolls: -23,000 in July.
• Economists had expected roughly +80,000 to +83,000 jobs.
• June was revised down to +20,000.
• May and June were revised down by a combined 103,000 jobs.
• Unemployment fell to 4.1% from 4.2%.
• Wage growth: approximately 3.2% year-over-year.

Richie’s Take on the Numbers

The revisions are arguably more concerning than the -23,000 headline. They tell us that the labor market was weaker in May and June than we previously thought.

That said, I would not call this a recessionary report. The unemployment rate is still only 4.1%, and the private sector actually added approximately 30,000 jobs. Much of the large decline came from government and local-government education employment, which can be affected by seasonal factors.

But the trend is definitely weakening. The key question now is whether July is an isolated weak month, or the beginning of a more meaningful deterioration in employment.

What It Means for the Fed

This is where the report becomes constructive for stocks in the near term. The weaker employment numbers reduce pressure on the Fed to keep policy restrictive. The market can now increasingly argue:

Slowing employment → Less inflationary pressure → Greater chance of easier Fed policy → Lower Treasury yields → Higher equity valuations

That chain of logic is particularly favorable for the Nasdaq, semiconductors, small caps, and other rate-sensitive growth stocks. And now we have a jobs report that potentially gives the Fed more flexibility.

The concern is that there is a point where weak employment stops being good news for stocks and starts being evidence of a weakening economy. In my view, we are not there yet — but today’s report moves that risk a little closer.

Richie’s bottom line: Constructive for the market in the near term, with a yellow flag for the economy.

The items below reflect Richard Naso’s personal areas of focus for the coming week and are provided for informational and educational purposes only. They do not constitute investment advice or a recommendation to trade any security.

WATCH LIST — WEEK OF AUGUST 10, 2026

• Wednesday — CPI Report (The Big Test)
  The most important market event of the week; particularly critical for Nasdaq, IWM, and rate-sensitive growth stocks
• Thursday — PPI Report
  Another read on inflationary pressure ahead of the Fed’s next meeting

Richie’s Take

The market is likely to focus initially on the Fed and interest-rate implications of the weak jobs report rather than the economic deterioration. That is why I believe the report could actually extend the equity rally. The jobs report is bad enough to increase expectations for easier Fed policy, but not yet bad enough to signal an economic downturn.

After this week’s very strong rally, the key question for next week is whether the market can absorb its gains while inflation remains under control. The CPI and PPI reports will be particularly important in determining whether the recent decline in interest-rate expectations can continue.

I will also be watching market breadth and sector rotation closely. Continued participation from small caps, financials, credit markets, and semiconductors would confirm that this is a broadening risk-on move rather than simply another mega-cap technology rally. The advance/decline line will be an important confirmation of that breadth.

While I expect there could be some near-term volatility and profit-taking following the market’s recent advance, I remain constructive on the longer-term outlook. If breadth and rotation continue to improve, pullbacks may represent potential opportunities rather than reasons to change course.

My overall view remains that the longer-term backdrop is constructive for patient, disciplined investors, with the potential for near-term volatility along the way.

— Richie

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