Weekly Market Update (Aug 02, 2026)
HIGHLIGHTS
The Fed kept rates unchanged. Citadel bought a large portion of AI stocks from hedge fund Situational Awareness, which was forced to liquidate due to margin calls.
- FOMC: The July Fed meeting steepened the real rate curve and pushed inflation risk higher. The Fed appeared inclined to step back and avoid further direct intervention, implying that the move in yields could substitute for a rate hike.
- Earnings: Q2 earnings continued to show strength, supporting the bull market. They also catalyzed upward revisions to 2027 earnings estimates. The effect of rising input costs on margins remains a risk.
- BoJ: Although the Bank of Japan (BoJ) statement emphasized upside inflation risk, the hurdle for monetary policy to dictate the yen’s path remains high. Over the long term, encouraging repatriation may be the most powerful policy tool for supporting the local currency.
MARKETS
| Nasdaq | 25,375.85 | +1.59% |
| S&P 500 | 7,489.72 | +1.05% |
| Dow | 52,485.03 | +1.04% |
| 10-Year | 4.75% | +7bps |
| Brent | 90.12 | -6.88% |
| DXY | 99.80 | -1.65% |
*Data as of market close. 5-day change ending on Friday.
VIEW FROM THE STREET
Equity
UBS: Investor sentiment improved after AI-related stocks reported accelerating cloud growth and AI spending.
Morgan Stanley: Q2 earnings are strong, prompting investors to question growth sustainability, margins, and pricing power. Most of the acceleration is tied to the AI ecosystem. Concentration is amplifying market risks.
Fixed Income
UBS: The Fed balance sheet will become smaller, as the Fed has mentioned this as one of its goals. The reform could reshape the long-term bond market, as it means more private investors would hold more long-term bonds. It could potentially push up long-term yields and steepen the yield curve.
Morgan Stanley: Markets are not too worried about persistent inflation, as reflected in inflation swaps. 10Y Treasury yields are climbing higher and recently reached 4.7%. This could become a headwind for equity valuations and financial conditions.
Economy
Standard Chartered: Energy prices and central bank policy dominate the narrative. The renewed Middle East conflict is pushing oil prices higher, increasing inflation concerns again.
J.P. Morgan: The US headline tariff rate has moderated significantly. Average tariff rates fell from 18% to 10%, mainly due to the Supreme Court’s ruling against the use of emergency tariffs, which led to the removal of many emergency tariffs.