Week of Aug 17: Yields Take the Wheel

The week ending August 21 was a losing one for U.S. equities, even though Friday brought a partial rebound. The main pressure came from long-term Treasury yields, while technology and consumer-sensitive names lagged. Next week brings a concentrated test: the July PCE report, Nvidia earnings, and Fed Chair Kevin Warsh's Jackson Hole speech.

The S&P 500 finished Friday at 7,674.37, up 0.43% on the day but down about 1.4% for the week. The Nasdaq Composite ended at 26,180.45, up 0.43% Friday and down roughly 2% for the week. The Dow closed at 53,277.01, gaining 517.80 points on Friday but losing about 0.9% for the week. All three major averages ended their weekly winning streaks.1

The bond market set the tone. The ten-year Treasury yield reached 4.734% on Friday, while the thirty-year yield reached 5.273%. Higher long-term borrowing costs competed with equities for investor capital and raised the discount rate applied to long-duration growth stocks. The move also reflected concern about inflation, government borrowing, and higher oil prices tied to the continuing Middle East conflict.2

Information technology fell more than 3% over the five-day period. Amkor Technology and Credo Technology were among the larger laggards, while Meta Platforms was down nearly 7% for the week. Health care was a clear relative winner, rising more than 4% as Moderna and Merck rallied on positive late-stage cancer-treatment results. Retail was less convincing: Walmart fell roughly 11% after its earnings update, and Advance Auto Parts dropped about 25%.1

The official industrial-production report offered a steadier signal. Total industrial production rose 0.2% in July, manufacturing output also rose 0.2%, and capacity utilization edged up to 76.3%. Consumer-goods production declined 0.4%, while business-equipment production rose 0.8%. That mix suggests continued investment strength, but less momentum in the part of the economy most directly tied to household demand.3

The Federal Reserve's July 28-29 minutes kept the policy picture restrictive. Officials said inflation remained elevated and that inflation risks were tilted upward, while employment and growth risks were tilted downward. Most participants supported holding rates, but several favored a 25-basis-point increase because inflation had not yet returned convincingly toward the 2% objective. The minutes also highlighted high equity valuations and risks around debt-financed artificial-intelligence investment.4

Wednesday is the key day. July personal-consumption-expenditure inflation, personal income and spending, second-quarter GDP, and Nvidia earnings all arrive that morning. The Jackson Hole Economic Policy Symposium runs August 27 through 29, with Warsh's remarks likely to be read against the bond market's recent rise in long-term yields. Durable goods, jobless claims, consumer confidence, and the final Michigan sentiment reading add more checks on demand.5

The question is not whether Friday's bounce can continue for a session. It is whether inflation data, Fed communication, and Nvidia's outlook can pull long-term yields back down. Until that answer becomes clearer, the market's record-high mindset has given way to a more demanding test of earnings and rates.