From the desks of Stanley Katz & Lauren Madera
KNOCK, KNOCK.
WHO’S THERE?
NATIONAL TELL A JOKE DAY.
Markets finished about where they started this week (DJIA: -0.56%, S&P 500: +0.36%, Nasdaq: +0.14%), though the quiet scoreboard masked a genuine tug-of-war. Easing inflation and favorable AI earnings news pulled one way. Rising oil prices, continued uncertainty around the Strait of Hormuz, and weaker consumer data pulled the other. Wednesday delivered the Bureau of Labor Statistics report that the consumer price index (aka CPI, the government’s primary measure of what households pay for goods and services) rose 3.4% over the prior 12 months, matching expectations and easing for a second consecutive month. Thursday’s producer price data brought more of the same relief. Futures markets moved quickly, and odds of a September rate hike fell to roughly 32% by Friday from about 52% earlier in the week. This extends the slide that began with the prior Friday’s weak jobs report. The consumer told a less encouraging story. Retail sales posted their largest monthly drop since May 2025, and consumer sentiment decreased in early August as households turned more pessimistic about business conditions.
Argus Research’s latest commentary puts a name to the week’s central oddity. Their director of research, Jim Kelleher, describes a bad-is-good market, where disappointing economic news lifts stocks because it points toward an easier Fed. Their piece walks through both halves of that trade. On the disappointing side, they document how sharply the pace of hiring has fallen over the past three months and how second-quarter economic growth decelerated from the first quarter. On the other side sits an earnings season Argus calls exceptional, where the share of companies beating expectations ran well above the historical range and operating margins now sit far above where they stood before the pandemic. Their caution is the part worth reading closely. Kelleher argues that soft data driving stocks higher is not a durable foundation for gains through year-end, particularly given unresolved war risk and visible soft spots in the economy. A market that needs weak data to rise has an obvious problem the moment the data turns strong.
Argus points to an exceptional earnings season as the counterweight to soft economic data. Zacks’ second-quarter scorecard shows exactly where that strength came from. They frame the quarter around record margins, an unusually high share of companies beating expectations, and upward revisions to estimates. Zacks’ analysis turns on a single adjustment. Headline earnings growth for the S&P 500 looks almost too good to be true until they strip out Micron and Alphabet, whose results were inflated by an extraordinary swing in memory chip profits and a one-time investment gain. Growth roughly halves once those two are removed, but the breadth underneath holds. Most sectors grew, and the share of companies beating both earnings and revenue estimates exceeded five-year averages. However, the Magnificent 7 alone accounted for close to a third of all S&P 500 earnings in the quarter, which is why the headline growth rate looks so different without them. The main takeaway: Broad participation and narrow leadership can both be true at once.
Below are links to a number of third-party research reports that we have read and analyzed over the past week. We hope you will find the information interesting, useful, and worthwhile.
Argus:
Zacks Investment Research:
First Trust:
Franklin Templeton:
Goldman Sachs:
Stanley Katz & Lauren Madera, Financial Advisors
ClientFirst Financial Strategies, Inc.
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Source for weekly stock market returns: Barron’s.
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