• Technology stocks lead markets higher – U.S. equity markets closed higher on Thursday, as strong gains in technology stocks more than offset weakness across most other sectors. Sentiment toward the tech sector appeared to improve following better-than-expected earnings reports from NVIDIA, Salesforce, and CrowdStrike. The positive equity-market response came despite a modest rise in bond yields, with the 10-year Treasury yield at 4.67%. International markets were softer, as Asian equities finished mostly lower overnight and European shares broadly declined. In energy markets, WTI oil rose to nearly $84 per barrel following reports that Iran and Oman plan to share revenue from managing ship traffic through the Strait of Hormuz, again raising the prospect of tolls to pass the waterway. The U.S. dollar was little changed against major currencies.
   
• Strong NVIDIA results help reinforce the AI investment theme – AI chipmaker NVIDIA reported second-quarter revenue and earnings that exceeded expectations after Wednesday's market close. The company also issued guidance above consensus estimates, providing further evidence that demand for AI-related computing infrastructure remains strong. Better-than-expected results from customer relationship management software provider Salesforce and cybersecurity company CrowdStrike lifted both companies' shares and helped support sentiment across the broader technology sector. These results help reinforce our view that the AI infrastructure buildout remains a durable investment theme. More broadly, the strong quarterly earnings season is coming to a close. With 96% of S&P 500 companies having reported results, 86% have beaten analysts' estimates by an average upside surprise of 27%. Earnings growth has also been broad-based, with 10 of the 11 sectors reporting year-over-year gains. We believe this wider participation could help make the market's advance more durable by reducing its dependence on a small group of mega-cap companies. It may also help create a more supportive environment for diversified portfolios, including value-oriented and cyclical allocations.
   
• Jobless claims point to continued labor-market resilience – Initial jobless claims declined to 203,000 this past week, below expectations for 210,000. Continuing claims, which measure the total number of people receiving benefits, also fell to 1.78 million, compared with forecasts for 1.79 million. Together, the figures suggest that layoffs remain limited and that labor-market conditions are relatively healthy, even as the pace of hiring has slowed from earlier in the year. The unemployment rate stands at 4.1%, slightly below the Fed's longer-run projection of 4.2%, which is widely considered to be its estimate of full employment. With the Fed's employment mandate largely being met, officials should be able to focus more heavily on inflation, which remains well above the 2% target. Policymakers may be inclined to hike rates later this year or early 2027, though the data appear to at least support a higher-for-longer policy stance, in our view.

Brian Therien, CFA;
Investment Strategy

^{Source for all data: FactSet.}

• Markets close modestly lower – U.S. equity markets closed modestly lower on Wednesday, with the tech-heavy Nasdaq lagging the S&P 500. This comes as oil prices fell toward the lows of the week, with WTI crude oil down by around 0.5% to $82. Meanwhile, Treasury yields moved slightly higher, as the headline PCE inflation metric ticked higher in July to 3.7% year-over-year. Core PCE inflation, the Fed's preferred inflation gauge, came in at 3.3%, in line with forecasts but still well above the 2.0% target. Treasury yields ticked higher across the curve, with the 10-year yield up by about 0.01% to 4.65%. In our view, the 10-year yield is likely to remain in the 4.5% to 5.0% range for the remainder of the year, although a rapid move to the higher end of this range could weigh on stock market sentiment. Nonetheless, equity markets have been supported by strong earnings growth and resilient personal consumption, which was revised higher in the second-quarter GDP estimate.
   
• Personal consumption expenditure (PCE) inflation in line with estimates – Headline PCE inflation for the month of July was up 3.7% year-over-year, a tick higher than the 3.6% forecast and flat from last month's reading. Core PCE inflation, which excludes volatile food and energy, came in at 3.3%, in line with forecasts and last month's reading. Core PCE inflation is often considered the Fed's preferred inflation metric, and this remains well above the 2.0% target. Goods inflation decreased by 0.1% in today's reading, driven by a drop in gasoline and energy-related goods, as well as a decline in household equipment. Services inflation, however, rose by 0.3% for the month, as pricing in areas like financial services and insurance, as well as housing, moved higher. In our view, the stickier core inflation likely adds to the case for a rate hike by the Federal Reserve. However, we expect that upcoming consumer price index (CPI) inflation as well as labor-market data will be critical inputs ahead of the next September 16 FOMC meeting.
   
• Positioning portfolios in a higher-rate environment – We expect uncertainty about inflation, fiscal concerns in the U.S., increased bond issuance, and broadly resilient economic activity to keep interest rates higher for a while longer, though largely within a range of 4.5% to 5.0% for the 10-year Treasury over the remainder of the year. While this may limit the potential for meaningful price appreciation in bonds, we think higher yields have helped improve the longer-term appeal of investment-grade bonds and help reinforce their role as a strategic allocation in a well-diversified portfolio. Nonetheless, we believe the outlook over the next 12 months favors equities over fixed income, particularly given the support from strong profit growth and healthy economic activity. Within equity markets, we acknowledge the potential for a period of near-term consolidation after what's been a solid move higher in 2026. August and September have historically been seasonally weaker months for stocks, and uncertainty could increase as the midterm elections approach, but periods of weakness may provide opportunities to add to equites, in line with your investment goals and risk tolerance. We specifically favor U.S. large- and mid-cap stocks, which we believe offer an attractive combination of quality, exposure to artificial intelligence, and sensitivity to continued economic resilience. We also favor emerging-market stocks, which we believe provide international exposure to strong profit growth tied to the AI buildout, while trading below their 10-year average forward price-to-earnings multiple.

Mona Mahajan;
Investment Strategy

^{Source for all data: FactSet.}

• Markets close higher as oil, yields pull back – U.S. equity markets ended higher on Tuesday, supported by a continued decline in bond yields. The 10-year Treasury yield fell to 4.63%, extending Monday's move lower and offering some relief to interest-rate-sensitive areas of the market. Technology and communications stocks led gains, while the energy sector underperformed as oil prices declined. International markets were also positive, with Asian equities finishing higher overnight and European shares gaining. WTI oil was down near $81 per barrel following reports that the U.S. plans to return diplomats to the Middle East. This development may have reduced some of the geopolitical risk premium embedded in oil prices. The U.S. dollar also weakened modestly against major currencies.
   
• Employment data shows firmer job growth – U.S. private employers added an average of 11,750 jobs per week for the four weeks ending August 8, up from 9,500 in the previous report, according to ADP. This marks the second consecutive report showing a reversal of the decline from the recent peak in May. Additional data will be needed to determine whether hiring is stabilizing, but a continuation of the trend could help support near-full employment. The broader labor market appears to be roughly balanced, in our view. The unemployment rate remains contained at 4.1%, while 7.4 million job openings continue to exceed the 6.9 million unemployed workers. Together, these figures suggest that labor demand remains healthy, even as hiring has slowed from the pace earlier in the year. Continued employment and wage gains should help support household income and consumer spending, key pillars of the broader economy.
   
• Consumer confidence dips as expectations weaken – The Conference Board's Consumer Confidence Index declined for the second consecutive month in August, falling to 89.4 and coming in below the consensus forecast of 90.2. The underlying details were mixed: consumers' assessment of current business and labor-market conditions rose by 6.8 points, after three consecutive monthly declines. Meanwhile, the short-term outlook for income, business and labor conditions fell by 5.8 points. Written responses indicated that concerns over the economy centered on prices and inflation, geopolitical tensions, trade, and jobs. The divergence between improving views of current conditions and a weaker outlook may suggest that consumers are more comfortable with their present circumstances but are becoming more cautious about the near-term future. While this caution could start to weigh on consumer spending, we believe the balanced labor market and further progress in bringing inflation down could help improve sentiment.

Brian Therien, CFA;
Investment Strategy

^{Source for all data: FactSet.}

• Stocks slightly lower to start the week – Major equity indexes ended modestly lower, with technology stocks underperforming ahead of NVIDIA's closely watched earnings report on Wednesday. Long-term Treasury yields declined and bonds rebounded from last week's sell-off, supported by reports that the Treasury Department could utilize its Treasury General Account to help fund buybacks and provide additional liquidity to the market. In commodities, WTI crude oil fell 2% to $85 per barrel as Treasury Secretary Bessent unveiled a new global sanction plan to isolate Iran's economy. On the trade front, U.S.-Canada negotiations broke down on Friday, triggering new U.S. tariffs of 50% on roughly $20 billion of Canadian goods and prompting Canada to pledge dollar-for-dollar retaliatory measures beginning September 8. The developments weighed on the Canadian dollar, while gold climbed to its highest level in three months as investors sought safety amid rising geopolitical and trade uncertainty. Overall, markets appear to be balancing trade and geopolitical concerns against easing bond yields and anticipation surrounding NVIDIA's earnings, which could provide an important gauge of AI-related spending and broader market sentiment.
   
• Bond yields ease but remain near cycle highs - Bonds got some relief today following last week's sell-off, which prompted the Treasury Department to announce plans to increase buybacks of long-dated Treasuries in an effort to ease upward pressure on yields. Reports this morning indicate that Treasury Secretary Bessent is considering utilizing the roughly $950 billion Treasury General Account (TGA) to help finance expanded government bond buybacks, potentially providing additional support to the Treasury market without requiring Fed involvement. In our view, the Treasury's intervention underscores the administration's sensitivity to rising interest rates. While buybacks of Treasury securities with 10 to 30 years remaining to maturity may improve market liquidity and investor sentiment at the margin, we believe they are unlikely to offset the fundamental forces driving yields higher. In our view, those include persistent inflation concerns, geopolitically driven energy risks, uncertainty surrounding the Fed's policy path over the next several months, resilient economic growth fueled in part by heavy AI-related investment, and increased bond issuance from both the public and private sectors.
   
• Markets can withstand current yields; Jackson Hole is the next key test - Although higher yields remain a headwind for fixed income returns and equity valuations, we do not believe current levels represent a material threat to the economy, corporate earnings, or equity markets. The 10-year Treasury yield peaked near 5% in 2023 and has largely remained within a broad trading range since then, while still below the economy's roughly 6.5% nominal GDP growth rate. Meanwhile, equity valuations have already compressed this year, leaving earnings growth as the primary driver of market performance. As long as economic activity remains solid and profits continue to expand, higher yields are more likely to act as a valuation constraint than a catalyst for a broader market downturn, in our view. Looking ahead, investors will be closely watching for signals from the Fed's Kevin Warsh at the Jackson Hole symposium, where any clues on the policy outlook, or the Fed's tolerance for above-target inflation, could influence both bond yields and broader market sentiment.

Angelo Kourkafas, CFA;
Investment Strategy

^{Source for all data: Bloomberg.}

• Markets rebound on Friday – U.S. equity markets were higher across the board on Friday as investors looked for buying opportunities after a near 2.0% sell-off in the S&P 500 earlier this week. The Dow Jones outpaced the S&P 500 and the tech-heavy Nasdaq. This comes after U.S. Treasury Secretary Bessent announced on Wednesday that the Treasury would at least double its buybacks of longer-dated Treasury securities, increasing purchases from roughly $2 billion to at least $4 billion, and suggested the buybacks could be expanded further if needed. He also noted that the administration would unveil a plan for fiscal consolidation in the days ahead. While Treasury yields have stabilized somewhat, they remain near the highs of the year, with the 10-year yield at about 4.73% and the 30-year yield at around 5.27%. In our view, the 10-year yield is likely to remain in the 4.5% to 5.0% range, and upcoming inflation readings will likely be critical inputs for both yields and the Federal Reserve interest rate decision.
   
• What do higher yields mean for investors? – Treasury yields are close to the highs of the year, with the 30-year Treasury yield near the highest level since 2007. What do higher yields mean for investors? First, the cost of borrowing increases, both for consumers, in areas like mortgages and auto loans, and for corporations looking to tap the debt market. But keep in mind, this economy has been able to grow steadily even with fluctuating yields. Higher yields also mean there is an alternative to equity markets, which can put downward pressure on stocks and valuations. Perhaps the silver lining is that for savers, or for those in retirement, near retirement or just looking for income, higher Treasury yields may provide that income opportunity. In addition, from the perspective of the Federal Reserve, higher yields also mean that the market is doing some form of tightening for the Fed.
   
• U.S. economic surprise index moves lower this month – The Citi U.S. economic surprise index, a measure of how U.S. economic data comes in versus forecast, has moved lower in recent weeks, indicating some cooling of the momentum in the U.S. economy. The index, which peaked at around 63 in early June, is now around 21 levels, suggesting economic surprises are still positive, but the magnitude and frequency of these upside surprises have eased. This likely has been driven by weaker-than-expected nonfarm-jobs reports as well as softer retail-sales and inflation readings. Overall, we believe that the U.S. economy has remained resilient, but that the Federal Reserve may consider this recent cooling as it debates whether to raise rates at the September FOMC meeting. In our view, if this backdrop of elevated Treasury yields and moderating economic data holds, the Fed may keep rates steady rather than raise rates and risk further deterioration in consumption and growth.

Mona Mahajan;
Investment Strategy

^{Source for all data: FactSet.}