Stocks Finish Higher as Amazon Leads Megacaps Higher

The S&P 500 Index ($SPX) (SPY) on Friday closed up +0.70%, the Dow Jones Industrial Average ($DOWI) (DIA) closed up +0.53%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.60%.  September E-mini S&P futures (ESU26) rose +0.69%, and September E-mini Nasdaq futures (NQU26) rose +0.59%.

Stock indices settled higher on Friday, with the S&P 500 and Nasdaq 100 posting 1-week highs.  Amazon.com surged more than 15% to lead megacap technology stocks higher, which bolstered market sentiment.  Amazon’s cloud unit recorded the fastest quarterly revenue growth in 5 years in Q2, reassuring investors that its projected increase in capital spending will generate sufficient returns and that the global AI buildout will be sustained. 

Stocks rallied on Friday despite better-than-expected US economic news and hawkish Fed comments that pushed bond yields higher.  The 10-year T-note yield jumped to a 1.5-year high of 4.75% on Friday.  Also, Friday’s -9% plunge in Apple was a negative factor for technology stocks after it reported disappointing service revenue and revenue from China.  It also gave a weaker-than-expected revenue forecast.

Friday’s US economic news was stronger than expected.  The US Q2 employment cost index rose +0.9%, stronger than expectations of +0.8%.  Also, the July MNI Chicago PMI unexpectedly rose +0.9 to 57.6, stronger than expectations of a decline to 56.0.  In addition, the University of Michigan US July consumer sentiment index was unexpectedly revised upward to a 5-month high of 55.2, stronger than expectations of a downward revision to 54.0.

Hawkish comments on Friday from Dallas Fed President Lorie Logan pushed bond yields higher and weighed on stocks when she said, "Without any policy restraint, inflation will likely continue to trend above target until there's an unanticipated shock.  Modest action in the near term would reduce the likelihood of needing to take sharper action later."

Weaker-than-expected Chinese economic news is negative for global growth prospects after the China July manufacturing PMI fell -1.1 to 49.2, weaker than expectations of 50.1 and a 5-month low.  Also, the July non-manufacturing PMI fell -1.2 to 49.0, weaker than expectations of 49.0 and the weakest level in 3.5 years.

Sep WTI crude oil prices (CLU26) rose more than +1% on Friday even after there were no fresh attacks by the US and Iran against each other overnight.  However, Houthi leader Abdulmalik al-Houthi said Friday that there were indications the Saudis were heading toward "comprehensive escalation," which he said would be met with a fiercer campaign. 

Tensions remain high in the Middle East.  In addition to the Houthi attempt to blockade Saudi ports in the Red Sea, the US is maintaining a full maritime blockade of vessels calling at Iranian ports.  Also, Iran continues to menace shipping transiting the Strait of Hormuz.  In addition, diplomatic attempts to reopen the Strait of Hormuz appear to be at an impasse. 

The outlook for strong Q2 earnings, which continued this week, is a bullish factor for stocks.  Forecasts compiled by Bloomberg Intelligence suggest Q2 earnings may increase by +23%, close to Q1’s blowout earnings of +30%, which was more than double the +12% analysts had expected.  AI spending is expected to account for most of earnings, with AI infrastructure stocks set to contribute nearly 60% of the S&P 500's earnings-per-share growth in Q2. So far, earnings results have been positive, with 86% of the 291 S&P 500 companies that have reported Q2 earnings beating estimates, according to Bloomberg data. 

The markets are discounting a 67% chance of a +25 bp rate hike at the next FOMC meeting on September 15-16.

Overseas stock markets settled higher on Friday.  The Euro Stoxx 50 climbed to a 3.5-week high and closed up +0.21%.  China's Shanghai Composite closed up +0.72%.  Japan's Nikkei-225 Stock Average closed up sharply by +4.03%.

Interest Rates

September 10-year T-notes (ZNU6) on Friday closed down -17.5 ticks.  The 10-year T-note yield rose +6.8 bp to 4.741%.  Sep T-notes tumbled to a 1.5-year nearest-futures low on Friday, and the 10-year T-note yield rose to a 1.5-year high of 4.745%.  T-notes were under pressure on Friday amid stronger-than-expected US economic reports including the Q2 employment cost index, the Jul MNI Chicago PMI, and the University of Michigan US Jul consumer sentiment index.  Also, Friday’s +1% increase in WTI crude oil prices raised inflation expectations, a bearish factor for T-notes.  T-notes added to their losses after Dallas Fed President Lorie Logan said she favors tighter Fed policy to curb inflation. 

European government bond yields moved higher on Friday.  The 10-year German bund yield rose to a 1-week high of 3.209% and finished up +5.2 bp to 3.206%.  The 10-year UK gilt yield rose +6.6 bp to 5.050%.

France Jul CPI rose +0.6% m/m and +2.1% y/y, stronger than expectations of +0.3% m/m and +1.8% y/y.

German July unemployment rose +6,000, showing a weaker labor market than expectations of +5,000.  The July unemployment rate unexpectedly rose +0.1 to 6.4%, showing a weaker labor market than expectations of no change at 6.3%.

The markets are discounting a 90% chance of a +25 bp ECB rate hike at their next policy meeting on September 10.

US Stock Movers

The Magnificent Seven technology stocks, sans Apple, rallied on Friday to support the gains in the broader market.  Amazon.com (AMZN) closed up more than +14% to lead gainers in the S&P 500, Nasdaq 100, and Dow Jones Industrials after reporting Amazon Web Services net sales of $42.23 billion, stronger than the consensus of $40.57 billion. Also, Alphabet (GOOGL) closed up more than +6%, and Microsoft (MSFT), Meta Platforms (META), and Nvidia (NVDA) closed up more than +3%.  In addition, Tesla (TSLA) closed up +0.76%.

Energy producers and service providers gained on Friday as WTI crude oil prices rose more than +1%.  APA Corp (APA), Baker Hughes (BKR), Chevron (CVX), and Devon Energy (DVN) closed up more than +2%.  Also, Diamondback Energy (FANG), Haliburton (HAL), Occidental Petroleum (OXY), SLB Ltd (SLB), and ConocoPhillips (COP) closed up more than +1%

Cryptocurrency-exposed stocks were under pressure on Friday as Bitcoin (^BTCUSD) fell more than -2% to a 2.5-week low.  Coinbase Global (COIN) closed down more than -10% after reporting Q2 total revenue of $1.22 billion, weaker than the consensus of $1.29 billion.  Also, Riot Platforms (RIOT) closed down more than -8%, and Strategy (MSTR) and MARA Holdings (MARA) closed down more than -4%.  In addition, Circle Internet Group (CRCL) and Galaxy Digital Holdings (GLXY) closed down more than -2%.

Dexcom (DXCM) closed up more than +10% after reporting Q2 revenue of $1.31 billion, better than the consensus of $1.29 billion, and raising its full-year revenue forecast to $5.18 billion to $5.25 billion from a previous forecast of $5.16 billion to $5.25 billion. 

Monolithic Power Systems (MPWR) closed up more than +8% after reporting Q2 revenue of $980.6 million, well above the consensus of $903.3 million, and forecasting Q3 revenue of $1.14 billion to $1.16 billion, stronger than the consensus of $986.4 million. 

Eaton Corp Plc (ETN) closed up more than +7% after reporting Q2 organic sales rose +14%, stronger than the consensus of +9.72%.

Weyerhaeuser (WY) closed up more than +6% after reporting Q2 net sales of $1.87 billion, better than the consensus of $1.82 billion. 

BBB Foods Inc (TBBB) closed up more than +2% after Citigroup initiated coverage on the stock with a buy recommendation and a price target of $49.

Roblox (RBLX) closed down more than -26% after reporting Q2 daily active users of 123 million, well below the consensus of 128.71 million.

Reddit (RDDT) closed down more than -20% after reporting Q2 US daily active users of 53.2 million, below the consensus of 54 million. 

GoDaddy (GDDY) closed down more than -16% to lead losers in the S&P 500 after reporting Q2 total bookings of $1.42 billion, below the consensus of $1.43 billion. 

Apple (AAPL) closed down more than -9% to lead losers in the Dow Jones Industrials and Nasdaq 100 after reporting Q3 service revenue of $30.74 billion, weaker than the consensus of $31.36 billion, and Q3 Greater China revenue of $18.82 billion, below the consensus of $19.58 billion.

Stryker (SYK) closed down more than -6% after reporting Q2 organic revenue growth of 9.00%, weaker than the consensus of 9.04%. 

Earnings Reports (8/3/2026)

Alexandria Real Estate Equities (ARE), Berkshire Hathaway Inc (BRK/A), Clorox Co/The (CLX), Diamondback Energy Inc (FANG), EchoStar Corp (ECHO), Loews Corp (L), Marriott International Inc/MD (MAR), ON Semiconductor Corp (ON), ONEOK Inc (OKE), Palantir Technologies Inc (PLTR), SBA Communications Corp (SBAC), TKO Group Holdings Inc (TKO), Tyson Foods Inc (TSN), Vertex Pharmaceuticals Inc (VRTX), Williams Cos Inc/The (WMB).