The US equity markets continued their strong momentum last week, with all major indices posting gains. The S&P 500 achieved its fifth consecutive record close with a 1.5% weekly gain, while the Nasdaq reached fresh all-time highs, advancing 1% for the week. Treasury bonds traded mixed, with short term rates around 5bps higher while 10 and 30 years bonds finished 3-6bps lower. Meanwhile, credit spreads rallied 2-3bps on better risk sentiment.
Strong corporate earnings from major companies like Alphabet and Verizon exceeded expectations, boosting investor confidence. The technology sector, led by the "Magnificent Seven" companies, continued to drive gains as investors remained confident in areas like artificial intelligence and cloud computing. Additionally, a resurgence in meme stock trading activity signaled strong risk appetite among some market participants.
Trade optimism also played a significant role as news of trade deals with Japan and other countries helped ease concerns about escalating tensions ahead of the critical August 1st tariff deadline. Trump announced during the weekend a trade deal with the European Union of 15% tariffs, supporting the current positive sentiment. The market rally was also backed by solid economic data, including encouraging data showing a rebound in consumer spending and strong employment figures.
For this new week, the Federal Reserve's rates meeting decision and any guidance on future monetary policy will be closely watched. Also very important will be the earnings results from tech giants Apple, Meta, Microsoft, and Amazon. The looming August 1st tariff deadline remains a key risk factor, with markets likely to remain sensitive to any developments in trade negotiations or potential tariff implementations.
