Hawks, Jobs, & New Highs
By Crest Capital Advisors on August 10, 2026
Dow: 2.96% to 54,036.93
S&P 500: 3.58% to 7,757.64
Nasdaq: 5.19% to 26,588.85
Russell 2000: 3.52% to 3,034.49
Bitcoin: 65,205
10 Year Yield: 4.65%
Outperformers: Tech 7.22%, Materials 5.61%
Underperformers: Energy (3.30%), Utilities (1.72%), Real Estate (0.12%)
Major US indices were higher this week, with the S&P and Nasdaq both seeing their strongest weeks since April and the S&P ending at a fresh all-time high. Momentum outperformed again, though semis and memory were up and down through the week.
The week was somewhat more micro than macro as investors worked through another big week of Q2 earnings, with 88% of the S&P 500 now reported. Earnings growth continued to come in very strong, with guidance and revision trends also well received – more on that below.
Treasuries were stronger across the curve, with the 30-year bond yield coming off its post-2007 highs. The Treasury’s quarterly issuance of new debt and forecast kept issuance levels stable and repeated its longstanding guidance that these will require no change for at least the next several quarters. In oil-related news, WTI crude settled down (7.7%) for the week, notching its second straight weekly decline after rising for three weeks through the Mideast escalation.
Economic data was mixed this week. The week’s big economic release was for July nonfarm payrolls, which contracted by 23,000 (first decline since February against expectations for 80,000) while the unemployment rate dropped to 4.1%, but with help from another drop in labor-force participation. Elsewhere, July ISM manufacturing topped consensus and rose to its highest level since May 2022. This led to more debate about rate policy and Fed Chair Warsh’s communication-lite strategy. The mixed economic data gave a lot of room for the Fed to not have to raise rates and tempered the recent hawkish Fedspeak. Rates on the long end of the curve declined as the market shifted from forecasting a new rate hike cycle (a pivot that we here at CMD have never thought was probable).
Payroll Surprise!
Friday morning’s July payroll report delivered a decidedly weaker picture of the labor market. Nonfarm payrolls contracted outright during the month at -23,000, while May payroll growth was revised from 129,000 to just 63,000 and June from 57,000 to 20,000. Combined, those revisions erased 103,000 jobs from the prior two months, suggesting the recent pace of hiring has been considerably softer than initially reported.
We would still caution against reading too much into a single July print. The headline contraction conflicts with several contemporaneous labor indicators we follow, and July is notoriously difficult to measure given seasonal adjustments exceeding one million jobs. Still, the revisions are harder to dismiss and reinforce the possibility that hiring momentum is cooling beneath the surface. For now, we would characterize the labor market as slowing rather than breaking, but the next several reports deserve considerably more attention.
One side benefit of Friday’s report is that it should quiet, at least temporarily, the increasingly loud chorus of media pundits arguing that another Fed rate hike is imminent. (Much more on this topic below…keep reading!) A weakening employment backdrop makes the rate hike narrative considerably harder to sell.
Handwringing About the Fed
Suddenly, everyone wants to talk about the next Fed rate hike. We continue to believe that conversation is badly misplaced. Inflation remains somewhat elevated, longer term Treasury yields have moved higher, and Chairman Warsh has deliberately removed much of the forward guidance markets grew accustomed to under previous Fed regimes. None of those conditions, however, requires another increase in the Fed Funds rate. Yet listen to enough financial television, and one could be forgiven for thinking a hike is lurking around every corner.
Start with the 10-year Treasury. There has been plenty of angst surrounding yields in the mid-4 % range, but the historical comparison in the chart below provides some useful perspective. The average 10-year yield this year is approximately 4.4%, below the average yield of every single year during the 1990s. And that decade somehow managed to produce extraordinary economic growth, enormous productivity gains, technological innovation, expanding profit margins, and one of the greatest equity bull markets in history. The comparison feels particularly relevant today given Artificial intelligence is driving another enormous investment cycle in computing, power, data centers, semiconductors, and infrastructure, with the potential for substantial productivity gains throughout the broader economy.
Part of the current anxiety has less to do with monetary policy than with how monetary policy is being communicated.
Chairman Warsh has intentionally moved the Fed away from explicit forward guidance, and we think he is right to do so. For years, investors became conditioned to having the Federal Reserve effectively provide a roadmap for future policy. Every adjective in the statement was parsed, every dot wasanalyzed, and every press conference became an exercise in determining what the Fed had already decided to do several meetings into the future. That creates false precision around something inherently uncertain.
Forward guidance can lock policymakers into paths that incoming data no longer justify, while markets begin trading the Fed’s promises rather than the economy itself. Removing that guidance restores flexibility. Rates can respond to inflation, employment, productivity, and financial conditions as they actually develop rather than according to a script written months earlier.
The financial press appears considerably less enthusiastic about the arrangement. Treasury Secretary Scott Bessent made that tension explicit this week when he took a decidedly unsubtle shot at Wall Street Journal Fed watcher Nick Timiraos, accusing journalists of relying on Fed “backroom gossip” rather than independent economic analysis. Whatever one thinks of the delivery, the underlying debate is worth considering. A Fed that leaks less, promises less, and telegraphs fewer future decisions inevitably makes life harder for anyone whose job depends on predicting its next move. See below for the tweet we’re referencing.
Warsh can still improve the framework. Eliminating forward guidance works best when investors understand the Fed’s reaction function. Markets do not need to know what the Fed will do six months from now, but they should understand how policymakers intend to evaluate inflation, balance sheet policy, financial conditions, productivity, and temporary supply shocks when making that decision.
The current lack of clarity has contributed to a higher term premium and greater volatility farther out on the yield curve. But investors should be careful about translating that volatility into an imminent Fed hike.
We remain firmly in the NO HIKE camp.
Higher long-term yields do not automatically require higher overnight rates. Energy driven inflation does not automatically require tighter monetary policy. And the disappearance of forward guidance certainly does not mean Warsh is quietly preparing markets for another tightening cycle.
The Fed is doing something markets have not experienced in quite some time: it is refusing to tell investors today what it intends to do tomorrow. That uncertainty may be uncomfortable, particularly for talking heads required to have an answer before every commercial break. But uncertainty and hawkishness are not synonyms. Investors who mistake uncertainty for hawkishness risk positioning for a tightening cycle that we simply do not believe is coming.
Profits Sky High
The major building block of bull markets, corporate profits, remains on extremely solid footing. As we discussed in last week’s CMD (and again further into this week’s CMD), Q2 earnings are tracking well ahead of expectations, with growth running at roughly double initial estimates. Looking ahead, consensus expectations for the next three quarters have also seen modest upward revisions. From our perspective, the more important question is whether we are approaching peak profit growth. Slower earnings growth is likely the more reasonable base case going forward, but that does not, by any means, signal the end of the bull market. Capex plans remain intact, although the areas attracting investment appear to be shifting as companies adjust their priorities.
Contrarian Corner
Despite the stock market making fresh all-time highs this week, we find a strange disconnect with investor sentiment. The AAII bullish/bearish poll continues to skew slightly bearish. Contrarians take note…if the average investor continues to be skeptical, or even bearish, it’s likely there is more room for markets to run. It’s only when positioning gets heavily one-sided to one direction or another that we get concerned about a possible turn.
Earnings Season Update
So far, Q2 earnings growth has DOUBLED initial estimates! The headline earnings growth as of earlier this week stood at 49.6%, which again is more than double the initial estimate of 24.4%. While much of the upside has come from the communications and discretionary sectors, the strength has been broad-based.
Every sector has exceeded its initial earnings expectations, with utilities as the only exception. Revenue growth has also been impressive, with expectations now at 15.1%, up from the initial estimate of 11.7%. Overall, the earnings season continues to reinforce a fundamental backdrop that remains supportive for equities. The focus now shifts to whether we are approaching peak earnings growth. Although earnings estimates for the next few quarters have continued to move higher, the revisions have been relatively modest.
Economic Funnies
Crazy Stat of the Week
- According to data from Goldman Sachs, call option buying on a single day earlier this week exceeded 4 million contracts on the S&P 500, the highest level ever recorded. See chart below.
Quote of the Week
“Forget consensus. To my knowledge, no business at our scale has ever grown half as much.”
– Alex Karp, Palantir CEO (earnings call quote from 8/3/2026)
Calendar of Events to Watch for the Week of August 10th
Earnings remain elevated at peak levels, but with almost 90% of the S&P 500 having reported Q2 at this point, we’re nearing the end of peak flows, particularly as we hit 13F deadline day next Friday, August 14th (For those that don’t know, 13F’s report hedge fund holdings as of the last quarter-end).
Brokerage Conferences start to kick up next week as we move along past the bulk of earnings, with notables being the Canaccord Genuity Growth Conference, Oppenheimer Tech, Internet, & Communications Conference, Raymond James’s Energy Summit and Industrial Showcase, and JP Morgan’s Auto Conference. We expect a plethora of market-moving company updates coming out of these conferences.
Next week, we get key US Economic Readings on the NFIB Small Business Index on Tuesday, CPI on Wednesday, and then wrap the week with Retail Sales on Friday.
Monday 8/10 – No major US economic reports today.
Tuesday 8/11 – The NFIB Small Business Index for July will be out with expectations of a modest uptick from last month’s 97.4 reading. US Existing Home Sales for July are expected to decline by about 0.4%.
Wednesday 8/12 – The July Consumer Price Index (CPI) is expected to show a 0.1% monthly increase at the headline and a 0.2% monthly increase at the Core. The Core (Ex-Food/Energy) is expected to post a 2.5% year-over-year rate of increase.
Thursday 8/13 – The July Producer Price Index (PPI) is expected to post a 0.3% monthly increase at the Core (Ex-Food/Energy) and a headline 0.1% monthly increase. This historically volatile data set takes on much less importance than the CPI report.
Friday 8/14 – July Retail Sales are expected to show a 0.2% increase, in line with last month’s 0.2% increase. Business Inventories are expected to also post a 0.2% monthly increase.
Source: MarketWatch / FactSet (August 7, 2026)
