The Best Week for Stocks Since April, and What Actually Drove It

The S&P 500 finished at a record and all three major indexes posted their largest weekly percentage gains since April.

Two inputs, pointing the same way

Second-quarter earnings came in strong enough to support current multiples, and July payrolls came in soft enough to reduce near-term policy pressure. Equities get their best weeks when the earnings side delivers and the rate side relaxes at the same time, and that is what happened here.

Payrolls fell 23,000 against a consensus near +80,000, with 103,000 jobs revised away from the two prior months. September hike odds went from the mid-50s to the low-40s.

The week was not uniformly kind

Underneath the index gains the dispersion was severe. Atlassian jumped 35% on a clean beat and a strong guide. Datadog beat and fell 19%. Trade Desk fell more than 20% on its outlook alone. A record close at the index level and a 20% single-name drawdown are not in tension; they are the same market applying one rule with no patience for a forward number that misses.

What carries into next week

The rate leg of this rally is an expectation, not a decision. It was built on one labor print and it can be unbuilt by the next one. The earnings leg is banked. That asymmetry is worth remembering if the following data comes in firmer.