Stocks at Record Highs – Bulls are in Charge in August

.S. stocks have pushed higher so far this week, with both the S&P 500 (SPX) and Russell 2000 (RUT) reaching record highs.

As investors welcomed encouraging inflation data, stability for oil prices, and another round of solid earnings, the ‘risk-on’ tone has expanded beyond mega-cap technology and has helped lift small-cap stocks alongside the major indices.

The S&P 500 climbed to a new all-time high above 7,800 on Thursday and finished at a record close near 7,799, while the Russell 2000 also ended the session at a fresh record high. Small caps have benefited from easing interest rate concerns and growing confidence that the Federal Reserve may not need to tighten policy further this year. The expectations for a rate hike at the September FOMC meeting are down to a 35% probability according to the CME FedWatch Tool.

With the S&P 500 and Russell 2000 now sitting at record highs, investors will keep their eyes on headline risks out of the Middle East and oil prices into the weekend. Looking ahead to next week, traders will focus on upcoming earnings and guidance from retailers for clues on whether consumers remain strong enough to support the rally through the remainder of August.

Behind the Market Rally: Easing Inflation Fears

Weaker inflation data this week has supported the push into equites. Wednesday's Consumer Price Index report met expectations, showing July CPI rose 0.1% month-over-month with the year-over-year falling to 3.4%. Thursday's Producer Price Index came in softer than expected. Headline PPI was unchanged from the prior month versus forecasts for a 0.2% increase, and the year-over-year figure fell to 4.7% versus the 4.9% expected. This reinforced hopes that inflation trends continue to moderate and eased concerns about additional Fed rate hikes. Investors responded by buying up equities.

Treasury yields were relatively stable this week, while oil prices pulled back sharply. The benchmark 10-Year Yield has consolidated near 4.65% as of Thursday’s close. WTI crude fell to near $81 per barrel on Thursday after a large build in U.S. EIA inventories and signs of weaker demand according to the IEA. Although oil is still up about 5% this week, this helped alleviate concerns that higher energy costs could reignite inflation.

Earnings and Technology Drive Momentum

Earnings continued to drive individual stock performance this month. AI-related technology names remained the leadership sector this week, helping power gains in the Nasdaq-100 (NDX) and broader market. Memory and semiconductor stocks such as Micron (MU) and SanDisk (SNDK) advanced 8.2% and 26.1% respectively this week as of Thursday’s close. Large-cap technology leaders including Nvidia (NVDA) and Meta (META) continued to support market momentum this month. It wasn’t all roses for post-earnings moves this week. Cisco Systems (CSCO) fell more than 8% on Thursday despite reporting results that topped expectations, as investors were skeptical about gross margins slowing.

The combination of moderating inflation, less volatile oil prices, resilient earnings growth, and strong AI-related demand has helped keep investors focused on economic growth rather than higher interest rates and geopolitical tensions.

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