Stocks Finish Strong Week Higher as Soft Jobs Report Boosts Rate-Cut Hopes

Stocks closed the week on a positive note Friday as a weaker-than-expected July employment report eased concerns about additional Federal Reserve tightening and sparked renewed buying across growth stocks and other interest rate-sensitive sectors. The S&P 500 gained 0.6%, the Nasdaq Composite advanced 1.3%, and the Dow Jones Industrial Average added 0.3%. All three major indices finished the week with gains of at least 3.0%, while the Russell 2000 (+1.1%) and S&P MidCap 400 (+1.3%) also posted strong weekly performances.

The July Employment Situation Report provided the session’s primary catalyst. Payroll growth came in at zero for the month, accompanied by a significant downward revision to June’s figures, reinforcing signs of a cooling labor market. The softer data prompted investors to scale back expectations for additional Federal Reserve rate hikes, driving Treasury yields lower and improving sentiment across equities.

According to the CME FedWatch Tool, the probability of a 25-basis-point rate increase at the September FOMC meeting fell to 41.9% from 55.0% on Thursday. Expectations for at least one additional rate hike by October also declined, dropping to 57.3% from 71.0%. The shift in policy expectations provided a meaningful boost to growth-oriented and other interest-sensitive sectors.

Technology was among the biggest beneficiaries of the friendlier rate backdrop. The information technology sector rose 1.3%, supported by a 2.6% gain in the Philadelphia Semiconductor Index as chipmakers extended this week’s rebound. Software stocks also enjoyed another strong session, lifting the iShares Expanded Tech-Software ETF 3.3%.

Cloudflare rallied following its earnings report, while Palantir Technologies extended its impressive post-earnings surge from earlier in the week. Datadog and AppLovin also recovered a portion of Thursday’s steep post-earnings declines, reflecting renewed investor confidence in software and AI-related companies.

Strength extended well beyond the technology sector. Consumer discretionary stocks gained 1.3%, led by Tesla’s 2.8% advance, a strong post-earnings rally in Airbnb, and broad buying across homebuilders and other rate-sensitive industries.

The materials sector outperformed with a 1.5% gain as Newmont Corporation surged more than 7% alongside a rebound in precious metals prices.

Mega-cap technology companies continued to provide important support, with the Vanguard Mega Cap Growth ETF rising 0.9%. SpaceX also staged a strong rebound, recovering much of its post-earnings decline from earlier in the week. At the same time, solid gains in both the Russell 2000 and S&P MidCap 400 highlighted that Friday’s rally extended well beyond the market’s largest companies.

A few areas of weakness remained. Communication services slipped 0.4% as The Trade Desk continued to tumble following its earnings report, while Alphabet extended its recent decline after reports earlier in the week that several senior AI executives had left the company.

The energy sector fell 1.2%, making it the weakest-performing S&P 500 sector despite another increase in oil prices. WTI crude oil futures settled $0.92 higher, or 1.2%, at $78.19 per barrel, although prices retreated after the market closed following reports that Oman and Iran continue to make progress toward an agreement to reopen the Strait of Hormuz.

Financials also underperformed, slipping 0.3% and joining communication services and energy as the only S&P 500 sectors to finish lower.

Friday’s gains capped an impressive week for equities, driven by a combination of encouraging corporate earnings and a softer labor-market report that reduced expectations for further Federal Reserve tightening. Investor attention now turns to next week’s July Consumer Price Index report, which could play a pivotal role in determining whether inflation is cooling enough to keep policymakers on hold and extend the market’s recent momentum.

Our FTinvest 11 model portfolio gained 0.17% to close at 1,063.05, extending its stabilization phase with a second consecutive positive session. While the advance was modest, it reflects continued resilience following the recent pullback from July’s record highs. The portfolio remains comfortably above the 1,000 level and trades approximately 3.1% below its all-time closing high of 1,096.33.

FTinvest 11 is now up approximately +14.47% year-to-date, maintaining a strong double-digit return for 2026. The recent sideways trading suggests the portfolio is consolidating after an exceptional run that saw it recover from June’s correction and establish multiple new all-time highs in July. Despite the quieter market action, FTInvest 11 continues to preserve the vast majority of its gains, reflecting the resilience of its disciplined, value-driven investment strategy and its long-term focus on capital appreciation.