The S&P 500 achieved a record close on Friday, capping off a strong week, as investors interpreted an unexpected contraction in July’s job market as a signal for the Federal Reserve to pause interest rate hikes. This sentiment drove broad market gains, with the Nasdaq Composite outperforming and various tech and travel stocks surging on positive earnings and industry developments.
The S&P 500 achieved a historic milestone on Friday, reaching a fresh closing record and concluding a remarkable week of gains. Traders largely embraced a surprisingly weak July jobs report, interpreting the data as a strong signal that the Federal Reserve might hold off on immediate interest rate hikes, maintaining a supportive monetary policy environment.
This optimism propelled the broad market index to advance 0.62%, closing at 7,757.64. The tech-heavy Nasdaq Composite led the charge, soaring 1.3% to 26,690.62, while the Dow Jones Industrial Average added 151.83 points, or 0.28%, to finish at 54,036.93.
All three major indexes enjoyed a second consecutive week of gains, marking their best weekly performance since April. The S&P 500 climbed 3.6% over the period, having breached the 7,700 mark for the first time ever earlier in the week. The Nasdaq surged an impressive 5.2%, bolstered by a robust bounce-back in chip stocks, with the iShares Semiconductor ETF (SOXX) ending the week up more than 7%. The Dow also recorded a healthy gain of nearly 3%.
The catalyst for this market rally was July's nonfarm payrolls report, which unexpectedly showed a loss of 23,000 jobs, starkly contrasting Dow Jones economists' forecast for an 83,000 gain. Furthermore, June's figures were revised downward. While the unemployment rate fell to 4.1%, this was primarily attributed to a drop in the labor force participation rate to its lowest level in over five years, rather than genuine job market strength. Economists had anticipated the unemployment rate to remain at 4.2%.
This 'weaker' jobs report, as described by Goldman Sachs chief economist Jan Hatzius, shifted market expectations significantly. A majority of fed funds futures traders now anticipate the central bank will maintain its benchmark lending rate at 3.50% to 3.75% at the September policy meeting, a dramatic change from just a day prior when a 55% chance of a quarter-point hike was priced in. Saira Malik, Nuveen's chief investment officer, noted on CNBC's "Squawk Box" that these numbers help counter the Fed's narrative for needing to raise rates.
Software stocks were among Friday's top performers, assuaging fears that artificial intelligence (AI) would disrupt the industry. Cloudflare popped over 5% after providing a solid full-year and current-quarter outlook. Atlassian shares jumped a remarkable 35% following strong fourth-quarter adjusted earnings and revenue that surpassed expectations, coupled with upbeat guidance.
Other notable company performances included Airbnb, whose shares rallied 17% after exceeding top and bottom-line estimates and raising full-year revenue and margin guidance. CEO Brian Chesky credited AI with driving strong performance and noted that first-time bookers are growing at their fastest pace in four years.
Elon Musk's Space Exploration Technologies (SpaceX) also surged 12% on Friday, marking its first week in the green after four consecutive weeks of declines. The stock was up nearly 19% week-to-date, fueled by an Argus upgrade to 'buy' and a $160 target, alongside investor optimism about its fundamentals. SpaceX CEO Elon Musk also announced Nvidia would be their exclusive partner for its AI buildout, leading Nvidia shares to climb more than 10% on the week.
In the energy sector, oil prices saw slight gains on Friday but ended the week lower due to ongoing speculation about a potential deal between the U.S. and Iran to reopen the Strait of Hormuz. West Texas Intermediate futures for September delivery settled 1.15% higher at $78.18 per barrel, while Brent crude climbed 1.29% to $83.55. However, the S&P 500 Energy sector fell more than 2% for the week, with majors like Chevron and ExxonMobil seeing significant losses as crude prices tumbled.
Precious metals, including gold and silver, enjoyed a strong week. December gold futures reached a high of $4,380.20 an ounce, up 6.6% for its best weekly performance since January. Silver futures for September delivery soared 11.84%, hitting a six-week high of $64.96 an ounce, its biggest weekly gain since February.
Other significant movers included Coherent, which popped nearly 16% on speculation of a Trump administration ban on Chinese data center component imports. First Solar jumped approximately 5% after President Trump imposed new tariffs on polysilicon products from China. Boeing shares rose about 7% for their best week since early April, boosted by FAA approval for its 737 Max 7 and a pullback in oil prices. Conversely, Under Armour dropped over 3% after lowering its revenue guidance due to softer demand, especially in North America and Asia-Pacific. Wendy's shares dropped 2% after reporting a global sales decrease and withdrawing its 2026 financial outlook, despite beating earnings estimates. Twilio, the customer engagement platform, saw shares surge more than 17% premarket after beating adjusted earnings and revenue expectations and boosting its full-year revenue growth forecast.
Globally, Asia-Pacific markets closed mixed amid Strait of Hormuz uncertainty, though China's exports jumped 23.9% in July, beating estimates. European markets started Friday in positive territory, with healthcare and technology leading gains. Kirin Holdings shares rose after an agreement to acquire Canadian supplements maker Jamieson Wellness, expanding its health supplements business. Eutelsat, Europe's challenger to Starlink, posted better-than-expected revenue figures but remained loss-making.
Investor sentiment, as measured by the American Association of Individual Investors (AAII) weekly poll, showed an increase in optimism but remained below the historic average for the third time in four weeks. A majority of respondents (55.1%) supported the Fed's decision to keep overnight lending rates unchanged, with a former Dallas Fed Chair also expressing satisfaction with July's job report, not seeing it as a disappointment and not favoring rate hikes.
