The broader market advanced modestly last week and continued to be led by a rotation into smaller-cap stocks along with optimism across select cyclical sectors. The Russell 2000 surged 3.3% and the S&P Mid Cap 400 climbed 2.6%, signaling broad support for domestically oriented stocks, while the Dow Jones rose 1.5%, finishing the week with fresh record highs. The S&P 500 only added 0.3%. The Nasdaq lagged behind the other indices, retreating 0.6% week-to-date, reflecting ongoing headwinds for the mega-caps.
The iShares U.S. Home Construction ETF gained 3.0%, while consumer discretionary rose 1.3%, underscoring interest in sectors positioned to benefit from a potentially more accommodative policy stance. The financials (+2.1%), industrials (+1.8%), materials (+2.1%), and energy (+2.8%) sectors also contributed meaningfully to the week’s gains. Conversely, defensive and large-cap technology names lagged. The technology sector fell 1.6%, the communication services sector retreated 0.9%, and the Vanguard Mega Cap Growth ETF closed the week down 1.1%, reflecting continued rotation away from mega-cap and tech-heavy indices toward smaller and more cyclical stocks.
The Markets surged on Friday after Fed Chair Jerome Powell’s Jackson Hole speech hinted at a willingness to adjust policy if conditions warrant, while Cleveland Fed President Beth Hammack emphasized that inflation remains elevated. The probability of a 25-basis-point rate cut at the September FOMC meeting fluctuated during the week but finished elevated, providing a cautiously supportive backdrop for equities.