Market Overview

The market sent a loud and clear message this week: the American economy is standing on solid ground. Investors are putting their money to work, shifting out of safety and into growth. The spark for this optimism was the latest inflation data, which cooled to 2.8%. When you combine easing prices with a consumer base that is feeling more hopeful about the future, you get a powerful recipe for a rally. Wall Street is betting on expansion, not recession. We saw this confidence drive stock prices higher while traders sold off defensive assets like government bonds and gold. The fear gauge is dropping, and the appetite for risk is climbing.

U.S. Equities

The action in the stock market was broad and healthy. It wasn't just the big names doing the heavy lifting. While Large Cap Growth stocks posted a solid 0.72% gain thanks to the tech giants, the real story was in the smaller companies. Small Cap Value stocks jumped 0.78%, outperforming their larger peers. This is significant because small companies tend to be more sensitive to the domestic economy. When they lead, it tells us investors believe the U.S. economy is accelerating. We also saw Large Cap Value slip slightly by 0.22%, showing that the market currently favors the aggressive growth potential of small caps and tech over steady value plays.

While U.S. Large Growth stocks have surged 23.01% over the past year, every single Mid-Cap and Small-Cap style box remains negative.

Sector Performance

Under the hood, there was a massive rotation of capital. Technology was the undisputed leader, surging 2.44% as investors chased growth and innovation. Energy stocks also had a banner week, rising 1.54%, likely piggybacking off the strength in oil prices. On the other side of the trade, the defensive sectors took a beating. Utilities plunged 4.45% and Healthcare dropped 2.78%. Investors typically hide in these sectors when they are worried. The fact that they are selling them aggressively confirms that sentiment has shifted to a "risk-on" mode. Consumer Discretionary also rose 1.27%, further proving that the market expects the consumer to keep spending.

Fixed Income

The bond market behaved exactly as you would expect in a growth environment. With the economic data looking good, there is less demand for the safety of U.S. Treasuries. As a result, the US Core Total Return Bond index fell 0.46%. Remember, when bond prices fall, yields rise. Higher yields here signal that the market is pricing in a stronger economy, not a weak one. Interestingly, riskier High Yield bonds bucked the trend and rose 0.17%. The difference in performance is important. It shows that credit investors are not worried about defaults; they are confident enough to chase the higher interest payments that corporate bonds offer.

Global Markets

We saw a real split in performance overseas. Developed markets in Europe joined the rally, posting a gain of 0.47%, and the Pacific region added 0.40%. These economies are likely benefiting from the same stabilizing forces we see in the U.S. However, Emerging Markets in Latin America went the other way, dropping 1.57%. This happened even though the U.S. Dollar weakened by 0.46%, which usually helps emerging markets. The fact that they fell despite the weaker dollar suggests there are specific, local economic issues hurting Latin American stocks right now.

Commodities

The Broad Commodities index climbed 1.59%, indicating strong demand for raw materials. This aligns perfectly with the gains we saw in the Energy sector. However, Gold did not participate in the party. Gold prices fell 0.37%. Gold is often used as insurance against disaster or inflation. With inflation expectations dropping to 4.1% and consumer sentiment rising to 53.3, investors felt comfortable cancelling that insurance policy for now.

Economic Impact

The economic calendar provided the fuel for this market moves. The biggest news was the Core PCE Price Index coming in at 2.8%, which is the Federal Reserve's favorite inflation gauge. This number confirmed that price pressures are fading. We also saw a resilient labor market; despite a weak ADP report, Initial Jobless Claims remained low at 191,000.