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This Week on Wall Street
Week of August 10, 2026
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Market Commentary
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Stocks finished last week at record highs, capping their best week since April. Semiconductors did the heavy lifting, with memory and AI-hardware names leading, and cheaper energy added to the move as crude fell on signals that a deal to reopen the Strait of Hormuz could be close. That last piece is where the week ahead begins, because the optimism has already cooled. Iran and Oman have settled the outlines of a shipping route through the waterway, but Tehran says nothing fully reopens until the United States lifts its naval blockade, unfreezes Iranian assets, and compensates for war damage. The demands track closely with the June memorandum of understanding that fell apart a month after it was signed, and they leave Iran holding the one piece of leverage that matters, the strait itself. Brent has drifted back toward the mid $80s. Prime Minister Netanyahu also rejected the U.S.-backed 15-point Gaza roadmap on Sunday, saying Israeli forces will not withdraw until Hamas disarms in full. The U.S. and Israel rarely differ this publicly, which makes the split worth watching. It leaves both the Iran and Gaza tracks unsettled as the week opens.
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The rate debate heading into this week has an unusual shape. Inflation is still running near 3.5%, well above the Federal Reserve's 2% target, and several officials have argued for raising rates as soon as the September meeting. A softer labor reading on Friday cut against that case and trimmed the odds of a September hike to roughly 44%, which hands the decision back to the data. This week all of it points at the consumer. July CPI lands Wednesday, where consensus looks for headline inflation to ease to 3.4%, with the softness expected to come from gasoline while services prices firm. That split is the part to watch, because energy prices swing month to month while services costs tend to move slowly. Producer prices follow Thursday and capture what companies receive rather than what households pay, which often previews where consumer prices head next. Retail sales and the first read on August sentiment arrive Friday. Together the four readings should show whether households are absorbing higher prices or starting to pull back, and that is the question the September debate now turns on.
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One framework worth understanding sorts the economy into cells based on where growth and inflation sit relative to their own histories, then asks how equities have done inside each one. The idea is that markets respond less to growth or inflation alone than to the combination of the two. Solid growth with cool inflation has historically been the most rewarding mix. Above-average growth paired with above-average inflation has been among the least rewarding, and the U.S. has now sat in that cell for six consecutive months. Going back to 1948, monthly S&P 500 returns in that combination have averaged close to flat on an annualized basis, against roughly 9% across all readings. Returns have also tended to weaken the longer a stretch in the cell runs, which is what makes a six-month run worth noting. Last month the macro data improved slightly and the reading drifted toward the center of the grid, though not out of the unfavorable zone. This is a historical distribution and not a forecast, and the sample inside any single cell is thin. It does offer a way to hold two facts at once: an index at record highs, and a backdrop that history has not rewarded broadly.
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Chart of the Week
U.S. Crude Inventories Fall to a 40-Year Low
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Total U.S. crude inventories, commercial tanks plus the Strategic Petroleum Reserve, fell to 711.8 million barrels in the week ended July 31, the lowest reading since 1984. The reserve is the reason. At 304.8 million barrels it now holds less than half its peak, after roughly 108 million barrels were released following the closure of the Strait of Hormuz in late February. Commercial stocks actually built that week, which is what makes the combined line the one to watch: government barrels have been filling the gap. The cushion available for any future disruption is now the thinnest in four decades.
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| Data through the week ended July 31, 2026 (EIA release August 5, 2026). |
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On the Calendar
Economic Releases This Week
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Monday None
Tuesday Existing Home Sales
Wednesday Consumer Price Index (CPI)
Thursday Producer Price Index (PPI), Initial Jobless Claims
Friday Retail Sales, Consumer Sentiment (Preliminary)
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Worth Reading
Stories to Start the Week
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| What is Newton? |
▼ 0–8
▬ 9–13
▲ 14–20
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Our Newton model determines the highest probability of future price direction using advanced algorithmic and high-order mathematical techniques on the current market environment. It scores securities over multiple time periods on a 0–20 scale (0 worst, 20 best). Trend and level both matter. A name moving from 18 to 16 still signals a strong level, with slight exhaustion in the trend.
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| Equities |
TREND |
THIS WK |
LAST WK |
| Large Cap | ▲ | 15 | 13 |
| Emerging Markets | ▬ | 11 | 10 |
| Small Cap | ▬ | 10 | 10 |
| Foreign Developed | ▬ | 9 | 12 |
| Mid Cap | ▼ | 8 | 8 |
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| Fixed Income |
TREND |
THIS WK |
LAST WK |
| Floating Rate Bond | ▼ | 6 | 11 |
| Short Term Bond | ▼ | 5 | 10 |
| Intermediate Term Bond | ▼ | 5 | 6 |
| High Yield Bond | ▼ | 4 | 10 |
| Corporate Bond | ▼ | 4 | 6 |
| Long-Term Bond | ▼ | 3 | 7 |
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| Sectors |
TREND |
THIS WK |
LAST WK |
| Consumer Cyclical | ▬ | 13 | 13 |
| Technology | ▬ | 12 | 12 |
| Energy | ▬ | 11 | 11 |
| Industrials | ▬ | 10 | 10 |
| Financials | ▼ | 8 | 14 |
| Health Care | ▼ | 7 | 12 |
| Communications | ▼ | 7 | 6 |
| Real Estate | ▼ | 6 | 11 |
| Materials | ▼ | 6 | 5 |
| Consumer Defensive | ▼ | 2 | 10 |
| Utilities | ▼ | 2 | 6 |
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| Market Segments |
TREND |
THIS WK |
LAST WK |
| Large Growth | ▲ | 14 | 12 |
| Small Growth | ▬ | 11 | 11 |
| Mid-Cap Growth | ▬ | 11 | 11 |
| Large Value | ▬ | 10 | 11 |
| Small Value | ▼ | 8 | 11 |
| Mid-Cap Value | ▼ | 6 | 13 |
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Notable Newton Moves This Week: The model turned decisively against anything rate-sensitive or defensive. All six fixed income reads sit in the red band, with High Yield (10→4), Floating Rate (11→6) and Short Term (10→5) each giving up half their score. The same pressure hit the defensive sectors, as Consumer Defensive collapsed from 10 to 2, Health Care fell from 12 to 7, and Real Estate dropped from 11 to 6. Financials was the largest sector reversal, sliding out of the strong band from 14 to 8. Only two reads improved into green, and both point the same direction: Large Cap rose to 15 from 13 and Large Growth to 14 from 12, while Mid-Cap Value fell from 13 to 6. Trend and level both matter here, and the pattern is a narrowing of strength toward large-cap growth.
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Technical trading models are mathematically driven based upon historical data and trends of domestic and foreign market trading activity, including various industry and sector trading statistics within such markets. Technical trading models, through mathematical algorithms, attempt to identify when markets are likely to increase or decrease and identify appropriate entry and exit points. The primary risk of technical trading models is that historical trends and past performance cannot predict future trends and there is no assurance that the mathematical algorithms employed are designed properly, updated with new data, and can accurately predict future market, industry and sector performance.
Disclosure: Investing involves risk, including the possible loss of principal and fluctuation of value. Past performance is no guarantee of future results. This newsletter is not intended to be relied upon as forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date noted and may change as subsequent conditions vary. The information and opinions contained in this letter are derived from proprietary and nonproprietary sources deemed by Waterloo Capital to be reliable. The letter may contain "forward-looking" information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecast made will materialize. Reliance upon information in this letter is at sole discretion of the reader. Please consult with a Waterloo Capital financial advisor to ensure that any contemplated transaction in any securities or investment strategy mentioned in this newsletter aligns with your overall investment goals, objectives and tolerance for risk. Additional information about Waterloo Capital is available in its current disclosure documents, Form ADV, Form ADV Part 2A Brochure, and Client Relationship Summary report which are accessible online via the SEC's Investment Adviser Public Disclosure (IAPD) database at www.adviserinfo.sec.gov, using SEC # 133705. Waterloo Capital is neither an attorney nor an accountant, and no portion of this content should be interpreted as legal, accounting or tax advice.
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