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This Week on Wall Street
Week of August 17, 2026
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Market Commentary
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Stocks ground out a third straight winning week, with technology doing most of the lifting. The S&P 500 set another record on Thursday, led by semiconductors. Friday complicated the picture. Two readings on the American consumer came in soft, with July retail sales falling 0.6% against expectations for a small gain and the University of Michigan's sentiment index sliding to 51.0 from 55.2. Stocks gave back ground into the close. That tension, a market at highs and a consumer looking tired, is what makes this week's retail earnings worth attention. Home Depot reports Tuesday, Lowe's, Target and TJX on Wednesday, and Walmart Thursday, a cross-section wide enough to show whether households are trading down or simply buying less. Trade sits alongside it. Washington has threatened 50% tariffs on roughly $20 billion of Canadian goods absent a deal by Wednesday, and negotiators spent last week working toward a framework that would also ease existing duties on steel, aluminum and autos.
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The bond market is where the more consequential story is developing. The Treasury curve has been steepening, with long yields climbing while the short end barely moves. The 30-year now sits near 5.26%, its highest since 2007, against 4.17% on the two-year. Three forces are pressing on the long end at once: firmer oil prices, a federal deficit the Congressional Budget Office now projects at $2.1 trillion a year, and heavy corporate borrowing to fund the AI data center buildout. Each competes for the same pool of long-term capital. What matters from here is that long rates, not the Fed, set most of what households and companies actually pay. Mortgages, corporate refinancing and project finance all price off longer maturities, so borrowing can stay expensive even if the Fed eases. Higher long rates also raise the discount applied to future earnings, which weighs most on the longest-duration assets, while a wider gap between short and long rates is generally a tailwind for bank lending margins. Whether the steepening continues is worth monitoring, because it moves the cost of capital regardless of what the Fed does at the short end.
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One of the quieter shifts in this market has nothing to do with prices and everything to do with what investors are willing to pay for earnings. For most of the past decade, the ten largest companies in the S&P 500 carried an obvious valuation premium over everyone else. That premium is gone. The top ten now trade at 19.8 times earnings and the other 490 at 19.3 times, close enough to call the same. How the gap closed is the interesting part, because it closed from both ends. Measured against their own histories, the top ten sit at 95% of their long-run average multiple while the remaining 490 sit at 121% of theirs. The megacaps grew into their valuations as earnings caught up, and the rest of the market was re-rated higher while that happened. So the familiar story of a few expensive leaders sitting atop a reasonably priced market no longer fits. What replaced it is flatter and fuller, with the average company in the index carrying a historically rich multiple. That leaves the broad market less room to close the gap on valuation and more reliance on earnings to do the work.
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Chart of the Week
The Megacap Valuation Premium Has Closed
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Price-to-earnings ratios for the S&P 500's ten largest companies, the remaining 490, and the index overall, going back to 1996. The three lines have converged at the right edge of the chart, a setup discussed in the commentary above.
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| Source: J.P. Morgan |
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On the Calendar
Economic Releases This Week
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Monday None
Tuesday Housing Starts
Wednesday None
Thursday Initial Jobless Claims
Friday S&P Global Flash Manufacturing and Services PMIs
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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 | ▬ | 13 | 15 |
| Mid Cap | ▬ | 13 | 8 |
| Emerging Markets | ▬ | 11 | 11 |
| Foreign Developed | ▬ | 11 | 9 |
| Small Cap | ▬ | 9 | 10 |
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| Fixed Income |
TREND |
THIS WK |
LAST WK |
| Floating Rate Bond | ▬ | 12 | 6 |
| Short Term Bond | ▬ | 11 | 5 |
| Intermediate Term Bond | ▬ | 9 | 5 |
| High Yield Bond | ▼ | 8 | 4 |
| Corporate Bond | ▼ | 7 | 4 |
| Long-Term Bond | ▼ | 6 | 3 |
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| Sectors |
TREND |
THIS WK |
LAST WK |
| Energy | ▲ | 15 | 11 |
| Technology | ▲ | 14 | 12 |
| Industrials | ▬ | 12 | 10 |
| Health Care | ▬ | 10 | 7 |
| Consumer Defensive | ▬ | 9 | 2 |
| Financials | ▼ | 8 | 8 |
| Communications | ▼ | 7 | 7 |
| Real Estate | ▼ | 7 | 6 |
| Utilities | ▼ | 7 | 2 |
| Consumer Cyclical | ▼ | 6 | 13 |
| Materials | ▼ | 4 | 6 |
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| Market Segments |
TREND |
THIS WK |
LAST WK |
| Large Growth | ▬ | 12 | 14 |
| Mid-Cap Growth | ▬ | 11 | 11 |
| Mid-Cap Value | ▬ | 11 | 6 |
| Small Growth | ▬ | 10 | 11 |
| Large Value | ▬ | 10 | 10 |
| Small Value | ▬ | 10 | 8 |
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Notable Newton Moves This Week: Fixed income tells the same story as the yield curve. The short end improved sharply, with Floating Rate Bond rising from 6 to 12 and Short Term Bond from 5 to 11, both crossing out of declining territory, while Long-Term Bond stays the weakest read in the table at 6. Energy moved into the top sector spot (11→15) and Technology pushed into green (12→14), matching last week's oil bid and tech leadership. The sharpest drop was Consumer Cyclical, down from 13 to 6, alongside a jump in Consumer Defensive from 2 to 9, a rotation that lines up with the soft retail sales and sentiment readings. Among equities, Large Cap slipped out of green (15→13) while Mid Cap climbed from 8 to 13, and Mid-Cap Value rose from 6 to 11.
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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.
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