A screen displays stock market information after the opening bell at the New York Stock Exchange (NYSE) in New York City, U.S., August 7, 2026. REUTERS/Jeenah Moon
Index Performance
U.S broad-based equity indices finished firmly in the green, supported by renewed strength within technology. Gains extended across the market, with the Nasdaq (+3.00%) leading the charge (+3.00%), followed by the S&P 500 Total Return Index (+2.07%), Russell 2000 (1.78%) and the Dow Jones Industrial Average (1.61%).
Broad-based fixed income indices also ended the week in a sea of green, extending the positive rally across markets. The FTSE Municipal Tax-Exempt Investment Grade Bond Total Return Index posted the largest gain of (+0.57%), followed by the FTSE High Yield Total Return Index (+0.51%) and FTSE U.S. Broad Investment Grade Bond Total Return Index (+0.36). With both equities and bonds posting gains, August is off to a strong start as investors found opportunities.
Macro Viewpoint
The soft landing everyone had been expecting suddenly looked like a stall. The July employment report showed total nonfarm payrolls falling by 23,000—not a soft gain, but an outright contraction—while the unemployment rate held at 4.1%, leaving roughly 6.92 million Americans out of work. The details were no kinder than the headline. The labor force participation rate sat at 61.4% and has now drifted down 0.7 percentage points since January, a quiet erosion that flatters the jobless rate even as it signals people stepping away from the workforce. After a long stretch in which every payroll print seemed to beat expectations, a negative number landed with real force.
What turned uneasily into fire alarms were the revisions. May was cut from an initially reported (+129,000) all the way down to (+63,000), and June as slashed from (+57,000) to (+20,000), together with 103,000 jobs that the prior data claimed existed and the revised data erased. The industry breakdown reinforced the softness: local government education shed 50,000 positions, retail trade lost 19,000, and financial activities gave back 14,000, with only healthcare (+22,000) offering a bright spot and even that at a slower clip than its recent trend. Wage growth remained contained, with average hourly earnings up two cents to $37.62 and running 3.2% over the year, enough to keep a lid on inflation worries, but not enough to distract from the hiring stall.
Layered on top was a housing market feeling the squeeze from the other direction. The average 30-year fixed mortgage rate climbed for a fifth consecutive week, pushing toward the high 6.60% and marking its highest level in more than a year, up from roughly 6.55% in mid-July. Investors responded the way they usually do when the ground shifts underneath them: they lighten up on domestic stocks and pile into cash, a pattern that ran straight through the weekly fund flows.
On the Yield Front
Yields dipped following the weaker than expected jobs report, with short-term yields leading the decline as investors scaled back expectations for further tightening until December. According to the LSEG Lipper Interest Rate Probability index, December faces a 67.6% probability that the Fed will hike rates, and 32.4% probability that the Fed will do nothing. The two and five year Treasury yields dipped 10 basis points (bps), while 10-year and 30-year yields 8bps.
Fund Flows by Asset Type
For the LSEG Lipper Flows week ending August 5, 2026, there was a crack in the jobs report but, investors didn’t stick around to argue, they bolted for safety. Money Market Funds inhaled a jaw-dropping $55.7bn and Taxable Bonds scooped up $5.3bn, the typical “running for the hills” combo. Stocks, meanwhile, took a global tour, $6.5bn flocked out of U.S. Large-Cap Funds and found grounding overseas.
The equity universe finished modestly in the red, giving back $1.4bn, though the headline understates the split beneath it. U.S. Large-Cap Funds carried the entire decline and then some, with an outflow of $6.5bn and U.S. Small-Cap Funds adding another $1.9bn outflow. The offset came from overseas: U.S. Emerging Market Funds gathered $3bn, and U.S. Developed International Market Funds matched them at $3bn, while U.S. Sector Equity Funds and U.S. World Sector Equity Funds added $734 and $392m, respectively.
Within the fixed income universe, bonds were a clear beneficiary from the flight from stocks, with the taxable universe pulling in $5.3bn. U.S. Short/Intermediate Investment-Grade Funds led at $2bn, trailed closely by U.S. High Yield Funds at $1.9bn, and U.S. Short/Intermediate Government & Treasury Funds at $1.1bn, U.S. General Domestic Taxable Fixed Income Funds, and U.S. World Income Funds added $861m and $733m, respectively. The lone soft spot was U.S. Government & Treasury Fixed Income Funds, with an outflow of $1.7bn. Municipals had a strong week, with a net inflow of $1.3bn. U.S. National Municipal Debt Funds did the heavy lifting at $41.2bn, while U.S. Single State Municipal Debt funds added $115m.
Money Market Funds was this week’s defining move. As the labor data cracked, they hauled in a towering $55.7bn, with U.S. Taxable Money Markt Funds accounting for $53.6bn and U.S. Tax-Exempt Money Market Funds a further $2.2bn. When conviction fades, there’s only one number investors dial—and this week, cash picked up on the first ring.
