A surprising comfort settled over markets this week: weak economic news started looking like good news for stocks. Data out of Washington disappointed almost daily, yet Wall Street kept climbing, because investors decided a struggling economy gives the Federal Reserve, the US central bank, one more reason to possibly cut interest rates next month.

Equities

The S&P 500 touched a record on Thursday and recorded its third straight weekly gain while the Nasdaq Composite crept higher. Behind the calm sat jarring numbers: July payrolls showed the economy shed jobs, retail sales posted their steepest drop in over a year, and consumer confidence fell sharply. None of it derailed stocks, because it strengthened the case for lower borrowing costs. Corporate results did the rest: Cisco raised its revenue forecast well above expectations, citing demand for artificial intelligence infrastructure, a preview of what investors want to hear.

Rates & Credit

Government bond yields, which move opposite to prices and reflect what it costs governments to borrow, rose even as investors bet on rate cuts, a sign long-term worries about debt are competing with short-term optimism. The 10-year US Treasury yield, a benchmark that also feeds into mortgage rates, ended the week at 4.68% and Germany's 10-year Bund yield pushed above 3.2%, its highest in more than a decade.

In corporate bond markets, the extra yield investors demand to lend to companies rather than governments, a gap that normally widens when confidence weakens, stayed unusually narrow, a calm that sits oddly beside rising government yields.

Currencies

The most striking currency story was in Japan. Two weeks ago, Japan and the United States carried out their first joint intervention to support the yen since 1998, spending roughly USD 59 billion to slow its decline. The currency rallied, then gave back about half those gains, drifting back toward 159 per dollar by Friday as traders concluded another intervention was unlikely soon. The euro held near USD 1.16 and the pound traded around USD 1.35.

Here in Switzerland, the Swiss franc (traditionally a shelter in uncertain times), kept weakening instead, as easing tensions in the Middle East reduced demand for havens.

Commodities

Gold held near USD 4,400 an ounce, well below the record above USD 5,300 it touched in January but still up sharply for the year, used by investors to hedge both rate cuts and lingering inflation worries.

Oil firmed, with US crude near USD 82 a barrel and Brent close to USD 90, supported by concerns over shipping through the Strait of Hormuz.

Copper also pushed higher, with unusually tight supply in London pushing short-dated contracts to their widest premium since 2021, a sign demand for the metal used in wiring and construction is outrunning supply.

The Week Ahead

Markets now turn to the Federal Reserve's annual gathering in Jackson Hole, Wyoming, where policymakers often signal their next moves, and to earnings from Target and Walmart that will show whether American shoppers are as cautious as recent data suggests. Nvidia reports on August 26, a date investors have circled as the next real test of whether artificial intelligence spending can keep justifying today's valuations.