Monthly Market Insights | August 2026

U.S. and Canadian Markets

Stocks were mixed in July as investors navigated a cross-current of news on the outlook for AI spending and Q2 corporate reports.

The Dow Jones Industrial Average led, adding 0.32 percent. The Standard & Poor’s 500 Index edged down 0.13 percent, while the Nasdaq Composite lost 3.20 percent. The S&P/TSX gained 1.06 percent.^1,2

Winning is not the point. Wanting to win is the point. Not giving up is the point.

Coach Pat Summitt, winner of 8 NCAA championships for the University of Tennessee’s women's basketball team

Inflation Power

The early part of the month was light on key economic reports, so investors cheered mid-month news that consumer inflation came in lower than expected. Wholesale inflation also came in below expectations, which helped the “improving inflation” narrative.³

AI in the News

Middle East diplomatic news hung over trading all month, as did concerns about how much money companies would need to spend on AI.⁴

Q2 Reports

As the month came to a close, mixed Q2 corporate reports from four influential tech companies pushed and pulled stock prices. But chip stocks led an enthusiastic rally over the last two days of the month, which was enough to push the Dow into the green and pare losses for the S&P and Nasdaq.⁵

U.S. Sectors

Energy (+12.1 percent) was the leading sector, benefiting from rising oil prices over the month. Financials (+6.2 percent), Health Care (+2.5 percent), Consumer Staples (+2.4 percent), Real Estate (+2.4 percent), and Communication Services (+1.0 percent) all posted solid gains.⁶

The remaining five sectors underperformed. Materials (-0.8 percent) and Consumer Discretionary (-1.0 percent) posted modest losses. Utilities (-2.2 percent) and Industrials (-2.9 percent) declined more.⁶

Information Technology (-8.0 percent) was under pressure all month, which put the spotlight on other sectors that were in favor.⁶

Canada Recap

The S&P/TSX Composite Index rose in July as energy and materials drove the bulk of returns, while a late-month rally in tech and financials added to gains. A stronger-than-expected employment report helped sentiment, including news that the unemployment rate nudged down 0.1 percent to 6.5 percent.^7,8

Investors seemed to rotate in and out of financial and tech shares from week to week, with AI disruption a major theme for the month. The TSX hit an all-time record high of 35,749.70 on July 28 before trending lower due to fluctuating commodity prices, which put pressure on energy and mining names.^9,10

What Investors May Be Talking About in August

In the month ahead, investors will closely watch monthly reports to see how the economy is managing growth and inflation.

Each economic release, from employment and inflation to retail sales and manufacturing activity, has the potential to shift expectations for the Fed's next move.

The key for investors is not whether any single report beats or misses market expectations, but whether the broader economic narrative remains intact. If the data continue to point toward steady growth and easing inflation, that may give the Fed some flexibility into 2027.

World Markets

The MSCI EAFE Index rose 1.91 percent in July behind a solid performance from European markets.¹¹

The United Kingdom (+3.53 percent) led, with Germany (+2.53 percent), Italy (+0.95 percent), Spain (+1.60 percent), and France (+1.26 percent) also posting solid gains.¹¹

Several markets outside of Europe also had good months. Brazil (+3.47 percent) and Egypt (+5.85 percent) were the most impressive. Elsewhere, Mexico (-0.04 percent) edged lower, and India (+2.11 percent) headed higher.¹¹

On the Pacific Rim, China's Hang Seng Index rose a strong 13.13 percent. But Korea’s KOSPI was again the story of the month, falling 22.19 percent. The KOSPI is up more than 56 percent through July 31, but the month-after-month volatility is causing concern among Korean officials and other market watchers.¹¹

Indicators

Gross Domestic Product (GDP)

The economy grew 1.5 percent year-over-year in the second quarter, slower than Q1’s 2.1 percent annualized growth and falling short of the 1.8 percent growth economists expected. An increase in AI-related imports (e.g., semiconductor chips for data-center builders) and lower overall government spending both detracted from GDP growth. On the upside, overall computer spending (including AI and adjacent industries) drove about half of GDP growth, while consumer spending was also a major contributor.¹²

Employment

Employers added 57,000 jobs in June, missing expectations for 115,000 jobs and slowing from the 129,000 jobs (revised down from 172,000) added in May. The unemployment rate declined to 4.2 percent in June after three consecutive months holding steady. Year-over-year wage growth rose 3.5 percent, as expected, a slightly faster pace than May’s 3.4 percent wage gain.¹³

Retail Sales

Consumer spending rose 0.2 percent in June over the prior month, in line with expectations but slower than May’s 1.0 percent. Year-over-year retail sales increased 6.7 percent in June, easing from May’s 7.3-percent increase.^14,15

Industrial Production

Industrial output edged higher by 0.1 percent in June over the prior month, matching May’s production rate but just shy of the 0.2 percent increase expected. Year over year, industrial production rose 1.1 percent, a slowdown from a 1.7 percent annualized gain in May and a 1.4 percent gain in April.¹⁶

Housing

Housing starts rose 19.0 percent in June over the prior month, following May’s 15.2 percent decline. A 76.3 percent increase in multifamily starts drove most of the increase, while single-family starts slipped 0.2 percent. Regionally, the Northeast (+10.3 percent), the South (+15.2 percent), the West (+22.1 percent), and the Midwest (+33.3 percent) all participated. Year over year, starts rose 3.5 percent.^17,18

Sales of existing homes fell 2.4 percent in June over the prior month to 4.09 million units, missing expectations of 4.2 million units sold. Regionally, sales rose in the Northeast but declined in the Midwest, West, and South. The median existing home sales price was $440,600, 1.8 percent higher than in June 2025. The supply of unsold homes in June was 1.56 million units, down 0.6 percent month over month but up 1.3 percent year over year, and equal to 4.6 months of supply at the current sales rate.^19,20

Sales of newly constructed, single-family homes rose to 628,000 in June from an upwardly revised 618,000 in May, beating expectations for 606,000 new home sales. The median new home price rose to $398,300 in June, down 3.3 percent from May. Inventory in June ticked down 0.2 percent from May to 485,000 unsold new homes, equal to 9.3 months of supply at the latest sales pace.^21,22

Consumer Price Index (CPI)

Inflation fell 0.4 percent in June over the prior month, more than expected. Falling gas prices and a 5.7 percent month-over-month drop in the CPI’s energy index drove the bulk of the decline. Core CPI (excluding energy and food) was flat in June over the prior month, cooler than the 0.2 percent increase economists expected and slower than May’s 0.2 percent rise.²³

Durable Goods Orders

Orders of manufactured goods designed to last three years or longer edged up 0.3 percent in June. It fell short of the 2.1 percent increase economists expected, but it was better than May’s upwardly revised 4 percent drop.²⁴

The Federal Reserve

As expected, the Federal Open Market Committee (FOMC) held rates steady at its July meeting.²⁵

The FOMC voted 9-3 to hold rates steady. Fed Chair Kevin Warsh noted the Committee’s broad agreement on the price stability mandate and the 2 percent inflation target, and that disagreement centered more around the tactics to achieve the price stability goal.^25,26

Though not an official FOMC meeting, the Fed will host its annual conference in Jackson Hole, Wyoming, at the end of August. This year’s conference theme is “Financial Innovation: Implications for Payments and Policy.” The next official FOMC meeting is September 15-16.²⁶

By the Numbers: Summer Spending