This week’s data told two different stories depending on where you looked. Friday’s jobs report showed the labor market losing steam — a negative payroll print and downward revisions to the prior two months — while the ISM surveys showed manufacturing hiring for the first time in nearly three years, even as services shed jobs. Add in a Treasury curve that is climbing at the long end, and an oil market still digesting a volatile July, and the picture is less “recession” or “boom” than a genuine crosscurrent that’s going to take a few more data points — starting with next week’s CPI and PPI.
Earnings Season: A Strong Finish
Q2 earnings season is now largely behind us, and by most measures it’s been one of the best in years. With the large majority of S&P 500 companies having reported, FactSet’s blended earnings growth rate for the quarter stands at 47.4% — the highest pace since Q2 2021 — while 86% of companies have beaten EPS estimates, also the best rate since 2021.
Even stripping out Alphabet’s and Amazon’s outsized one-time gains, earnings growth still comes in at a robust 28.8%, marking a seventh straight quarter of double-digit growth for the index. Revenue growth (14.1%) is running at its fastest pace since 2021 as well, and net profit margins hit 16.9% — a record in the 15-plus years FactSet has tracked the metric. Ten of eleven sectors are posting year-over-year earnings growth, led by Energy, Communication Services, Consumer Discretionary, Information Technology, and Materials; Health Care is the lone holdout. It’s a genuinely broad-based quarter, not just a mega-cap story — which helps explain the conviction behind this week’s breakout to new highs.
Employment Situation (NFP) — July
Nonfarm payrolls fell by 23,000 in July, the first negative print in recent memory while the unemployment rate ticked down to 4.1%. May and June numbers were also revised down by a combined 103,000, bummer.
However, job losses were concentrated in local government education (-50,000) and retail trade (-19,000), while health care kept adding jobs, just at a slower pace than its trailing average. Keep in mind that the World Cup also kept many employed in the hospitality space and that temporary effect is unwinding.
Manufacturing vs. Services: A Split ISM Picture
Both ISM surveys, released this week for July, showed the same divergence playing out in real time. These are diffusion indexes, where a reading above 50 signals expansion and below 50 signals contraction. The Manufacturing PMI posted a reading of 55.6, a seventh straight month of expansion and the fastest pace since May 2022, with the Employment sub-index crossing into growth for the first time in 33 months and Production hitting its highest level in nearly five years.
The Services PMI told a different story: still expanding at a reading of 54.1, with Business Activity and New Orders both strong, but Employment fell back into contraction at 47.4 — the eighth time in the last 18 months it’s been below 50 — with respondents citing AI-driven headcount reductions and offshoring.
Oil / Commodities
WTI crude bottomed at $66.39 on July 2, rallied more than 25% to retest resistance near $90–92, and has since rolled over to mid-$70s range. That pullback matters beyond the oil market itself: energy is an input for CPI and PPI and maybe we see some relief on the headline numbers purely from the decline in gasoline and energy costs.
Both ISM surveys are still flashing elevated Prices Index readings (71.1 for manufacturing, 70.3 for services — a 110th consecutive monthly increase for the latter), so the disinflation case leans heavily on energy doing the work. Worth watching closely once next week’s actual prints land.
The Stock Market Breakout
The S&P 500 extended its rally off the March 2026 low by breaking to new highs after several weeks of choppy and sideways price action. Trading sideways is one way to work off an overbought condition and that came to an end this week. This breakout looks impulsive and will likely continue into the Fall months.
The Yield Curve
The effective fed funds rate has fallen roughly 70 basis points over the past year as the Fed has eased, yet long-end yields have done the opposite — the 30-year sits near 5.20%, up from roughly 4.80% a year ago. This points to a bond market still pricing sticky inflation risk, elevated term premium, or ongoing fiscal issuance concerns, even as growth and labor data soften. However, a positive slope on the yield curve is good for banks and financial institutions as spread lenders generate more margin in this environment.
Putting It Together
Oil’s pullback off its July highs is the wildcard that could start answering the inflation half of that question as soon as next week’s CPI and PPI prints land. Until then, the labor market divergence and the yield curve’s long-end climb are the two threads worth watching most closely.
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President, Kisco Capital
This commentary is provided by Kisco Capital LLC for informational purposes only and does not constitute investment advice or a recommendation to buy or sell any security. Opinions are subject to change without notice. Past performance is not indicative of future results. All investments involve risk, including possible loss of principal. Kisco Capital and its clients may hold positions in securities discussed herein.
