Stocks Rebound, but Rising Treasury Yields Keep Investors on Alert

Stocks ended July on a positive note after a two-week losing streak, but investors are still balancing strong corporate profits against higher Treasury yields, persistent inflation concerns, and uncertainty surrounding the enormous investment in Artificial Intelligence.

The rebound was welcome, but it did not eliminate the crosscurrents investors are trying to sort through. Strong earnings and resilient spending continue to support the market, while rising interest rates and oil prices create pressure in the other direction.

I do not believe this is a stock market to run away from. However, I do believe investors should expect continued volatility in both directions and pay close attention to what the bond market is telling us.

Key Takeaways

• Major U.S. stock indexes finished the week higher.
• The Federal Reserve held interest rates steady for the fifth consecutive meeting and made it clear that investors should expect less forward guidance.
• The 10-Year U.S. Treasury yield climbed to approximately 4.74%, increasing pressure on bond prices and borrowing costs.
• Strong results from Microsoft and Amazon revived enthusiasm for Artificial Intelligence, while Meta reminded investors that capital spending must eventually produce cash flow.
• Second-quarter GDP grew at a 1.5% annual rate, but consumer spending and business investment remained resilient.
• This week brings a heavy earnings calendar and four important labor-market reports.

Market Overview & Index Performance

After two consecutive losing weeks, stocks recovered as investors reacted to one of the busiest stretches of the summer. The Federal Reserve meeting, the first estimate of second-quarter economic growth, and several closely watched technology earnings reports all arrived within a matter of days.

The week was anything but calm. Stocks sold off sharply on Wednesday as Treasury yields surged following the Federal Reserve meeting. By Thursday, however, technology shares came back to life after strong earnings from Microsoft and Amazon helped reassure investors that at least some of today’s enormous AI investments are beginning to generate meaningful growth.

Market Index Performance: Last Week, July, and Year-to-Date

INDEX	LAST WEEK	JULY	YTD
Dow Jones Industrial Average	+1.1%	+0.4%	+9.3%
S&P 500	+1.0%	(0.2%)	+9.3%
NASDAQ Composite	+1.6%	(3.4%)	+9.3%
Russell 2000	±0.0%	(2.9%)	+18.1%
Foreign Stocks	+2.2%	+1.7%	+10.1%
Emerging Markets	+1.4%	(6.1%)	+17.4%

10-YEAR U.S. TREASURY 4.74% continued moving higher

WTI CRUDE OIL $86.80/barrel down slightly from the week prior

The 10-Year U.S. Treasury yield ended the week near 4.74%, up from approximately 4.68% the previous Friday and close to its highest level of the year.

WTI crude oil finished at approximately $86.80 per barrel, below the prior week’s roughly $90 level but still sharply higher than it was only a few weeks ago.

The Federal Reserve Holds Rates Steady—but Changes the Message

Last week’s main event was the Federal Reserve’s decision to leave its target interest-rate range unchanged at 3.50% to 3.75%. This marked the fifth consecutive meeting without a change in rates.

Chairman Kevin Warsh spoke in a decidedly firm tone. He remains focused on bringing inflation under control, and he made it clear that the Federal Reserve does not plan to provide the same level of forward guidance markets became accustomed to in prior years.

In practical terms, Warsh wants investors to make more price discovery on their own rather than waiting for the Federal Reserve to signal every future move. That is a meaningful change. Markets generally prefer certainty, and the absence of clear guidance can create sharper reactions as each new inflation, employment, and growth report is released.

That is exactly what happened Wednesday afternoon. Treasury yields surged and stocks moved lower as investors reassessed the likelihood of future rate increases or cuts. The Federal Reserve approved the decision by a 9–3 vote, while Warsh emphasized elevated inflation and a reduced reliance on forward guidance.

Why Rising Treasury Yields Matter to Retirees

With the 10-Year Treasury climbing above 4.7%, the bond market may be signaling that investors continue to view inflation as a serious issue. Higher yields may also reflect concern about the amount of government debt that must be financed.

Rising yields have several consequences. They increase borrowing costs for consumers and businesses, place pressure on stock valuations, and generally reduce the market value of existing bonds. At the same time, higher yields can improve the future income available from newly issued bonds and other fixed-income investments.

For retirees, both sides of that equation matter. Short-term price pressure can be uncomfortable, but better future income opportunities can be helpful when incorporated thoughtfully into a diversified retirement plan.

The 10-Year Treasury began 2026 near 4.16%. A move toward 5% would not automatically signal a crisis, but it would be an important psychological and financial threshold for markets, borrowing costs, and portfolio valuations.

Big Tech Earnings Reveal What Investors Want

Stocks quickly reversed course on Thursday as the technology sector came back to life. Strong profit reports from Microsoft and Amazon helped ease some of the concern that enormous capital expenditures on Artificial Intelligence will permanently reduce future profitability.

Microsoft reported strong growth in its cloud and AI businesses, while Amazon’s cloud results provided additional evidence that demand for AI infrastructure remains significant.

Meta received a much colder response. Investors focused on the company’s heavy capital spending and the pressure it placed on free cash flow. Meta’s shares fell as investors questioned how quickly the company’s expanding AI expenditures would produce an acceptable return.

The larger message is straightforward: Wall Street is still willing to reward companies that invest aggressively in Artificial Intelligence, but investors increasingly want evidence that those investments can produce revenue, profit, and cash flow. Spending alone will no longer be enough.

Technology had already experienced a minor pullback from its recent high before last week’s rebound. That correction reflected growing uncertainty about how quickly companies will earn an acceptable return on today’s historic AI spending.

Second-Quarter GDP: A Slower Headline, but Better Details

The first of three estimates for second-quarter Gross Domestic Product showed the U.S. economy grew at a 1.5% annual rate, down from 2.1% during the first quarter.

The headline was weaker than many investors expected, but the underlying details were more encouraging. Consumer spending and business investment contributed to growth, while a surge in imports reduced the final GDP figure because imports are subtracted in the calculation.

The report did not suggest that consumers or businesses have suddenly rolled over. In fact, private domestic demand remained strong. That resilience is one reason the Federal Reserve continues to face such a difficult balancing act: economic growth versus inflation pressures.

The Week Ahead: Jobs and Another Wave of Earnings

Corporate earnings remain front and center. Among the companies scheduled to report are:

The week’s earnings calendar includes major companies from technology, healthcare, industrials, consumer products, and travel.

On the economic front, the labor market will be the main focus:

• Tuesday: Job Openings and Labor Turnover Survey (JOLTS Report)
• Wednesday: ADP Employment Report
• Thursday: Challenger Job-Cut Report and weekly jobless claims
• Friday: Nonfarm Payrolls Report

Will another week of strong corporate profits be enough to lift stocks again? Much will depend on future guidance. Investors want to know whether companies remain confident about consumer demand, business spending, and the potential return on their AI investments.

What This Means for Retirees and Long-Term Investors

The market is sending mixed signals, which is not unusual. Corporate profits are strong, consumer and business spending remain resilient, and innovation continues. At the same time, Treasury yields are rising, oil prices remain elevated, and geopolitical uncertainty involving Iran continues to influence inflation expectations.

This is not a market I believe investors should run away from. It is also not a market where anyone should expect gains to come in a straight line.

A diversified portfolio is especially important in this type of environment because leadership can change quickly. Technology may lead one week while small-cap, foreign, or dividend-paying stocks lead the next. Bonds can experience short-term pressure as yields rise, while eventually offering more attractive income.¹

For retirees, the more important questions remain personal and practical:

• Is enough cash available for near-term spending?
• Is my portfolio diversified?
• Is the amount of risk in my portfolio consistent with my retirement plan?

Those questions matter far more than trying to predict whether the market will rise or fall next Tuesday.

Final Thoughts

The saga continues: excellent corporate profits and robust consumer and business spending on one side, rising bond yields, higher debt levels, persistent inflation, higher oil prices, and geopolitical uncertainty on the other.

That combination should continue producing volatility in both directions. I will be watching Treasury yields closely, especially if the 10-Year moves closer to 5%. I will also be watching whether corporate earnings and guidance remain strong enough to offset the pressure from higher interest rates.

As always, thank you for taking a few minutes each week to read our Retirement Report. Please feel free to share it with family, friends, or colleagues who may find it helpful.

Until next week, stay informed and enjoy the journey to and during retirement.

Paul Levin, CFP^®, ChFC^®, RICP^®2, TPCP^®

Managing Principal | Retirement Refined, LLC

---

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

All market data sourced from The Wall Street Journal, July 31, 2026.

Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC. 

1. While diversification can help spread investments across different asset classes and market segments, there is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Additionally, diversification does not protect against market risk. ↩︎
2. RICP^® conferred by The American College.​ ↩︎