Trump canceled the planned strikes on Iran and said talks would resume. Oil fell 6%. The ISM Manufacturing PMI came in at 55.6 — the best factory reading in more than three years — with employment expanding for the first time in 33 months and prices easing. The Dow surged nearly 700 points to a record close, topping its July 6 peak for the first time in four weeks. The S&P gained 1.48% to 7,600. The Nasdaq rose 2.1%. Every force that broke the market in July — war, $100 oil, the bond revolt, the chip correction — reversed on the first trading day of August. As one analyst put it: every ingredient in today's rally was wrecking the market last month. Nothing fundamental about these businesses changed in seven trading days. The narrative did.
Record day. The Dow surged nearly 700 points to close above 53,100 — a new all-time high, eclipsing the July 6 record for the first time since the blockade began. The S&P gained 1.48% to 7,600. The Nasdaq rose 2.1% to 25,914. Alphabet climbed 5% and was the single largest contributor to both the S&P and Nasdaq. Meta gained 6%. Software and consumer names led the rally. The old chip suspects — while up — were not the leaders. The rotation that started in late July is still intact: software over hardware, monetization over spending.
| The Numbers I Circled | At the close, August 3 · Day change |
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| S&P 500 | 7,600.50 | +1.48% |
| Nasdaq | 25,913.9 | +2.1% |
| Dow Jones | ~53,165 | record close |
| S&P 500 Sectors | Day change |
|
| Comm. Services | | +2.5% |
| Info. Technology | | +2.0% |
| Consumer Disc. | | +1.5% |
| Financials | | +1.2% |
| Industrials | | +1.0% |
| Materials | | +0.8% |
| Health Care | | +0.6% |
| Consumer Staples | | +0.4% |
| Utilities | | +0.3% |
| Real Estate | | +0.2% |
| Energy | | −1.5% |
| | Notable Gainers | Day change |
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Trump posted Sunday night that he had called off what he described as the "biggest attack since World War II" at the request of allies, saying the outlines of a deal on reopening the Strait of Hormuz had been agreed to. Iran denied any talks were underway. But the market didn't need certainty — it needed direction. Oil plunged. The United States Oil Fund fell 6%. WTI dropped to $83.86. Brent fell toward $80 — down from above $100 just eight days ago.
The ISM report was the confirmation. Manufacturing PMI hit 55.6, beating the 54.0 consensus by 1.6 points — the widest beat since the report started improving last year. New export orders and backlogs both rose 4.5 points. Production jumped 6.3 points to 58.5. Employment climbed to 52.8 — in expansion for the first time in 33 months. And the prices index, while still elevated at 71.1, fell 1.9 points from June. The factories are running. The hiring is picking up. And the input costs are easing. That's the opposite of stagflation.
Imax hit an all-time high as Christopher Nolan's "The Odyssey" tracked nearly double what "Oppenheimer" earned at the same point. Palantir reports after the close tonight. SpaceX delivers its first quarterly report as a public company on Tuesday.
What The Market Is Pricing In
In July, the story the market told itself went like this: war drives oil higher, oil drives inflation higher, inflation drives the Fed to hike, the hike kills the rally. Every piece of data got filtered through that lens. The ISM was fine in June — 53.3 — but no one cared because oil was at $90 and rising. Earnings were strong — 88% beat — but no one cared because Alphabet and Tesla were burning cash. The narrative was bearish, so bullish data got ignored and bearish data got amplified.
Today the narrative flipped. Trump called off the strikes. Oil fell $15 from its peak. The ISM beat. Employment expanded. Prices eased. And suddenly the same economy that was "heading for stagflation" last week is "resilient and expanding" this week. The companies didn't change. The earnings didn't change. The way the market tells the story changed. On Wall Street they call this a re-rating — when the same set of earnings and the same set of economic data get assigned a higher price because the perceived risks are lower. The Dow set a record not because the companies are worth more today than a week ago. It set a record because the market decided the risks are smaller.
The Dow hit a record and the S&P crossed 7,600 on the same day Trump canceled strikes on Iran and the ISM beat by the widest margin in a year, and the market is telling you that the July correction was a narrative-driven repricing, not a fundamental breakdown — the economy was strong the whole time, and the moment the war premium eased, the data reasserted itself. The ISM's employment component expanding for the first time in 33 months is not a one-day headline. It's a structural shift. Factories are hiring again. New orders are growing. The economy absorbed $100 oil for three weeks and came out the other side still expanding at 55.6. That number, more than any headline about Iran, is what pushed the Dow to a record.
In November 2018, the market had fallen 20% from its September peak on trade-war fears, Fed hikes, and a China slowdown. Then Trump and Xi met at the G-20 and agreed to a 90-day trade truce. Oil bottomed. The Fed hinted at a pause. The S&P rallied 15% in two months. The fundamentals hadn't changed — the tariffs were still there, China was still slowing. But the narrative shifted from crisis to resolution, and the money followed the story. Today's tape rhymes: the war isn't over, Iran denies the talks, oil is still at $84. But the direction changed, and direction is all the market needs.
Three things I'm watching this week:
01 — Caterpillar and SpaceX earnings Tuesday August 4
Caterpillar is the global industrial bellwether. If the ISM is telling the truth — that factories are humming and orders are growing — Caterpillar's revenue and backlog should confirm it. SpaceX reports its first quarterly results as a public company. The stock has been volatile since its Nasdaq-100 addition in July. Revenue from Starlink, government contracts, and launch services will tell you whether the most valuable private-turned-public company of the decade can back up its valuation with numbers.
02 — Does oil hold below $85?
Brent dropped toward $80 on the Trump de-escalation. If it stays below $85 through the week — because the diplomacy holds or the Strait shows signs of reopening — the July CPI fears ease, the September hike odds drop, and the 30-year yield pulls back from 5.25%. If Iran's denial of talks hardens and Trump reverses again — as he has multiple times this year — oil goes back above $90 and the narrative flips right back. The market has seen this movie before: Trump claims a deal, Iran denies it, oil whipsaws. Watch whether the diplomacy lasts past Tuesday.
03 — July nonfarm payrolls Friday August 7
The economy's final exam. Consensus expects 86,000 jobs, up from 57,000 in June. The ISM's employment component just expanded for the first time in 33 months — if that shows up in Friday's payrolls with strong hiring and rising wages, the economy's resilience is confirmed and the Dow's record has legs. If payrolls disappoint — below 50,000 — the GDP miss at 1.5% and the consumer confidence dip become the trend, and the stagflation question returns. Friday's number determines whether today's record is the start of a new run or the peak of a narrative-driven bounce.
The narrative flipped. The Dow set a record. The ISM says the factories are hiring for the first time in nearly three years. Oil is $15 off its peak. The war isn't over, but the direction changed — and direction is what markets follow. This week Caterpillar confirms whether the factories are as strong as the ISM says. Friday's jobs number confirms whether the hiring is real. And oil tells you whether the de-escalation lasts or whether this is another head fake.
That's it for today. See you tomorrow after the close.
— Tom Hartley
Today In Perspective · Published daily, Monday–Friday, after the close
This newsletter is for informational purposes only and does not constitute investment advice. The author is not a registered investment advisor. Past performance does not guarantee future results. Consult a qualified financial professional before making investment decisions.
