Weekly Wrap

The equity market posted modest gains this week despite volatility stemming from earnings, economic data, Fed policy speculation, and tariff developments. The Nasdaq Composite and S&P 500 closed at or near record highs, while small caps outperformed on renewed economic optimism.

Earnings Season in Full Swing

A busy earnings slate drove much of the market's tone. Financials got the ball rolling with generally strong results from JPMorgan, Citigroup, and Goldman Sachs. Citigroup stood out, while others saw “sell-the-news” pullbacks. Taiwan Semiconductor lifted chip stocks after strong earnings and a positive outlook.

Snap-On, PepsiCo, and Travelers also beat expectations. However, Netflix, 3M, and American Express faced post-earnings selling on Friday, tempering overall sentiment, while regional banks Comerica and Regions outperformed.

Economic Data in Focus

Markets digested a variety of high-impact economic releases:

• CPI showed core inflation at +0.2%, slightly better than expected, but price increases in apparel and furnishings raised concerns over tariff-driven inflation.
• PPI was unchanged month-over-month, adding to a disinflationary narrative favorable to the Fed.
• Retail sales rose 0.6% in June after two months of decline, signaling renewed consumer strength.
• Initial jobless claims fell to 221,000, consistent with a solid labor market.
• Housing starts and permits beat expectations on the surface, but weakness in single-unit construction and permits remains a headwind for housing supply.
• Consumer sentiment rose to a 5-month high, reflecting improving inflation expectations.

The data suggests a resilient economy with sticky, though moderating, inflation—just enough to keep the Fed on hold for now.

Federal Reserve Developments

Fed policy remained central to the market narrative. The CPI and PPI reports, while not alarming, weren’t dovish enough to prompt immediate rate cuts. Several Fed officials, including Collins, Williams, and Kugler, reiterated that current policy remains appropriate, given ongoing inflation risks. Expectations for a July rate cut sit just below 5%, according to the CME FedWatch Tool.

A midweek report that President Trump might fire Fed Chair Powell caused momentary turbulence. Though later called “highly unlikely” by the president, the speculation unsettled markets and reignited debate about Fed independence. 

Tariffs and Trade Tensions

Early-week jitters followed President Trump’s proposed 30% tariff on EU and Mexican goods effective August 1. Reassurances from EU and Mexican leaders helped stabilize markets.

Separately, the administration announced secondary tariffs on Russian goods unless a Ukraine ceasefire occurs by September 1. Markets largely shrugged this off but remained alert to inflation risks from rising import costs.

Tariffs remain a wildcard for both inflation and monetary policy going forward.

Market Performance and Flows

• Nasdaq Composite: Led the week, notching multiple record highs behind strength in semiconductors and AI-related names like NVIDIA and AMD.
• S&P 500: Also set new records, lifted by good earnings news.
• Russell 2000: Gained 0.2% for the week, leaving it up 3.0% for the month.
• Treasuries: Saw a tug-of-war between inflation optimism and Fed policy skepticism. The 2-year yield settled at 3.88%, down three basis points for the week, while the 10-year note yield settled at 4.43%, up one basis point for the week.
• U.S. Dollar Index: Finished the week higher, boosted by firmer inflation expectations and tariff-related concerns.

Investor Takeaway:

Resilient economic data and strong earnings kept equity markets buoyant, though risks around Fed policy and tariffs remain unresolved. With the July FOMC meeting ahead, investors should expect continued headline-driven volatility.

Monday:

The stock market rebounded from early session lows following some new tariff headlines, driven by a steady, mechanical trade that saw the major averages finish with modest gains and the Nasdaq close at a new record high.

A proposed 30% tariff on the EU and Mexico, starting August 1, was enough to incite a sluggish start, but true to form, the market displayed resilience to tariff headlines that have done little so far to sway the market’s upward momentum.

The head of the EU's Executive Commission and the President of Mexico both expressed a willingness to negotiate a better trade deal before the August 1 deadline. That mindset helped temper today’s selling activity.

Separately, the markets were unfazed by President Trump's announcement of secondary tariffs on Russia of up to 100% starting September 1 if Russia hasn't agreed to a ceasefire or an end to the war with Ukraine.

Though there was strength in the wake of the tariff developments, today's gains were modest. Buyer conviction was lacking ahead of consequential economic data releases and a plethora of earnings reports this week.

Tomorrow will bring the release of June CPI data, with June PPI on Wednesday and June Retail Sales on Thursday.

Several large banks, such as Wells Fargo (WFC 83.43, +0.88, +1.1%), Citigroup (C 87.50, +0.77, +0.9%), and JPMorgan Chase (JPM 288.70, +1.84, +0.6%), will release their earnings reports before the open tomorrow. Positioning before earnings contributed to the financials sector (+0.7%) finishing among the top-performing sectors.

The communication services sector (+0.7%) was another leader today, as Netflix (NFLX 1260.81, +15.70, +1.26%) traded higher ahead of its earnings report on Thursday.

Additionally, the sector benefitted from strength in its mega-cap components Alphabet (GOOG 182.76, +1.45, +0.8%) and Meta Platforms (META 720.37, +2.86, +0.5%).

Mega-cap stocks as a cohort slightly outperformed the market. The Vanguard Mega Cap Growth ETF posted a gain of 0.3%, while the S&P 500 increased 0.1%. The Russell 2000 (+0.5%) and the S&P Mid Cap 400 (+0.2%) outperformed the S&P 500 as well.

Seven S&P 500 sectors finished in positive territory with gains ranging from 0.1% to 0.7%.

The energy sector (-1.2%) was the only sector that saw a change of more than 1%, falling in tandem with the 2.3% decline in oil prices to $66.90 per barrel.

Treasuries traded in a tight range, exhibiting a similar wait-and-see disposition in front of this week's key economic releases.

There was no U.S. economic data of note today.

Tuesday:

The stock market opened with strength amid news that NVIDIA (NVDA 170.55, +6.48, +4.0%) would resume the sale of its H20 chips in China, but rising interest rates following the June CPI report resulted in selling pressure that kept the S&P 500 and broader market on its heels for most of the session.

Supported by NVIDIA’s gain and strength in Advanced Micro Devices (AMD), which is also aiming to resume AI chip sales in China, the Nasdaq Composite closed at another record high.

The S&P 500 information technology sector (+1.3%) was the only sector to finish in the green today, as the news involving NVIDIA and AMD was bolstered by reports of heavy investment in AI data centers. Alphabet (GOOG 183.10, +0.29, +0.2%) and CoreWeave (CRWV 140.59, +8.22, +6.2%), for instance, both made AI infrastructure investment announcements.

The strength in chipmakers saw the PHLX Semiconductor Index finish with a gain of 1.3%.

The other ten S&P 500 sectors could not shake off the impact of rising interest rates following the 8:30 ET release of the June CPI.

Total CPI was up 0.3% month-over-month in June and core CPI, which excludes food and energy, was up 0.2%. The latter was lower than expected and contributed to the stock market's early strength (the S&P 500 briefly touched a new intraday high at 6302), but a closer look at the report revealed pockets of inflation in several areas that stirred concerns about tariff-driven inflation.

Apparel prices, for example, increased 0.4% after being down 0.4% in May, while household furnishings and supplies prices increased 1.0% following a 0.3% increase in May.

Ultimately, the report was not good enough to suppress concerns over tariff-related inflation, which in turn left the market thinking the Fed is going to remain in a wait-and-see mode.

The financials sector (-1.7%) finished near the bottom of today's action, with several major financial companies, such as JPMorgan Chase (JPM 286.55, -2.15, -0.7%) and BlackRock (BLK 1046.16, -65.30, -5.9%), facing some "sell the news" pressure despite surpassing earnings expectations. Citigroup (C 90.72, +3.22, +3.7%) was an exception to the upside. Wells Fargo (WFC 78.86, -4.57, -5.5%) was a downside outlier, disappointing with its net interest income guidance.

Today's losses were broad-based. Roughly 90% of S&P 500 stocks declined today. Although a few mega-cap tech names helped mask further losses, a lack of positive headlines kept the market in a bearish state following the June CPI report. The Russell 2000 declined 2.0%, the S&P Midcap 400 index dropped 1.8%, and the equal-weighted S&P 500 slumped 1.4%.

The Treasury market was not unscathed either. The 10-year note yield settled up six basis points at 4.49%.

U.S. Treasuries traded calmly overnight following the release of a trove of economic data out of China that featured a stronger-than-expected Q2 GDP print and June retail sales, fixed asset investment, and industrial production data that was mixed relative to expectations.

The calmness faded, however, after the release of the June CPI report at 8:30 a.m. ET. There was selling interest across the curve, rooted in the sticky inflation and the notion that the Fed will view today's report as a basis to continue with a wait-and-see policy mindset.

The probability of at least a 25 basis point rate cut to 4.00-4.25% at the September FOMC meeting slipped to 54.0%, versus 62.6% a day ago, according to the CME FedWatch Tool. The dollar rallied after the report, mirroring the notion that rates may be sticking higher for longer. The U.S. Dollar Index was up 0.6% to 98.64.

Boston Fed President Susan Collins (voting FOMC member) echoed an “actively patient” approach to monetary policy in a speech today.

Wednesday:

The stock market traded in a relatively stable manner following the pre-market earnings reports of several large banks and the release of the relatively tame June PPI, while dealing with some headline volatility.

The June PPI and Core PPI figures were unchanged month-over-month, and both decreased year-over-year from May. Interest rates fell in response to the optimistic data, which influences core PCE, the Fed's preferred inflation gauge. The 10-year note yield traded down as much as five basis points to 4.44%.

A volatile pocket of trading occurred late in the morning trade when news reports suggested President Trump is likely to fire Fed Chair Jerome Powell. The president, himself, said in an Oval Office interview with the press pool shortly after the headlines circulated that he wouldn't rule out anything, but that it is highly unlikely that he will fire Fed Chair Powell, unless there is fraud.

The financials sector (+0.7%) was an early performer, supported by the second consecutive day of positive earnings reports from large banks.

Goldman Sachs (GS 708.82, +6.31, +0.9%), Morgan Stanley (MS 139.79, -1.80, -1.3%), and Bank of America (BAC 46.03, -0.12, -0.26%) all surpassed EPS expectations. The post-report weakness in the stocks was mainly a sell-the-news reaction following an impressive run, which also seemed to be the case yesterday.

The information technology sector (+0.3%) lagged in the early going as it was burdened by ASML (ASML 754.45, -68.57, -8.33%), which topped Q2 earnings expectations, stating that the company cannot confirm if it will deliver growth in FY26. The sector was able to recover throughout the trade and post a finishing gain, but weakness among chip makers was a notable trend that saw the PHLX Semiconductor Index finish with a loss of 0.4%.

For quite some time, only the defensive health care (+1.2%) and real estate (+1.1%) sectors traded in positive territory, with the health care sector getting added support from Johnson & Johnson (JNJ 164.77, +9.60, +6.2%) reporting strong upside results for Q2 EPS and revenues and raising its FY25 guidance.

The president’s clarification that it is highly unlikely that he will fire Fed Chair Powell helped stocks recover from the headline volatility, with broad-based support enabling the major averages to finish just below their session highs. Eight S&P 500 sectors finished in positive territory.

Support was distributed across stocks of all sizes, though there was a noticeable outperformance in small-cap stocks, evidenced by a 1.0% gain in the Russell 2000.

The market cap-weighted S&P 500 (+0.3%) finished similarly to the equal-weighted S&P 500 (+0.4%).

U.S. Treasuries had an exciting cash session, alternating between the inflation optimism that followed a relatively tame-looking June PPI report and the inflation angst surrounding reports that President Trump may soon fire Fed Chair Powell.

The 2-yr note yield settled down seven basis points at 3.89%, while the 10-yr note yield fell three basis points to 4.46%.

Reviewing today's data:

• The index for final PPI demand was unchanged month-over-month in June (Briefing.com consensus: 0.2%) following an upwardly revised 0.3% increase (from 0.1%) in May. The index for final demand, less foods and energy, was also unchanged month-over-month (Briefing.com consensus: 0.2%) following an upwardly revised 0.4% increase (from 0.1%) in May. The index for final demand was up 2.3% year-over-year, versus 2.7% in May, while the index for final demand, less foods and energy, was up 2.6% year-over-year, versus 3.2% in May.
  • The key takeaway for the market is the disinflation seen on a month-over-month and year-over-year basis. That is clearly moving in the Fed's preferred direction, and the unchanged readings for June should foster good thoughts about what the PCE Price Index for June will show when it is released.
• Industrial production increased 0.3% month-over-month in June (Briefing.com consensus 0.1%) following an upwardly revised unchanged reading (from -0.2%) in May. The capacity utilization rate was 77.6% (Briefing.com consensus 77.4%), versus an upwardly revised 77.5% (from 77.4%) in May. Total industrial production increased 0.7% yr/yr while the capacity utilization rate was 2.0 percentage points below its long-run average.
  • The key takeaway from the report is that the jump in industrial production in June was driven mostly by an increase in the output of utilities, which tends to be volatile based on weather conditions. Manufacturing output was up, but only by a modest 0.1% despite a more conciliatory tariff environment.

Thursday:

The stock market was encouraged by some key economic data releases and earnings reports before the open that prompted a day of broad-based gains, ultimately propelling the S&P 500 (0.5%) and Nasdaq Composite (+0.7%) to new all-time highs.

Travelers (TRV 261.81, +9.62, +3.81%), PepsiCo (PEP 145.44, +10.09, +7.5%), Citizens Financial Group (CFG 48.82, +1.85, +3.9%), Snap-On (SNA 337.80, +24.79, +7.92%), and Taiwan Semiconductor Manufacturing (TSM 245.60, +8.04, +3.38%) were among the more notable companies to report better-than-expected earnings and to trade higher after their reports.

Notably, equity futures were little changed following these encouraging earnings reports, but that changed after the 8:30 ET release of the retail sales and initial jobless claims reports triggered a positive opening that got extended over the entirety of the session.

Total retail sales rose 0.6% month-over-month in June after two consecutive months of decline, and initial jobless claims for the previous week decreased by 7,000 to 221,000.

The increase in retail sales and the surprisingly low level of layoffs conveyed an upbeat message about consumer spending and consumer spending potential that was reflected in the pro-cyclical advance by the stock market.

Broad-based buying interest saw nine sectors finish in positive territory, with sector strength and breadth figures improving throughout the session.

The information technology sector (+0.9%) was among the top performers, with chipmakers displaying strength after Taiwan Semi’s report. The PHLX Semiconductor Index finished with a gain of 0.7%. The strength in tech stocks contributed to the Nasdaq Composite (+0.7%) reaching a new all-time high of 20,911.83.

Large tech names were not the only beneficiaries of today's risk-on move, as strength was seen across stocks of all sizes.

In fact, small-cap stocks outperformed the broader market, evidenced by a 1.2% gain in the Russell 2000. Mid-caps performed similarly, with the S&P Mid Cap 400 finishing up 1.1%.

Mega-caps, for their part, did not underperform; smaller caps simply fared better today, with economic growth optimism contributing to their outperformance.

The Vanguard Mega Cap Growth ETF closed with a gain of 0.6%, a slight edge over the S&P 500 (+0.5%).

The Treasury market got stymied by the positive economic news and some remarks from New York Fed President Williams (FOMC voter) and Fed Governor Kugler (FOMC voter). Both Fed officials indicated that the current policy rate is appropriate for the conditions they see in front of them, which includes the possibility of tariff-driven inflation in coming months. Treasuries, however, suffered only modest losses, with shorter-dated securities faring worse than longer-dated securities in a curve-flattening trade.

The 2-year note yield finished up 3 basis points at 3.92%, and the 10-year note yield finished up one basis point at 4.47%. The U.S. Dollar Index increased 0.3% to 98.68.

Reviewing today's data:

• Total retail sales increased 0.6% month-over-month in June (Briefing.com consensus: 0.2%) following a 0.9% decline in May. Excluding autos, retail sales rose 0.5% month-over-month (Briefing.com consensus: 0.3%) following an upwardly revised 0.2% decline (from -0.3%) in May.
  • The key takeaway from the report is that the sales pickup was fairly broad-based across retail businesses following declines in April and May. Importantly, the June report also conveyed increases in discretionary spending activity, captured in areas like autos (+1.2%), apparel (+0.9%), building materials and garden equipment supplies (+0.9%), and food services and drinking places (+0.6%).
• Initial jobless claims for the week ending July 12 decreased by 7,000 to 221,000 (Briefing.com consensus: 230,000). Continuing jobless claims for the week ending July 5 increased by 2,000 to 1.956 million.
  • The key takeaway from the report is the remarkably low level of initial jobless claims, which connotes limited layoff activity that fits hand-in-hand with good business conditions and a good outlook.
• The Philadelphia Fed Index jumped to 15.9 in July (Briefing.com consensus: -0.2) from -4.0 in June, led by increases in the indexes for new orders, shipments, and the number of employees. However, there were also increases registered in the indexes for prices paid and prices received. The dividing line between expansion and contraction is 0.0.
• Import prices in June were up 0.1%, as were nonfuel import prices. Export prices, meanwhile, jumped 0.5% month-over-month, as did non-agricultural export prices. On a year-over-year basis, import prices were down 0.2%, nonfuel import prices were up 1.2%, export prices increased 2.8%, and nonagricultural export prices jumped 2.9%.
• July NAHB Housing Market Index (Actual 33; Briefing.com consensus: 32; prior 32)
• May Business Inventories (Actual 0.0%; Briefing.com consensus -0.1%; prior 0.0%)

Friday:

The stock market got off to a strong start following several key earnings reports before the open, but broad-based selling pressure confined the major averages to a tight range that ultimately saw them close little changed from their opening levels.

Futures were only slightly higher following a fresh wave of generally positive earnings reports but ticked higher after the 8:30 ET release of the June Housing Starts and Building Permits Report, which showed better-than-expected headline numbers for starts (1.321 mln, Briefing.com consensus 1.300 mln) and permits (1.397 mln, Briefing.com consensus 1.383 mln).

The details of the report, however, showed weakness in single-unit starts and permits, which stalled the initial momentum and did little to deter the market from the selling trend that ensued shortly after the S&P 500 (unch) and Nasdaq Composite (+0.1%) touched new all-time highs.

The selling activity was broad-based but modest in today's trade and reflected a proclivity towards "selling the news" of companies that beat earnings expectations. Netflix (NFLX 1209.24, -64.93, -5.1%), American Express (AXP 307.95, -7.40, -2.4%), and 3M (MMM 153.23, -5.81, -3.7%) were among the names that faced pressure despite generally positive earnings and guidance.

There were a few winners in the wake of earnings reports. Charles Schwab (SCHW 95.78, +2.68, +2.9%), for instance, reached a new 52-week high, and Comerica (CMA 65.32, +2.90, +4.7%) and Regions Fincl (RF 26.01, +1.50, +6.1%) also fared well.

Five sectors finished in positive territory, though only the consumer discretionary (+1.0%) and lightly weighted utilities (+1.7%) advanced by more than half a percent. The energy (-1.0%) and health care (-0.6%) sectors were the only sectors that declined by more than half a percent.

Today's lack of buying conviction permeated through stocks of all sizes. The market-weighted S&P 500, the equal-weighted S&P 500, and the Vanguard Mega Cap Growth ETF all finished flat for the day.

The S&P MidCap 400 (-0.1%) slightly lagged, and while the Russell 2000 (-0.6%) underperformed, it still managed a 3.0% gain for the week.

U.S. Treasuries finished the week on a higher note with relative strength in shorter tenors driving yields on 5s and 2s to their lowest levels in a week while the long bond continued this week's underperformance.

Fed Governor Waller repeated Thursday evening that a rate cut should be made at the July FOMC meeting, but the fed funds futures market remains highly skeptical of that move, with the CME FedWatch tool showing just a 4.7% implied likelihood of a rate cut on July 30.

The 2-yr note yield settled the session down four basis points at 3.88%, and the 10-yr note yield dropped three basis points to 4.43%.

Reviewing today's data:

• Total housing starts increased 4.6% month-over-month in June to a seasonally adjusted annual rate of 1.321 million units (Briefing.com consensus: 1.300 million). That is the good news. The bad news is that single-unit starts declined 4.6% month-over-month. Total building permits increased 0.2% month-over-month to a seasonally adjusted annual rate of 1.397 million units (Briefing.com consensus: 1.383 million). That is the good news. The bad news is that single-unit permits declined 3.7% month-over-month.
  • The key takeaway from the report is that there wasn't any strength in single-unit starts and permits, which is where the strength needs to be to help curtail the affordability constraints in an existing home market that is still relatively light on available inventory for sale.
• The preliminary University of Michigan Consumer Sentiment Index for July edged higher to 61.8 (Briefing.com consensus: 61.5) from the final reading of 60.7 for June, hitting its highest level in five months. In the same period a year ago, the index stood at 66.4.
  • The key takeaway from the report is that consumer sentiment, while not strong, has improved in recent months along with inflation expectations.