STORY OF THE WEEK
Inflation Cools, S&P 500 Holds Near Record High
Wall Street closed out the week near its record levels, as softer inflation data offset growing signs of a slowing consumer.
Stocks hit an all-time high midweek after the July Producer Price Index came in flat month-over-month, with core PPI rising just +0.2%, below expectations. The softer reading gave investors renewed confidence that inflation pressures are beginning to ease, even as energy costs remain elevated relative to pre-shock levels. In response, the market-implied odds of a Federal Reserve rate hike fell sharply over the course of the week, according to the CME FedWatch tool.
The S&P 500 climbed +0.65% at midweek to close at a fresh record above 7,800 points, with the Nasdaq also advancing its own milestone close. But the rally cooled by week's end as markets turned cautious ahead of Friday's retail sales report, which showed consumer spending slowing in June from May after a notable bump earlier in the year tied to tax refunds. Despite the softer spending signal, major indexes held firm near their highs rather than giving back the week's gains.
The S&P 500 surpassed 7,800 for the first time, while the Nasdaq also reached a record as investors welcomed the latest economic data.
July’s Producer Price Index was unchanged month over month, while prices for final demand goods fell -0.7%, signaling less pressure from wholesale prices.
U.S. retail sales fell -0.6% in June, well below the forecasted +0.1% increase and a notable drop from the prior month's +0.2% gain.
This week captured a market caught between two signals: cooling inflation that gives the Fed more room to hold steady, and softening consumer data that hints at a slower economic backdrop ahead. Investors will be watching closely to see whether resilient spending returns, or if this week's soft retail read marks the start of a broader slowdown.
