The S&P 500 (SPX) and the Nasdaq-100 (NDX) inched down from Thursday’s record highs, though still closing the week up 0.59% and 1.25%, respectively. The Dow Jones Industrial Average (DJIA) finished the week nearly flat at –0.07%.
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While other indexes hovered around zero line on Friday, pulled in different directions by apparent strength of the economy, the resulting reduction in rate-cut expectations, as well as high earnings variability – the Dow was decisively in the red on reports that Trump is pushing for larger tariffs on European Union. According to media reports, Trump has demanded a minimum tariff of between 15% and 20% in any deal with the EU, as the bloc strives to reach a trade agreement before August 1 deadline for implementing a 30% levy.
Last week, another batch of data confirmed that the U.S. economy continues to be healthy, even if moderate weakness is emerging in some pockets. Retail sales rebounded in June, indicating that tariffs are not significantly impacting consumer spending, at least not yet. The print confirmed what was earlier reflected in the earnings commentary of the largest U.S. banks, with JPMorgan Chase (JPM), Citigroup (C), and Wells Fargo (WFC) reporting increases in their consumer banking revenues, stemming from higher credit-card debt – while delinquencies remain stable year-over-year.
Meanwhile, initial jobless claims fell last week to their lowest level in three months, confirming the “Goldilocks” state of the economy. The Philly Fed business outlook jumped to one of the strongest readings in the past three years, confirming robust business activity. That was reaffirmed by a stronger-than-expected gain in industrial production in June.
Earlier in the week, CPI and PPI reports showed that core price increases remain subdued. Import prices fell in June, helping ease tariff-related worries. Importantly, Friday’s UoM consumer survey showed plunging one-year inflation expectations, along with the continued decline in the long-term expectations. Moreover, July’s preliminary consumer sentiment index came in better-than-expected for the fourth month in a row, continuing its strong rebound from April’s lows.
Traders are now assigning nearly zero chances for a rate cut at the Federal Reserve’s next meeting on July 30, as the economy continues to demonstrate enviable health and corporate sector appears strong, while inflation is grinding down despite the tariffs – but at a much slower pace than policymakers would like to see. Fed Governor Christopher Waller said that the Fed should cut rates now – saying that the economic momentum is slowing and risks to employment are elevated. However, Waller and Michelle Bowman are the only rate committee members who have opined in favor of a July cut.
Three Economic Events
Here are three key economic events that could affect your portfolio this week. For a full listing of additional economic reports, check out the TipRanks Economic Calendar.
» June Existing Home Sales Change – Wednesday, 07/23 – This report measures the sales volumes and prices of existing single-family homes, condos, and co-ops nationwide. Existing homes account for over 90% of total home sales in the country, so this report provides insights into the health of the housing market which has significant implications for economic activity throughout the U.S.
» July S&P Global Manufacturing PMI and Services PMI (preliminary) – Thursday, 07/24 – PMI indices are leading economic indicators used by economists and analysts to gain timely insights into changing economic conditions, as the direction and rate of change in the PMIs usually precede changes in the overall economy.
» June Durable Goods Orders – Friday, 07/25 – This report measures the cost of orders received by manufacturers for durable goods, such as vehicles and electrical appliances. As those durable products often involve large investments, they are sensitive to the economic situation. The report helps assess the state of U.S. production activity and reflects the demand for big-ticket goods, which is dependent on both the forecasted state of consumer sentiment and the economy in general.
For more exclusive market insights and content from TipRanks Macro & Markets research analyst Yulia Vaiman, click here.