Updated 7/20/2026

Our Perspective on the Markets Last Week

Equity markets moved lower last week, with the Nasdaq experiencing the steepest decline as AI-related hardware stocks came under additional selling pressure. The price change of select U.S. indexes for the week was: S&P 500 (-1.55%), Dow Jones Industrial Average (-0.93%), and Nasdaq (-2.90%). The yield on the 10-year Treasury note fell 0.01 percentage points to 4.55%.

Despite the small step backwards for the major indexes, market breadth told a more positive story. Among companies listed on the New York Stock Exchange, 52.3% advanced during the week while 46.0% declined. Over on the Nasdaq, where a heavier concentration of the tech companies are listed, only 37.6% of listed companies advanced compared with 59.2% that declined.

Semiconductor and memory-chip stocks have had a rough start to the third quarter, with the Philadelphia Semiconductor Index now more than 20% below its June 22 record close. The selling continued despite favorable quarterly results from ASML and Taiwan Semiconductor as bulls and bears continued to debate the outlook for memory demand and the economics of artificial intelligence investment.

Inflation reports were more encouraging. The Consumer Price Index declined 0.4% in June, while core prices, which exclude food and energy, were unchanged. Over the past year, headline inflation slowed to 3.5% and core inflation fell to 2.6%. Producer prices declined 0.3%, while the underlying index excluding food, energy, and trade services rose just 0.1%. The reports helped reduce concerns about the possibility of an immediate Federal Reserve rate increase.

Other economic reports were generally positive as well. Retail sales rose 0.2% in June following an upwardly revised 1.0% increase in May, while core retail sales increased 0.5%. Housing starts jumped 19.0%, largely because of an increase in multifamily construction, while single-family starts were nearly unchanged and building permits declined 3.0%.

Second quarter earnings are off to a good start. According to FactSet, 10% of S&P 500 companies had reported second-quarter results by the end of the week, with 88% exceeding earnings estimates and 85% reporting revenues above expectations. Positive earnings surprises from the financial sector helped raise the blended earnings-growth rate for the quarter to 24.7%, up from 22.5% one week earlier.

Geopolitical developments also returned to the forefront following the cancellation of the ceasefire between the United States and Iran and another round of military exchanges. West Texas Intermediate and Brent crude oil prices each gained approximately 16% for the week as concerns increased over energy shipments through the Strait of Hormuz. The move brought renewed attention to the possibility that higher energy prices could complicate the inflation and interest-rate outlook, even as the June inflation reports showed improvement.

Looking Ahead:

With a relatively light economic calendar, corporate earnings will take center stage with 86 companies in the S&P 500 scheduled to report second-quarter results this week. Alphabet, Tesla, and IBM are scheduled to report Wednesday, followed by Intel on Thursday. Other notable reports will come from General Motors, 3M, AT&T, American Express, and Verizon.

Alphabet and Intel will be among the most closely watched earnings reports. Investors will likely focus on Alphabet’s capital-spending plans and commentary regarding the pace of artificial intelligence investment, while Intel’s results may provide additional insight into conditions across the semiconductor industry.

The Middle East developments will also remain in focus. With crude oil prices moving higher last week, markets will be watching for any change in military activity, diplomatic discussions, or traffic through the Strait of Hormuz that could alter the outlook for energy supplies and inflation.

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Probability of an interest rate change at next FOMC meeting:

DECREASE -25 bps
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No Change
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INCREASE +25 bps
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Current Target Rate is 3.50% - 3.75%

Select Economic Data Releases

*Colored icon denotes a new data release.
Gross Domestic Product

First-quarter GDP was revised higher to an annualized 2.1%, although the increase was driven primarily by lower imports while consumer spending was revised down sharply, pointing to softer underlying economic momentum..  The final revision to fourth quarter GDP showed growth of just 0.5%, reflecting a notable slowdown in economic momentum.  For the full year 2025, GDP grew by 2.1%.  U.S. GDP grew at a strong 4.4% annualized rate in the third quarter of 2025, marking the fastest pace of growth in about two years, led by solid consumer spending, exports, investment, and government outlays.  The final estimate of Q2 GDP came in at an annualized rate of 3.8%, well above the initial 3.0% estimate.  The final revision showed gross domestic product shrank at a revised -0.5% annual rate in the first quarter.  More than the previous revision of -0.2%.  The final revision of Q4 2024 GDP was raised a tenth of a percent to a 2.4% annualized pace.  Q3 GDP showed the U.S. economy expanded at a frothy 3.1% annual pace in the third quarter, revised up from 2.8%.  Q2 GDP grew at a 3.0% annual pace.  Q1 2024GDP grew at a 1.4% pace due largely to much slower growth in consumer spending.  The final revision of Q4 GDP rose to 3.4%.  U.S. GDP grew at 4.9% annual pace in the third quarter.  

Employment Data

The U.S. economy added 57K jobs in June, well below expectations, reducing concerns over additional Federal Reserve tightening while the unemployment rate remained at 4.2%.  The U.S. economy added 172K jobs during May, exceeding expectations and highlighting continued resilience in the labor market.  The unemployment rate remained unchanged at 4.3%.  The April employment report came in stronger than expected, with nonfarm payrolls increasing by 115K and the unemployment rate holding steady at 4.3%.  In addition, March payrolls were revised higher, reinforcing the view that the labor market remains resilient despite signs of broader economic moderation.  The March nonfarm job gains were revised up to 185K from 178K.  The unemployment rate held near 4.3%, suggesting the labor market remains stable overall.  The U.S. labor market showed modest weakness in February, with nonfarm payrolls declining by 92K jobs, while the unemployment rate edged up to 4.4%. Despite the softer headline, average hourly earnings rose 0.4% for the month and 3.8% from a year earlier, indicating wage growth remains relatively firm.  The U.S. added 130K jobs in January, while the unemployment rate held steady at 4.3%, indicating continued but moderate labor market growth.  The economy added approximately 50K jobs in December, noticeably less than the anticipated addition of 60K, but the unemployment rate unexpectedly decreased to 4.4%, suggesting that while hiring has slowed, labor conditions remain relatively stable.  The November U.S. nonfarm payrolls report showed a modest rebound in hiring with about 64K jobs added, beating expectations after an unusually large October decline of -105K, primarily driven by steep federal government job losses tied to the prolonged government shutdown.  The unemployment rate ticked up to around 4.6%, its highest in several years, signaling continued cooling in the labor market. The September nonfarm payrolls increased by 119K, while the unemployment rate rose to 4.4%, signaling modest job gains amid a cooling labor market.  Employers added a mere 22K jobs in August.  July nonfarm payrolls rose just 73K while June and May were revised significantly lower.  

Retail Data

June retail sales rose a modest 0.2% from May and 6.7% from a year earlier, while sales excluding automobiles and gasoline increased 0.4%, pointing to continued but uneven consumer spending.  Retail sales rose a stronger-than-expected 0.9% in May, while sales excluding automobiles increased 0.7%, indicating that consumer spending remains resilient despite persistent inflation concerns.   Retail receipts rose by a seasonally adjusted 0.5% in April, but mostly due to increased spending on gas.  Retail sales surged 1.7% in March 2026, exceeding forecasts, driven heavily by a 15.5% spike in gasoline prices due to the Iran conflict.  Retail sales rose modestly in February, increasing approximately 0.6% and coming in generally in line with expectations after falling -0.2% in January.  U.S. retail sales were flat in December (0.0% month-over-month), missing expectations and signaling softer consumer demand as households pulled back on big-ticket purchases. Year-over-year sales were up about 2.4%.  November retail sales rose about 0.6 % month-over-month, rebounding from a revised dip in October and topping forecasts.  Retail sales in the US flattened in October from September 2025, following a downwardly revised 0.1% rise in the previous period.  August retail sales rose 0.6% from July, exceeding expectations and underscoring consumer resilience.  Omitting autos and gasoline sales, a better way to measure trends in retail spending, rose an even stronger 0.7%.  July retail sales rose 0.5%, matching expectations and underscoring steady consumer demand.  June retail sales rose 0.6% month-over-month and 3.9% year-over-year, reversing two months of declines. 

Housing Data

More housing data will be reported. Housing starts in June jumped 19.0% largely because of increased multifamily construction, while building permits fell 3.0%.  New home sales unexpectedly declined 7.3% in May to an annualized rate of 580,000, while the supply of homes for sale increased to 496,000.  Existing home sales rose 3.2% in May to an annualized pace of 4.17M units, the fastest pace since December, while the median home price increased 1.3% from a year earlier to a record $429,300 for the month of May.  New home sales fell 6.9% in April to an annualized rate of 635K units, reflecting some cooling in housing demand as higher mortgage rates and affordability challenges continued to weigh on buyers.  Existing-home sales increased by 0.2% in April.  Despite higher mortgage rates, new home sales rose in March to a seasonally adjusted annual rate of 682K, increasing 7.4% from the prior month and slightly above year-ago levels.  New home sales rose 1.6% in February to an annualized pace of roughly ~662K units, while pending home sales declined about -0.8%.   Existing-home sales increased by 1.7% in February 2026. For the month, sales rose in the Midwest, South and West, but fell in the Northeast.  Year-over-year sales rose in the South and declined in the Northeast, Midwest and West.  December pending home sales report showed a notable pullback in the U.S. housing market, with the National Association of Realtors’ Pending Home Sales Index sliding 9.3% month-over-month to an index level of 71.8, the largest drop in contract activity since early 2020, and down about 3% from a year ago. New single-family home sales were essentially flat in October at about 737K units annualized, just a touch below September’s 738K but still roughly 19% higher than a year ago, suggesting steady builder demand even as closings level off.  Existing-home sales climbed about 5% to roughly 4.35M units, highlighting stronger resale market activity alongside cautious new construction. 

Leading Indicators

The June update to the LEI comes this week.  The Conference Board's Leading Economic Index (LEI) declined 0.2% in May, marking its sixth consecutive monthly decline.  The Conference Board’s Leading Economic Index rose slightly by 0.1% in April 2026 to 97.4 (2016=100), following a 0.6% decline in March.  The U.S. Leading Economic Index (LEI) fell by -0.2% in December, following the -0.3% decline in November.  The U.S. Leading Economic Index (LEI) fell by -0.5% in August.  The Conference Board Leading Economic Index (LEI) for the US was revised up to a 0.1% increase in July 2025 to 98.7 (2016=100), after declining by -0.3% in June.  The LEI fell by -2.7% over the six months between January and July 2025, a faster rate of decline than its –1.0% contraction over the previous six-month period (July 2024 to January 2025).  The Conference Board Leading Economic Index® (LEI) for the US ticked down by -0.1% in May 2025 to 99.0 (2016=100), after declining by -1.4% in April (revised downward from –1.0% originally reported).  The Leading Economic Index (LEI) for the U.S. declined by -0.7% in March to 100.5 (2016=100). The LEI in February fell by -0.2% after an upward revision in January from -0.3% to -0.2%.  The Leading Economic Indicators index rose 0.1% in December 2024 (upwardly revised from an initially estimated decline of 0.1%).  November LEI was revised up +0.4% in November. The LEI declined by -1.3% over the second half of 2024, slightly less than its -1.7% decline over the first half of 2024.  The leading index dropped -0.3% in October, largely because of higher jobless claims, fewer building permits and a decline in manufacturing orders.  The leading indicators of the U.S. economy fell -0.5% in September because of weakness in a few key industries such as housing and manufacturing, but not enough to suggest any sign of major trouble.  

Inflation

Inflation data was encouraging in June, as consumer prices fell 0.4% and core prices were unchanged, while producer prices declined 0.3% and the underlying measure excluding food, energy, and trade services rose just 0.1%.  The Federal Reserve's preferred inflation measure, the Personal Consumption Expenditures (PCE) Price Index, rose 0.4% in May and 4.1% from a year earlier, while core PCE increased 0.3% for the month and 3.4% year-over-year, indicating inflation remains above the Fed's long-term target.  Consumer prices rose 0.5% in May and 4.2% from a year earlier, though core inflation remained relatively contained at 0.2% and 2.9%, respectively.  Meanwhile, producer prices increased 0.4% in May and 3.8% over the prior year, as higher energy costs continued to pressure businesses.  The PCE Index, rose 0.4% in April, pushing the annual inflation rate to 3.6%, the highest level in nearly three years. The report reinforced concerns that inflation remains a significant risk and may be trending higher again.  U.S. inflation rate leaped to a nearly three-year high of 3.8% in April and the producer price index jumped 1.4%, mostly due to higher oil prices.  The Federal Reserve’s preferred inflation measure, the core PCE index, rose approximately 0.3% in March and 3.5% year-over-year, indicating that inflation remains elevated and above the Fed’s 2.0% target.  Producer prices rose 0.5% in March due to surging oil prices tied to the Iran war, but aside from energy, the increases in the cost of other goods and services were surprisingly tame.  March inflation data was mixed but remained elevated, with core PCE rising 0.4% month-over-month and CPI increasing 0.9% for the month. The Producer Price Index report showed wholesale prices rising 0.6% in February, a stronger-than-expected increase that reinforced concerns that inflation progress may remain uneven. The February Consumer Price Index (CPI) rose 0.4% on the month and 3.2% from a year earlier, while core CPI increased 0.3% month-over-month and 3.8% year-over-year, indicating inflation pressures remain persistent.  Similarly, the latest Personal Consumption Expenditures (PCE) price index showed headline prices rising 0.3% for the month and 2.5% year-over-year, with core PCE up 0.4% on the month and 2.8% annually, reinforcing expectations that Federal Reserve rate cuts may be more gradual.  The January Producer Price Index rose 0.5% month over month, above the 0.3% consensus estimate, signaling that pipeline inflation pressures remain somewhat sticky.  The headline PCE index rose 0.3% for December and 2.5% year-over-year, while core PCE increased 0.4% on the month and 2.8% from a year earlier.  

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