Happy Friday, everyone. Only one more week until school starts, so get those last-minute beach and pool trips in while you can. Let’s catch up on a confusing (but good) week.
📊 Weekly Market Recap
- S&P 500 return Year to date were approximately 9.90%
- S&P 500 return over the past month were approximately 2.97%
- S&P 500 return over the past 7 days were approximately 0.94%
This Week in the Markets- 3 Things to Know
- Inflation data shocked markets – If you were following the inflation news this week you likely came away with whiplash. The Consumer Price Index came in at an annualized 2.7% this month slightly below expectations. On the flipside, the Producer Price Index (PPI) posted its largest monthly jump in years (+0.9%), adding fuel to worries that underlying inflation isn’t cooling as much as hoped. These were decidedly mixed messages that left many people wondering which way is which.
- Stocks still betting on a September cut – Despite the inflation confusion, equity markets pushed higher, showing investors are still firmly in “soft landing” mode. The thinking is that the Fed will prioritize supporting a cooling economy over keeping rates elevated for too long. Traders are pricing in a 25-basis-point cut in September, with the hope that it will be the first of several moves into early 2026. That optimism has fueled gains across growth and cyclical sectors alike, with investors willing to overlook near-term inflation risks in favor of the bigger-picture prospect of easier money.
- Lumber futures took a nosedive – September ’25 contracts plunged nearly 13% in two weeks, falling from just under $700 to about $606. This sell-off appears to be fueled by a combination of factors: a seasonal slowdown in building activity, the impact of higher mortgage rates on housing starts, and a wave of speculative tariffs unwinding long positions after a summer run-up. Interestingly, spot prices are still inching higher, meaning current demand remains solid…but forward contracts are flashing a warning that builders and suppliers see softer conditions ahead.
Following a week of choppy trading, markets managed to close on an upbeat note, powered largely by good corporate earnings. Consumer discretionary names outperformed after several major retailers posted stronger than expected quarterly sales, hinting that spending remains steady despite higher prices. Energy stocks also did well, buoyed by global demand forecasts that were revised upward.
The broader macro narrative remains centered on the Fed’s September decision, with futures markets still pricing in a quarter-point cut despite hotter inflation prints earlier in the month. For now, the belief is that easing will help offset slowing manufacturing activity and a cooling labor market. Lower rates could also relieve pressure on credit-sensitive sectors like housing, which has been feeling the pinch of higher mortgage rates and declining builder sentiment. At the same time, investors are watching commodities like lumber and copper for early signs of a deeper demand slowdown as forward contracts weake.
Looking toward the end of 2025, optimism is building that a series of rate cuts could support a soft landing, keep corporate earnings growth intact, and extend the bull market well into next year (hopefully). That scenario depends heavily on inflation continuing to trend lower, something that tariffs, energy price volatility, or supply chain disruptions could easily derail. If cost pressures stay elevated, the Fed may be forced to move more cautiously, limiting the size and speed of cuts. For now, though, the market tone remains constructive, with traders willing to look past near term risks in favor of the bigger picture story of cheaper capital and continued growth heading into Septembers possible cut.
S&P 500 SECTOR SNAPSHOT- Past Week
Top Movers In the Market This Week
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