Week in Review: July 18 2025

July 21, 2025

Recap & Commentary

Markets edged up over the course of the week with the S&P 500 setting a new record high along the way. Investors generally seemed content to wait for further trade developments, while digesting June inflation data and the start of second quarter earnings season. Notably, the 30-Year Treasury yield surpassed 5.0% as bond investors fretted about the pace of inflation and its potential impact on future Fed rate cuts. At the start of July, markets were pricing in a 75% chance for a September rate cut. Following the June CPI inflation report, those odds dropped to 55%, as markets began to doubt the Fed’s willingness to cuts rates in the face of rising inflation, especially if labor markets remain as healthy as they did through the first half of the year.

Through Friday, 12% of S&P 500 companies had reported 2Q25 earnings, including large banks such as JP Morgan, Wells Fargo, Citigroup, and Bank of America, along with investment firms Goldman Sachs and Morgan Stanley. In every case the companies surpassed their earnings estimates aided by a combination of resilient consumer spending and trading revenues bolstered by equity market volatility. According to industry group FactSet, second quarter S&P 500 consolidated earnings growth is expected to be 5.6%, better than the 4.9% growth anticipated as of June 30.

Economic Commentary

On a headline basis, consumer prices (CPI) rose 0.3% in June, the fastest monthly pace since January. Compared to a year ago, headline CPI rose 2.7%, a four-month high. Core CPI, excluding more volatile food and energy prices, rose 0.2% for the month and 2.9% from a year ago. Underneath the headlines, certain categories of import-dependent goods, showed upward tariff-related pressure, including appliances, toys, and sporting goods which rose 1.9%, 1.8%, and 1.4%, respectively for the month, well ahead of the 0.3% headline pace.

Producer prices (PPI) showed less pressure than CPI in June, registering at 0.0% for both headline and core levels. Compared to a year ago, headline and core PPI rose 2.3% and 2.6%, respectively, down from 2.7% and 3.2% in May.

Consumers continued to spend in June with headline retails sales rise 0.6% after falling 0.9% in May. Retail control sales, used in the calculation of GDP, rose 0.5% after just a 0.2% gain in May.

Consumer sentiment improved slightly in the first half of July, building upon June’s gain, the first in six months. The increase was led by consumers’ views of current and future economic conditions. Consumers’ concerns about inflation continued to wane as 1- and 5- year inflation expectations fell to 4.4% and 3.6%, respectively, both five-month lows. The combination of improved consumer sentiment coupled with the rebound in retail sales suggests consumers are generally feeling more upbeat as the worst of the potential economic impacts envisioned immediately after President Trump’s April 2 tariff announcement have failed to materialize thus far.

Of Note

Events in Washington, while not necessarily market moving, attracted attention as Congress passed a rare rescission package, allowing the executive branch (President) to avoid spending money previously approved by Congress. The decision cut $9B in funding for the United Nations, international aid, and the Corporation for Public Broadcasting, among other programs.

Market Indices (As of 07/18/2025)

• Manufacturing PMI
• Services PMI
• Existing Home Sales
• New Home Sales
• Durable Goods Orders
• Initial Jobless Claims