The S&P 500 climbed to a fresh record high this week, powered by new data showing inflation is cooling—developments that, together with the previous week’s weak jobs report, further raise the odds the Federal Reserve holds interest rates steady at its next meeting.
Aiding the positive market sentiment for equities was a wave of strong earnings from AI-infrastructure companies that added to investor interest in stocks.
By Friday’s market close, the Dow Jones Industrial Average stood at 53,732, down 0.56 percent for the week. The S&P 500 finished the week up 0.36 percent at 7,785 after touching its record high on Thursday. The Nasdaq edged up 0.14 percent, while the small-cap Russell 2000 jumped 1.12 percent.
The CBOE Volatility Index sank 4.36 percent to 14.25—a sign fear is draining out of the market even as the rally shows signs of slowing.
The week didn’t start smoothly, as crude oil prices spiked amid growing uncertainty over a U.S.-Iran deal to reopen the Strait of Hormuz, while profit-taking and investor caution ahead of the closely watched inflation data also weighed on the market, sending all major indexes lower for the first two days.
The mood shifted Wednesday morning decisively when a new report showed inflation easing further. The consumer price index—a measure of the cost of living—moderated for a second straight month, to 3.4 percent in July from 3.5 percent in June, matching expectations.
The reading moved further below the high of 4.2 percent hit in May, as the energy shock from the war with Iran works its way through the data. Gasoline prices are now rising at an annual rate of 24.6 percent, down from 26.7 percent in June, while fuel oil prices climbed 39.1 percent, versus 42.9 percent previously.
“Although inflation remains elevated, [Wednesday’s] report should give investors greater confidence that peak inflation appears to be behind us,” Bret Kenwell, eToro U.S. investment analyst, told The Epoch Times.
Skyler Weinand, chief investment officer at Dallas-based Regan Capital, told The Epoch Times that the numbers were encouraging, but weren’t compelling enough for the Federal Reserve to determine its next interest-rate move.
That lack of clarity capped the rally in late-afternoon trading, but strong earnings from Lumentum Holdings Inc., Super Micro Computer, and CoreWeave revived interest in AI infrastructure stocks. All major indexes closed moderately higher except the Dow, which edged lower.
Thursday brought another dose of good news: the producer price index, a gauge of wholesale inflation, moderated in July, rising 4.70 percent from a year earlier, down from 5.5 percent in June and below expectations.
Glen Smith, chief investment officer at Texas-based GDS Wealth Management, told The Epoch Times that the reading is further evidence that inflation is showing signs of stabilization.
“This is good news for consumers and the Federal Reserve, which is walking an extremely tight line between trying to tame inflation while monitoring a softening labor market,” he said.
Still, Smith doesn’t expect the report to change the Federal Reserve’s calculus, since the central bank has no control over the Middle East conflict driving oil prices. “For now, the Fed is likely to keep rates steady through year-end,” he said.
Bond markets rallied on the back of the cooler retail and wholesale inflation data, with the benchmark 10-year yield sliding from 4.73 percent earlier in the week to 4.61 percent by Thursday afternoon—clearing the way for stocks to close in the green across the board, with the S&P 500 hitting a new record high.
The rally cooled on Friday as a pair of weak consumer reports weighed on the market. The S&P 500, the Dow Jones, and the Nasdaq closed down slightly, while the Russell 2000 edged up.
July retail sales fell 0.6 percent, reversing June’s 0.2 percent gain. It was the first decline since October 2025 and the biggest drop since May of last year.
The University of Michigan’s consumer sentiment index also dropped to 51 in early August from 55.2 in July, missing expectations of 54.5 and snapping two straight months of improvement.
“Today’s Retail Sales report revealed that the U.S. consumer may be losing momentum,” Kenwell told The Epoch Times.
He said one month of weak spending doesn’t necessarily mean the economy is deteriorating, but it is harder to dismiss given the disappointing GDP and jobs data released last week.
“Combined with an in-line inflation reading, that softer data should ease pressure on the Fed to raise rates,” he said.
