S&P 500: 1.52% DOW: 1.26% NASDAQ: 1.18% 10-YR Yield: 4.39%
What Happened?
Markets kept climbing this week, with the summer rally rolling on and no real signs of slowing down. Despite all the chatter about a cooling economy, the data continues to tell a different story. Consumers are still spending, earnings are beating expectations, and while inflation isn’t gone, it’s staying in check as corporations and consumers await more tariff policy.
The S&P 500 gained ground every single day and is now closing in on 6,400. The Magnificent 7 megacaps hit their first record since December, and earnings season has been a standout as over 80% of companies are beating estimates, the best rate in four years. Under the surface, Health Care – this year’s underperformer – led the way, while Tech took a breather.
Valuations are certainly stretched, and signs of speculative froth are re-emerging, but the rally has remained resilient. Many bearish investors have started to step aside, not necessarily because they’ve turned bullish, but because fading this trend has become a difficult trade. Positioning still looks relatively balanced, and improving breadth plus a stable macro backdrop are giving markets some solid footing, at least for now.
On the political and policy front, things stayed relatively calm. Trump’s team made progress on EU trade talks and may target Brazil next, while the Section 301 investigation lays the groundwork for more negotiations. Trump and Fed Chair Powell had a quiet meeting, but the President did keep pushing for rate cuts and a weaker dollar, even while touting the benefits of both strong and weak currencies.
Looking ahead, next week will likely shake things up. We’ve got a loaded slate: megacap earnings, jobs data, and the Fed’s next rate decision. For now, the bulls are in charge and with so much on deck, it’s fair to expect a bumpier ride next week.
Home Prices Hit Record High in June, Dragging Down Sales
- Home sales came in well below total sales estimates of 4M at 3.93M.
- June median home prices rose to a record $435,300, rising 2% from a year earlier.
The key takeaway – The latest data on existing home sales is out, and it’s not pretty. While the stock market pushes new highs and recession calls quiet down, the U.S. housing market is flashing red.
This week’s report confirmed what buyers and sellers have been feeling all year: the real estate market is stuck. National home sales have now fallen below pre-pandemic levels, a sobering milestone that reflects the weight of today’s economic and policy headwinds.
Blame the 6.5%+ mortgage rates. Blame stubbornly high home prices. Or blame the broader macro and political backdrop that continues to chip away at consumer confidence. Either way, it’s clear that affordability has become the dominant force, and it’s shutting buyers out in droves. Inventory is still tight, but that hasn’t stopped the slide. Many would-be sellers are locked into ultra-low rates and see no incentive to list. On the other side, prospective buyers are grappling with the reality of $3,000+ monthly mortgage payments on median-priced homes.
The housing market, once a pillar of the post-COVID recovery, is now one of the biggest laggards in the 2025 economy. Without meaningful relief on the interest rate front or a broader cooldown in prices, this chill in sales activity could stick around longer than anyone hoped.
Fed officials, banking experts discuss regulatory rewrite effort at conference
- Regulators and banks are pushing to streamline capital rules, arguing current frameworks stifle lending and hurt regional banks.
- Looser requirements could boost growth via more lending, but raise concerns about systemic risk if banks overextend.
The key takeaway – The Fed’s regulatory conference this week sharpened the focus on how capital rules shape credit and growth. Chair Powell stressed the need for a unified, coherent capital framework, while Treasury Secretary Bessent called for scrapping the “dual capital” proposal, arguing it stifles lending and pushes risk into shadow banking. The discussion underscored a growing recognition that over-regulation, particularly for mid-sized and regional banks, may be slowing credit flow and hurting economic dynamism. Industry voices echoed these concerns, urging a shift toward more flexible oversight to boost lending capacity without sacrificing stability.
What’s at stake? Looser capital rules could accelerate economic activity by allowing banks to extend more credit, fund corporate investments, and support consumer lending. Reduced regulatory burdens could free up balance sheets for regional banks, many of which have struggled under post-crisis capital constraints. If these reforms were in place two years ago, banks like First Republic might have had a better shot at weathering deposit outflows. With fewer capital traps and more lending flexibility, they could have absorbed liquidity stress instead of becoming a casualty of rigid, one-size-fits-all rules.
While streamlined regulation could bolster GDP through more aggressive bank lending and capital deployment, it also opens the door to potential systemic risks if weaker institutions take on too much leverage. Markets are likely to view this as a short-term positive for financials but will remain watchful for long-term stability challenges, especially if rate volatility persists.
S&P Global US Flash PMI
- Flash US Composite PMI Output Index: 54.6 (June: 52.9). 7-month high.
- Flash US Services PMI Business Activity Index: 55.2 (June: 52.9). 7-month high.
- Flash US Manufacturing Output Index: 51.2 (June: 53.1). 2-month low.
- Flash US Manufacturing PMI: 49.5 (June: 52.9). 7-month low.
The key takeaway – The U.S. economy entered the third quarter on solid footing, but not without cracks. In July, S&P Global’s flash Composite PMI recorded a sharp pickup in overall private-sector activity, driven almost entirely by strength in services. The flash Manufacturing PMI dropped to 49.5, sinking below the neutral 50 mark for the first time since early this year, even while the Composite reading climbed as services compensated for industrial weakness
That divergence underlines a growing bifurcation: robust consumer demand fueling services, while factories face cooling order books and insufficient pricing power. The services sector is clearly the engine of growth, even as manufacturing stalls.
Labor conditions remain supportive, but inflation is gradually encroaching. Firms reported strong hiring momentum early in Q3, and the labor market continues to underpin demand. However, rising wage demands, elevated input costs and climbing selling prices are squeezing margins across the board. This upward pressure on compensation and costs reinforces inflationary risk and hampers business expansion plans.
Policy ambiguity is weighing on sentiment. Companies consistently flagged the uncertainty surrounding future tariff regimes and the potential cutbacks tied to the so‑called “Big Beautiful Bill.” Rather than stimulus or restraint alone, it is the absence of policy clarity that is rattling business confidence. Firms say they’d prefer a clear direction, either way, rather than a draw‑out “wait and see” posture that stalls investment decisions.
From Around the Watercooler
Trump’s Tariffs Are Being Picked Up by Corporate America
Union Pacific and Norfolk Southern have confirmed merger talks to create a coast-to-coast railroad.
Sydney Sweeney sparked the latest meme stock rally as American Eagle surged.
The creators of South Park announced they had struck a $1.5 billion, five-year streaming rights deal with Paramount.