Commentary
Last week, America enjoyed its largest monthly decline in inflation since April 2020. That lasted roughly three days, until renewed fighting around the Strait of Hormuz pushed oil back above $80. Bagged lettuce gets a better run than that. Oh, wait…
- Stocks: The S&P 500 Index and Nasdaq Composite both fell during the week. Energy led (for reasons the Commodities bullet below will explain, and nobody will enjoy) and technology lagged. Value beat growth. U.S. stocks outperformed international stocks.
- Bonds and rates: Yields fell across the curve in the same week oil jumped, suggesting the market is pricing the surge as geopolitical noise rather than inflation. Fair enough…as long as the ceasefire cooperates.
- Commodities and currencies: WTI crude sits more than 40% above its year-end level and gasoline has followed, which means the relief in June’s inflation report has already left the pump. Gold managed almost no movement during a week of escalating conflict—not the performance you'd expect from the designated crisis asset. Currencies were quiet.
- June’s consumer-price and producer-price indexes both looked like a turning point but functioned like a one-time refund. Nearly all the improvement came from gasoline; strip out energy and core consumer prices remained flat, while core producer prices still rose.
- Retail sales rose in June, with a margin of error wide enough to include zero. The gain came from everything except autos and gas—meaning American consumers are still spending, just not on the two things economists watch most.
- Industrial production inched forward in June and manufacturing output was flat. Factories are running below their long-run average and showing no urgency about it. Nothing is breaking, but it’s not accelerating, either.
- Housing starts in June beat expectations on the multifamily line. This is the most volatile number in the report (and the one least likely to mean anything next month). Take the W and move on.
- Jobless claims fell on both the initial and continuing side (for the weeks ending July 11 and July 4, respectively). Layoffs remain rare, and the people who do lose jobs are getting rehired quickly. Excellent news for workers, and a terrible argument for anyone building a rate-cut thesis.
- Fed Chair Kevin Warsh delivered his semiannual testimony to the House and Senate, and then the Fed went quiet. Before every policy meeting, Fed officials observe a self-imposed blackout—no speeches, no interviews, and nothing on rates—so the committee can deliberate without moving markets first; this one began on July 18. For a Fed Chair who won't publish his own rate forecast and thinks the Fed overcommunicates, it's less a restriction than a preference.
- 2Q earnings results are narrow but strong. 49 companies have reported, with 90% beating expectations (against a 68% long-term average). Blended growth is at 26%, carried by energy (119%) and tech (66%). Excluding energy, blended earnings growth falls to 22%. Health care is the lone negative at -18%.