The Markets (as of market close July 31, 2026)
Stocks ended last week with mixed results as traders rotated away from many of this year’s largest technology and artificial intelligence companies into value-oriented sectors and blue-chip stocks. While the NASDAQ and Russell 2000 posted monthly declines, an end-of-month rally helped the Dow Jones Industrial Average reach another record high, and the Global Dow also finished July on a positive note.
Markets spent much of the week digesting the Federal Reserve’s latest policy decision, second-quarter GDP data, and another round of corporate earnings. Stock market followers were encouraged by moderating inflation and resilient consumer spending but remained cautious as Treasury yields climbed to new highs for the year. Energy prices also remained volatile, reflecting continued uncertainty surrounding the Middle East. Financials, real estate, consumer staples, and health care outperformed during the month, while technology and communication services lagged.
Last Week’s Economic News
- The Federal Reserve left interest rates unchanged. Following its July meeting, the Federal Open Market Committee maintained the federal funds target range at 3.50%–3.75%. While policymakers acknowledged continued economic expansion and a healthy labor market, they also noted that inflation remains above target. Three members voted in favor of another quarter-point rate increase, highlighting the Committee’s continued focus on inflation.
- The economy continued to grow, though at a slower pace. The advance estimate showed second-quarter GDP increased at an annualized rate of 1.5%, down from 2.1% in the first quarter. Consumer spending accelerated significantly during the quarter, helping offset slower business investment, exports, and government spending.
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Inflation continued to moderate. The Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s preferred inflation gauge, declined slightly in June, while core PCE rose just a bit. Over the past 12 months, headline PCE inflation eased to 3.7%, while core PCE measured 3.3%, suggesting price pressures continue to gradually soften.
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Consumer income and spending both increased. Personal income and disposable income each rose in June, while consumer spending increased, indicating households continue to support economic growth despite elevated borrowing costs.
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The labor market remained resilient. Initial unemployment claims remained near historically low levels and signaling employers continue to retain workers even as hiring has slowed from earlier in the year.
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Housing remained mixed. Existing home sales declined in June but remained above year-ago levels, while inventories continued to improve. New home sales increased from May but were still below June 2025 levels.
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Manufacturing activity held steady. Industrial production edged up in June and remained above year-ago levels, while durable goods orders slipped during the month after a sizable decline in May.
Eye on the Week Ahead
Stock traders will turn their attention to the July employment report, which will provide another important update on labor market conditions. Additional reports on manufacturing activity, services-sector growth, and international trade will help shape expectations for the Federal Reserve’s next policy decision. With earnings season continuing and inflation showing signs of moderating, markets will remain focused on whether the economy can sustain steady growth without reigniting price pressures.
Have a nice week!
Sincerely,
Robert G. Carpenter