Last week, the US equities market delivered positive returns, with the Dow Jones up +1.7%, the S&P 500 +0.9%, and the Nasdaq +0.8%. The primary catalyst was softer-than-expected July inflation data, with the Consumer Price Index rising 2.7% year-over-year versus the 2.8% forecast, fueling expectations for a September Federal Reserve rate cut. Strong corporate earnings further supported the rally, as 80% of Q2 S&P 500 companies beat earnings estimates. Trump's extension of the US-China trade truce by 90 days was also a positive factor, alleviating some uncertainty and supporting market sentiment.
Despite the overall positive week, Friday's session saw mixed performance with the S&P 500 and Nasdaq pulling back slightly due to a higher-than-expected Producer Price Index report showing wholesale inflation surging beyond forecasts. Meanwhile, geopolitical developments are unfolding as Ukrainian President Zelenskiy and European allies arrive in Washington this week to discuss a potential peace deal with Trump, who met with Putin last Friday and has expressed openness to US involvement in Ukraine security guarantees.
Looking ahead, market is pricing in 80% chances of a 25 basis-point rate cut in September citing stable inflation and recent downward jobs revisions, though the economy continues showing resilience despite elevated interest rates and tariff shocks. Market is maintaining caution ahead of the Federal Reserve's annual Jackson Hole retreat this week, with Chairman Powell's speech being closely watched for guidance on the next monetary policy meeting.
