Wall Street Review: S&P 500 Reaches Record as Inflation Eases and Earnings Remain Strong
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The S&P 500 reached a new record high this week as fresh economic figures indicated that inflationary pressure is continuing to moderate. Combined with last week’s disappointing jobs report, the latest data have strengthened expectations that the Federal Reserve may maintain its current interest-rate policy.
Investor confidence was also supported by a series of better-than-expected earnings reports from companies involved in artificial intelligence infrastructure, helping sustain demand for technology and growth stocks.
At Friday’s close, the Dow Jones Industrial Average was at 53,732, down 0.56 percent over the week. The S&P 500 gained 0.36 percent, ending at 7,785 after setting a record on Thursday. The Nasdaq Composite added 0.14 percent, while the small-cap Russell 2000 advanced 1.12 percent.
The CBOE Volatility Index, commonly known as the VIX, declined 4.36 percent to 14.25, suggesting that investor anxiety has eased despite signs that the broader market rally may be losing some momentum.
Trading was cautious at the beginning of the week. Oil prices moved sharply higher as uncertainty increased over negotiations involving the reopening of the Strait of Hormuz. Investors were also taking profits and waiting for important inflation figures, pushing the major indexes lower during the first two sessions.
Market sentiment changed significantly on Wednesday after new inflation data showed additional signs of moderation. The Consumer Price Index rose 3.4 percent in July compared with a year earlier, down from 3.5 percent in June and matching economists’ expectations.
The latest figure remained well below the 4.2 percent level recorded in May, as the impact of higher energy costs associated with the Iran conflict continued to appear in the economic data. Gasoline prices increased 24.6 percent annually in July, compared with 26.7 percent in June. Fuel oil prices rose 39.1 percent, down from the previous month’s 42.9 percent increase.
Bret Kenwell, an investment analyst at eToro U.S., said the report offered investors more reason to believe that the worst of the recent inflationary pressure may have passed, although inflation remains elevated.
Skyler Weinand, chief investment officer at Dallas-based Regan Capital, described the figures as encouraging but said they did not provide enough certainty for the Federal Reserve to determine its next interest-rate decision.
The uncertainty limited the market’s advance later Wednesday. However, stronger-than-expected results from Lumentum Holdings, Super Micro Computer, and CoreWeave renewed investor enthusiasm for companies supplying infrastructure for the artificial intelligence boom.
Most major indexes ultimately finished Wednesday higher, while the Dow posted a modest decline.
Another favorable inflation report arrived Thursday. The Producer Price Index, which tracks prices received by producers and provides an indication of wholesale inflation, increased 4.70 percent year over year in July. That was below June’s 5.5 percent increase and also came in below market expectations.
Glen Smith, chief investment officer at GDS Wealth Management in Texas, said the producer-price figures offered additional evidence that inflation may be stabilizing.
He noted that the development could benefit both consumers and the Federal Reserve, which is attempting to balance persistent inflation against signs of weakness in the labor market.
Smith said, however, that the latest data were unlikely to dramatically alter the Fed’s near-term outlook because the central bank has limited influence over energy-price increases caused by geopolitical developments in the Middle East. He expects interest rates could remain unchanged through the end of the year.
Bond markets also responded positively to the softer inflation readings. The yield on the benchmark 10-year Treasury note fell from roughly 4.73 percent earlier in the week to about 4.61 percent by Thursday afternoon.
The decline in Treasury yields helped support stocks, allowing the major indexes to finish Thursday’s session higher and pushing the S&P 500 to another record.
The momentum weakened Friday after new consumer data raised concerns about the strength of household spending. The S&P 500, Dow, and Nasdaq all ended slightly lower, while the Russell 2000 managed a small gain.
U.S. retail sales declined 0.6 percent in July after rising 0.2 percent in June. It marked the first monthly decrease since October 2025 and represented the sharpest decline since May 2025.
Consumer confidence also weakened. The University of Michigan’s preliminary consumer sentiment reading fell to 51 in August from 55.2 in July, coming in below the 54.5 forecast and ending two consecutive months of improvement.
Kenwell said the retail-sales figures suggest that American consumers may be beginning to lose some momentum.
He cautioned that one month of weaker spending does not necessarily signal a deteriorating economy. However, he said the decline deserves more attention given the weaker GDP and employment figures released the previous week.
Taken together with inflation data that came roughly in line with expectations, the softer consumer figures could reduce pressure on the Federal Reserve to consider raising interest rates, Kenwell said.