Over the last week, inflation was back in focus as tariffs,
the Iran conflict, rising oil prices, and doubts about the Federal Reserve•s
next move dominated headlines.
Strong early earnings helped, but concerns about heavy AI
infrastructure spending hit mega-cap tech stocks and outweighed the good news
for the broader market.
Stock Index Performance
What Moved the Market
Inflation cooled, but the relief didn•t last. June•s Consumer
Price Index (CPI) report, released earlier in the month, had shown
headline inflation easing to 3.5% and core inflation (excluding food and
energy) down to 2.6%, giving the Fed some breathing room. However, that faded
during the week as fresh
tariffs on 60 trading partners raised new concerns about pricing
pressure. Investors shifted from confidence that inflation was improving to
worry that progress could stall or reverse.
Earnings kept the market split. Strong results from several
major companies gave the market a lift, but heavy AI infrastructure spending weighed
on hyperscaler stocks that reported earnings. Both Alphabet and Tesla reported
strong revenue growth, but investors focused on their AI spending instead. Free
cash flow (operating cash flow minus capital expenditures) was the number
investors zeroed in on, and it turned negative at both companies.
Oil prices are spiking again. Middle East tensions pushed
oil sharply higher during the week, with Brent crude briefly topping $100 a
barrel. Rising energy prices tend to lift inflation expectations and
transportation costs at the same time, complicating the Fed•s calculus ahead of
its July meeting. Markets began pricing in a chance of a hike, even as most
economists still expect the Fed to hold steady in July.
The Week Ahead
The Fed•s rate
decision, which will be delivered on Wednesday (July 29), comes with
limited drama since a hold is widely expected, but its tone matters more than
the decision itself. Any hawkish shift, or any hint that easing remains on the
table, will move bonds, the dollar, and rate-sensitive stocks. Alongside that,
mega-cap tech earnings will test whether growth leadership can hold up under
higher rates. Solid results paired with cautious guidance may still spook
investors rather than reassure them.
