Tariffs, Tech, and Tight Yields: Markets Tread Cautiously Ahead of Inflation Data

Market Overview

U.S. markets paused after reaching record highs, with the S&P 500 slipping 0.29% for the week as tariff headlines resurfaced. Despite softer weekly results, the index is still up 7.18% YTD and nearly 14% over the past 12 months. Energy led sector gains, up 2.5%, boosted by reduced crude output projections and tight supply expectations. Financials and Consumer Discretionary lagged.

In global equities, Europe extended a winning streak before retreating on fresh U.S. trade threats, while Asia posted mixed results. Taiwan and South Korea outperformed on tech optimism and dovish central bank policies, while Japan weakened on currency pressures.

Bond markets continued to digest a stronger-than-expected jobs report and looming deficit concerns. Yields on both the 2-year and 10-year Treasuries rose, with the benchmark 10-year hitting 4.43%. Corporate credit remains tight, though elevated yields continue to attract institutional buyers.

Commodity markets rebounded late in the week as crude oil rose on signs of strong gasoline demand. Gold gained as renewed trade tensions sparked a haven bid, while the U.S. dollar strengthened against major peers.

Federal Reserve Insights & Economic Roundup

The latest FOMC minutes reflected growing divisions among policymakers. While some members supported potential rate cuts, others advocated for holding steady amid persistent inflation concerns. Notably, Fed officials recognized signs of resilience in consumer spending, but flagged risks from tariffs—particularly for lower-income households.

Markets are now adjusting expectations as last week’s strong jobs report pushed rate-cut hopes further out. Inflation data expected this week could reinforce the Fed’s preference to hold rates higher for longer, especially if reacceleration appears in core CPI.

The Week Ahead

A pivotal week for inflation and consumer sentiment data. Key reports to watch:

Tuesday: CPI, Real Earnings, Empire Manufacturing

Wednesday: PPI, Industrial Production, Beige Book

Thursday: Retail Sales, Philly Fed, Initial Jobless Claims

Friday: Housing Starts, Consumer Sentiment (U. of Michigan)

These figures will shape the Fed’s outlook heading into late summer and may fuel further market volatility.