Weekly Market Update – August 15, 2025

Quick Takes

• The S&P 500 Index slipped -0.3% on Friday after setting three straight record highs on Tuesday, Wednesday, and Thursday. In the end, the benchmark U.S. index was up for a second straight week with a +0.9% gain. 
• The week saw several countertrend moves. Health Care led sectors with a +4.7% gain for the week, while Technology slipped -0.1%. Also, the small cap Russell 2000 Index was the best performing major index, up +3.1%, its best week since July 4, when it also last beat the S&P.  
• It was a week that saw tariff and trade news take a back seat to economic data, as well as rate cut speculation. Headline and core CPI inflation was tepid, and a decent rise in July retail sales, plus upward revisions to June’s gains, helped boost stocks.

Source: Bloomberg. Data as of August 15, 2025.
Price Returns for Equity, Total Returns for Bonds.
* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.

More all-time highs for stocks, while bonds were flat

Powered by a strong finish to earnings season and mostly moderate consumer inflation, U.S. stocks continued to power higher last week. The S&P 500 Index slipped -0.3% on Friday after setting three straight record highs on Tuesday, Wednesday, and Thursday. Still, the benchmark U.S. index was up for a second straight week with a +0.9% gain. The week saw some countertrend moves with Health Care leading all sectors with a +4.7% gain for the week, while Technology actually slipped -0.1%. Year to date, Health Care has the lowest return among sectors with a negative -1.0% decline in 2025, while Technology is the second-best performing sector with a +14.3% gain for the year (Communication Services leads 2025 with a +15.2% advance). Another contrarian move last week was seen in small caps. The Russell 2000 Index was the best performing major index, moving up +3.1%, its best week since July 4, when it also last outperformed the S&P 500. With Technology lagging last week the Nasdaq Composite Index also lagged the other U.S. indices but was still positive with a +0.8% gain. It was a week that saw tariff and trade news generally take a back seat to economic data, as well as rate cut speculation for much of the week. The headline Consumer Price Index (CPI) showed inflation cooled modestly in July and helped balance the acceleration in core CPI inflation, which excludes the volatile food and energy components. Later in the week, the Producer Price Index (PPI) showed wholesale inflation unexpectedly reaccelerated, but like the consumer inflation, much of the increase was driven by services costs, not tariff-related goods costs, which were generally mixed. Investors were also buoyed by a rise in retail sales in July, plus upward revisions on top of June’s initially reported increase.

The U.S. dollar was down for a second straight week, and that helped non-U.S. equities outperform their U.S. counterparts. The MSCI EAFE Index (developed market non-U.S. stocks) was up +2.3% following the prior week’s +2.8% increase. Easing trade tensions and hopes for progress on the end to the Russia-Ukraine conflict helped push Europe higher, while better-than-expected economic growth and strong corporate earnings in Japan helped power the major indices there to all-time high levels. The MSCI Emerging Markets Index was up +1.5% to add to the prior week’s +2.3% gain.

U.S. Treasury yields were nearly flat last week, with the yield on the benchmark 10-year U.S. Treasury note rising +3 basis points for the week, to end at 4.32%, while the 2-year Treasury yield slipped one basis point to 3.75%. With more-or-less unchanged yields, U.S. bonds returns were also flat. The total return for the Bloomberg U.S. Aggregate Bond Index was -0.02% for the week. Non-U.S. bond returns were also little changed, with the Bloomberg Global Aggregate ex U.S. Bond Index inching up a tiny +0.03%.

Chart of the Week

The rate of inflation for consumer goods and services rose again in July, as the headline Consumer Price Index (CPI) was up +0.2% for the month, matching Wall Street expectations. That was down from an unrevised +0.3% increase the prior month. Year-over-year (YoY), CPI was +2.9%, a tick below expectations for +2.8%, unchanged from the prior month (unrevised). Core CPI, which excludes the more volatile food and energy prices, increased +0.3% for the month, matching expectations and up from an unrevised +0.2% the prior month. YoY Core CPI was +3.1%, up from +2.9% the prior month, and a tick above expectations of +3.0%. Following the tepid release, Wall Street traders bid up bets that the Fed would begin cutting rates at the September meeting. Indications for the impact of tariffs were mixed, showing up in several categories, but other areas that normally would be hit by import duties showed little affect. The footwear index and jewelry and watches index rose +1.4% and +0.8% month-over-month, after +0.7% and +0.1% increases the prior month. But the energy index was down -1.1% month-over-month and was down -1.6% year-over-year. Household Furnishings, another import-heavy category, rose +0.7% which was a slower rate than the +1.0% the prior month. Shelter, which is about one-third of the CPI weighting, was steady at a +0.2% monthly rise, and up +3.7% from last year.  The Food index was flat for the month and +2.9% for the year. The bottom line is that while both headline CPI and core CPI were moderate, there was a mixed bag on tariff-related inflation, so one can’t declare an “all-clear” from tariff pressures from this report.

Consumer Inflation up +2.7% annually in July, less than expected

U.S. consumer price index (CPI), Year-over-year % change (Jan. 2021–July 2025)

Source: U.S. Bureau of Labor Statistics, CNBC.

The Week Ahead

It will be another relatively quiet week for economic reports, with the main event probably being Federal Reserve Chairman Jerome Powell’s speech from Jackson Hole, Wyoming. Traders have priced in a greater than 90% chance of a quarter point cut, and Powell has been under pressure from the White House to cut interest rates by up to a half a percentage point at its September meeting. So, all eyes and ears will be on Powell for clues on what the Fed will do at the September meeting. Minutes from the prior Fed meeting in July are set for release on Wednesday afternoon. 

Beyond the Fed activity there will be a steady dose of housing data, which has been on the soft side or late. It begins on Monday with homebuilder confidence with the NAHB Housing Market Index. Tuesday brings Building Permits and Housing Starts, and Wednesday has the usual weekly MBA Mortgage Applications. Housing data concludes on Thursday with Existing Home Sales from the National Association of Realtors. 

Also released on Thursday will be the advanced reading of Manufacturing and Services Purchasing Managers’ Indexes (PMIs) from S&P Global.

Earnings season is all but wrapped up, save for the retailers. This week brings some of the most prominent retailers, which will provide a glimpse into the state of the American consumer and any potential impact from tariffs. Home Depot releases earnings on Tuesday, followed by Lowe’s, Target, and TJX Cos. on Wednesday. Industry behemoth Walmart announces results on Thursday, along with Ross Stores.

Did You Know?

ACTIVE LISTINGS SLOW – Active home listings across the U.S. are up huge since inventory levels bottomed in 2022, but they’ve ticked slightly lower in the last couple of months. Both new and pending listings remain low, so the median days on market for active listings has gone from 30-40 days up to 60-70 days in the last few years. (Source: Bespoke)

DATA CENTERS REPLACING OFFICES – In the month before ChatGPT’s release in November 2022, private-sector U.S. construction spending on data centers was less than 1/5th the spend on offices. Since then, data center construction spending has jumped +211% to over $40 billion annually, while office construction spending has fallen -35.3% to $46.7 billion. (Source: US Census Bureau)

WHAT’S THE SCORE? – 81% of Gen Z Americans know that it is important to have a good credit score for their financial health, but only 55% know the factors that determine their score. Only 18% have checked their credit score, and just 33% say they would look to a parent or expert for help in improving their score. (Source: USAA)

This Week in History

SSA BDAY – On August 14, 1953, the Social Security Act was signed into law, ensuring some retirement income for all working Americans. Payroll taxes were set at 1%, for both workers and employers, on the first $3,000 of earnings. (Source: The Wall Street Journal)

Economic Review

• Unlike consumer inflation, wholesale inflation was on the hot side in July. The headline Producer Price Index (PPI) was up +0.9% for the month, well above expectations for +0.2% increase and the prior month’s flat reading (unrevised). That was the biggest monthly increase since June 2022. Year-over-year (YoY) PPI increased at a +3.3% rate, also above expectations for +2.5%, and was down from the prior month’s +2.4% annual rate (revised higher from +2.3%). Core PPI, which strips out volatile food and energy costs, was also up +0.9% for the month, compared to expectations for a +0.2% rise, and up sharply from a flat reading the prior month (unrevised). That was the biggest monthly gain for Core PPI since March 2022. YoY Core PPI was up +3.7%, higher than expectations for +3.0% and up from the prior month’s +2.6% annual rate (unrevised). According to the CME Group’s FedWatch tool, the market-implied odds of a September cut decreased following the PPI release, but only slightly. With the index for final demand goods up +0.7% versus the index for final demand services jumping +1.1%, its largest increase since March 2022, it was difficult to pin the surprising increases on tariffs and will keep interest on the upcoming PCE Price Index to see if it too surprises higher after the unexpectedly tame CPI report. 
• Imports Prices were up +0.4% in June, far above expectations for a +0.1% rise, and up from a -0.1% drop the prior month (revised lower from +0.1%). Import Prices ex Petroleum were up +0.3%, up sharply from -0.2% the prior month (revised higher from 0.0%) and above expectations for +0.1%. Year-over-year, the cost of imports was down -0.2%, matching expectations, and up from the prior month’s -0.5% annual rate after it was revised down from -0.2%. Meanwhile, Export Prices were up +0.1%, in line with expectations and down from the prior month’s +0.5% rise (unrevised). Export prices decelerated to +2.2% over the past year, from last month’s +2.6% annual rate (revised down from +2.8%). 
• The Commerce Department reported that advanced read on U.S. Retail Sales for July showed a rise of +0.5%. That was just shy of Wall Street expectations for a +0.6% increase and was down from +0.9% the prior month after being revised higher from +0.6%. Retail sales represent about one-third of all consumer spending and offer clues on the strength of the economy. Retail Sales Ex-Autos rose +0.3% for the month following a +0.8% jump the prior month after being revised up from +0.5%. That was in line with expectations. Auto sales account for one-fifth of all retail sales. Sales Ex-Autos and Gas rose +0.2%, below expectations for a +0.3% rise and down from a +0.8% the prior month (revised up from +0.6%). The Control Group, a figure used to calculate Gross Domestic Product (GDP), increased +0.5%, above expectations for a +0.4% increase and down from +0.8% the prior month (which was revised higher from +0.5%). Electronics and appliance stores fell -0.6%. Also concerning, Food Services and Drinking Places declined -0.4%. The bottom line is that the report showed a slower but decent pace of retail consumption following declines in April and May.  
• The National Federation of Independent Business (NFIB) reported that their Small Business Optimism Index improved to 110.3 from an unrevised 98.6 the prior month. That was ahead of Wall Street expectations for 98.9. Of the 10 component indexes, six increased, two declined, and two were unchanged. The improvements were led by Expect Economy to Improve, which improved +14 points to a net +36%, well above the historical average. Now a Good Time to Expand was the next best contributor, up +5 points to a net +16%. Current Job Openings and Expect Real Sales Higher were the only two components to fall, slipping -3 and -1 points respectively. The key takeaway was that there was a notable improvement in overall business health.
• The preliminary reading of the August University of Michigan Consumer Sentiment Index fell to 58.6 from 61.7 the prior month and short of expectations to improve to 62.0. In the same period a year ago, the index stood at 67.9. The Current Economic Conditions component dropped to 60.9 from 68.0 prior month. The Consumer Expectations component was down to 57.2 from 57.7 the prior month. One-year inflation expectations was edged up to 4.9% from +4.5% the previous month. The five-year inflation expectations rose to 3.9% from 3.4% the prior month. The bottom line is that this was the first downturn in sentiment in four months, primarily due to concerns about rising inflation.
• U.S. Industrial Production decreased -0.1% for the month of July, short of expectations for a flat reading and down sharply from the +0.4% increase the prior month (revised up from +0.3%). However, Manufacturing Production was unchanged, matching expectations, but down from the +0.3% gain the prior month (after being revised higher from 0.1%). Manufacturing represents about three-quarters of total Industrial Production. Year-over-Year, Industrial Production was up +1.4%, following the prior month’s +0.6% annual pace. Capacity Utilization ticked down to 77.5% from 77.7%, after being revised higher from 77.6% where Wall Street expected to remain this month. Capacity Utilization reflects how much a manufacturing plant is being used to produce things. The key takeaway from the report is that industrial production was muted in July as manufacturing output stalled.
• The U.S. Treasury Department recorded a surprise Federal Budget Deficit of -$291.1 billion in July compared to a deficit of -$243.7 billion in the same period a year ago. Wall Street was expecting a -$239.2 billion deficit for July. Deficits are typical in July because there are no major income or corporate tax filing deadlines. Receipts rose +2.5% (to $338.5 billion) on a year-ago basis, while Outlays increased 9.7% (to $629.6 billion) to reach a cumulative budget deficit for the first 10 months of fiscal 2025 of -$1.629 trillion, +7.4% higher than in the same period in fiscal 2024 ($1.517 trillion). The bottom line from the report is that after a surprise surplus in June, the Federal Budget returned to a deficit in July despite receipts from tariffs bringing in +$28 billion (increasing the year-to-date total to $136 billion).  
• The New York Fed’s Empire State Manufacturing Index, a gauge of manufacturing activity in the state, surged to +11.9 in August from +5.5 in July (which was the first positive reading since February). That is its highest level since last November. The improvement was driven by a +13.4-point increase in New Orders to +15.4 and a +9.1 point jump in Delivery Time to +17.4. Still, signs of caution remained, such as diminished optimism, reflected not just in a drop in the six-month-ahead general business conditions index but in the forward-looking measures that reflect inflation and the health of the labor market.
• Weekly MBA Mortgage Applications jumped +10.9% for the week ending August 8, following a +3.1% rise the prior week. The Purchase Index was up +1.4% after gaining +1.3% the prior week. The Refinance Index soared +23.0% after a +5.2% increase the prior week. The average 30-Year Mortgage Rate dropped to 6.67% from 6.77% the prior week, the lowest since April 4.
• Weekly Initial Jobless Claims fell -3,000 to 224,000 for the week ending August 8, better than expectations for 225,0000. The prior week was revised up from 226,000. The number of people already collecting unemployment claims (i.e., Continuing Claims) fell -15,000 to 1,953,000 for the week ending August 2, better than expectations for 1,967,000. The prior week’s reading was revised lower from 1,974,000.

Asset Class Performance

Source: Bloomberg.
Asset‐class performance is presented by using market returns from an exchange‐traded fund (ETF) proxy that best represents its respective broad asset class. Returns shown are net of fund fees for and do not necessarily represent performance of specific mutual funds and/or exchange-traded funds recommended by The Retirement Planning Group. The performance of those funds may be substantially different from the performance of the broad asset classes and to proxy ETFs represented here. US Bonds (iShares Core US Aggregate Bond ETF); High‐Yield Bond (iShares iBoxx $ High Yield Corporate Bond ETF); Intl Bonds (Vanguard Total International Bond ETF); Large Growth (iShares Russell 1000 Growth ETF); Large Value (iShares Russell 1000 Value ETF); Mid Growth (iShares Russell Mid-Cap Growth ETF); Mid Value (iShares Russell Mid-Cap Value ETF); Small Growth (iShares Russell 2000 Growth ETF); Small Value (iShares Russell 2000 Value ETF); Intl Equity (iShares MSCI EAFE ETF); Emg Markets (iShares MSCI Emerging Markets ETF); and Real Estate (iShares US Real Estate ETF). The return displayed as “Allocation” is a weighted average of the ETF proxies shown as represented by 24% US Bonds, 10% International Bonds, 6% High Yield Bonds, 13.8% Large Growth, 13.8% Large Value, 3.6% Mid Growth, 3.6% Mid Value, 1.2% Small Growth, 1.2% Small Value, 16.8% International Stock, 4.2% Emerging Markets, 1.8% Real Estate.
* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.