WEEKLY MARKET RECAP – July 17, 2026

Major U.S. stock indexes ended the week lower as leadership rotated away from large-cap technology stocks. The NASDAQ Composite and S&P 500 posted the steepest declines, while the Dow Jones Industrial Average and Russell 2000 held up relatively better. Within the S&P 500, information technology and communication services were the weakest sectors, pressured by selling in mega-cap technology and AI-related companies. Energy was the lone standout, benefiting from higher oil prices as tensions between the United States and Iran escalated.

Second-quarter earnings season gained momentum on Tuesday, with major financial institutions including JPMorgan Chase and Goldman Sachs reporting results that generally exceeded expectations. Despite the strong start, weakness in semiconductor, memory, and AI infrastructure stocks weighed on the broader market, overshadowing upbeat reports from Taiwan Semiconductor Manufacturing and chip-equipment maker ASML.

Inflation data provided encouraging news. The Consumer Price Index declined 0.4% in June, a much larger drop than economists had anticipated and the biggest monthly decline since April 2020. The decrease was driven primarily by a 5.7% fall in energy prices. Core CPI, which excludes food and energy, was unchanged for the month, below expectations for a modest increase. On an annual basis, headline inflation slowed to 3.5% from 4.2%, while core inflation eased to 2.6% from 2.9%.

Producer prices also came in below expectations. The Producer Price Index fell 0.3% in June as lower energy costs pushed final demand goods prices down 1.4%. Core PPI rose just 0.2%, undershooting forecasts. Following the inflation reports, traders sharply reduced expectations for a July Federal Reserve rate hike. According to CME FedWatch, the implied probability fell from about 40% before the data to roughly 14% by Friday.

Consumer sentiment improved modestly. The University of Michigan’s preliminary July survey showed one-year inflation expectations falling to 4.2% from 4.6%, while long-term expectations held steady at 3.3%. Overall sentiment strengthened during the month, helped by lower gasoline prices, although it remained about 12% below its level a year earlier.

Additional economic data pointed to continued resilience in the U.S. economy. Retail sales rose 0.2% in June, matching expectations, while sales excluding gas stations increased a stronger 0.7%, reflecting the impact of lower fuel prices on the headline figure. Meanwhile, initial jobless claims declined to 208,000, their lowest level since early May, and continuing claims also moved lower, signaling ongoing labor market strength.

Housing indicators remained soft. Pending home sales fell 5.4% in June, and the National Association of Home Builders reported weaker builder confidence amid affordability challenges and economic uncertainty. Freddie Mac also reported that the average 30-year fixed mortgage rate rose to 6.55%, its highest level since August 2025.

Softer-than-expected inflation data and reduced expectations for near-term Fed tightening more than offset earlier weakness driven by higher oil prices and hawkish policy concerns. Investment-grade corporate bonds also advanced but slightly underperformed Treasuries.

High-yield bonds proved relatively resilient despite heightened geopolitical tensions and volatile energy markets. After facing pressure early in the week, the asset class recovered as investors responded positively to easing inflation data and stronger-than-expected bank earnings.