Major stock indices ended the week substantially lower as inflation ticked up, tariffs increased substantially, and July jobs came in much weaker than expected.  The smallest loss was in the Nasdaq 100 due to strong tech earnings.  The sharpest loss was in the Russell 2000 small cap while developed international had the smallest decline.  While 2^nd quarter gross domestic product rebounded to a 3% annual growth rate, July jobs and purchasing managers’ indices indicate a slowing economy.  In July the U.S. all five of trading partners had contraction in the manufacturing PMI indices.  Many of the threatened tariffs were delayed until August 1^st and the fear that this could drive inflation higher and slow economic growth in the coming months caused traders to sell stocks.

The Federal Reserve met and chose to leave the federal funds rate at a range of 4.25% to 4.5%.  The FED governors voted 9-2 to leave rates unchanged.  This was the first time since 1993 that more than one governor dissented on a rate decision.  However, inflation is still running above the FED’s 2% target, and the effects of tariff policy remain unknown with various delays and negotiations.  The FED’s preferred measure of inflation, the core PCE index, is rising.

The FED’s other objective is to create full employment.  Employment, up until Friday’s jobs report was relatively strong leaving little motivation to cut interest rates further.  The FED may face a dilemma in September if employment continues to deteriorate and inflation increases.

Treasury bond yields fell with the 30-year bond yield at 4.831% and the 10-Year note at 4.257%.  Freddie Mac reported that the average 30-year mortgage rate fell to 6.72%.  Crude oil rose to $67.47 a barrel and natural gas fell to $3.105 per MMBTUs.  The U.S. dollar index rose to 98.96 and gold fell to $3397.70 an ounce.

In economic reports last week:

• The S&P CoreLogic Case-Shiller national home price index rose 0.45% in May and was up 2.25% from last May.
• S&P released its purchasing manager’s indices for July.  Keep in mind that anything over 50 represents expansion and anything under 50 represents contraction.
  • U.S. manufacturing PMI fell from 52.9 to 49.8.
  • Japan manufacturing PMI fell from 50.1 to 49.8.
  • China manufacturing PMI fell from 50.4 to 49.5.
  • Eurozone manufacturing PMI rose from 49.5 to 49.8.
  • Mexico manufacturing PMI rose from 46.3 to 49.1.
  • Canada manufacturing PMI rose from 45.6 to 46.1.
• The Commerce Department reported:
  • The first reading of 2^nd quarter domestic product rebounded to a 3.0% annual rate, following a 0.5% decline in the first quarter.
  • The decline in Q1 was largely due to a surge in imports ahead of tariffs.

• • Personal consumption expenditures rose 0.3% in June.
    • The PCE price index rose 0.3% and was up 2.6% from a year ago.
      • Excluding volatile food and energy, the PCE index also rose 0.3% in June and 2.8% year-over-year. 
        • This is the FED’s preferred measure of inflation and was up from a low of 2.6% in April.

• • • Personal incomes rose 0.3%. 
    • The personal savings rate was 4.5%.
  • Construction spending fell 0.4% in June.

• The Labor Department reported:
  • Seasonally adjusted job openings fell from a revised 7.71MM in May to 7.44MM in June.
    • This was the first decline in three months but is still well above pre-pandemic levels.
    • The number of openings per unemployed worker remained at 1.1.
    • June’s hiring rate fell to 3.3%, the least since November.
    • Layoffs were little changed at 1.6MM
    • Quits were little changed at 3.1MM.
  • Employment costs rose 0.9% in the second quarter.
    • Wages and salaries rose 1.0%.
    • Benefit costs increase 0.7%.

                Source: Department of Labor

• • The U.S. added 73,000 jobs in June and the prior two months were revised down by a total of 260,000.
    • The past three months now have averaged only 35,000 jobs per month.
    • The unemployment rate rose slightly from 4.1% to 4.2%.
    • Average hourly earnings rose $0.12 to $36.44 and were up 3.9% over the past year.
  • Seasonally adjusted first-time claims for unemployment were 218,000, up 1,000 from the previous week’s unrevised level.
    • The 4-week moving average of claims, designed to smooth out volatility, were 221,000, a decrease of 3,500 from the previous week’s unrevised level.
    • Recurring claims were unchanged from the previous week’s unrevised level.
  • For the full unemployment report go here:  https://www.dol.gov/ui/data.pdf
• The EIA weekly oil report is here: Weekly Petroleum Status Report.  Also, the EIA reported in the prior week:
  • Field production of crude oil rose from 13.273MM BPD to 13.314MM BPD.
  • Natural gas storage rose 48BN cubic feet and was above its average level during the past five years at this time of year.
• Baker Hughes reported the number of oil rigs fell 5 to 410 and the number of natural gas rigs rose 2 to 124.
• Factset reported with 82% of S&P 500 companies reporting 2^nd quarter earnings, that the blended earnings increase was 10.3%.

Please call us if you have any questions.

Loren Rex – Emeritus

Erik A Smith, AIF® – President & C.E.O.

Nicholas Acri, CFP® – Partner & Wealth Advisor

Dylan Thomas, CFP® – Partner & Wealth Advisor

These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. The Indices mentioned are unmanaged and cannot be invested into directly. The Dow Jones Industrial Average, Dow Jones, or simply the Dow, is a stock market index of 30 prominent companies listed on stock exchanges in the United States. The DJIA is one of the oldest and most commonly followed equity indexes. The Nasdaq Composite is a stock market index that includes almost all stocks listed on the Nasdaq stock exchange (more than 2500 stocks).

Sources:

https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCRFPUS2&f=W

https://ir.eia.gov/ngs/ngs.html

https://www.freddiemac.com/pmms

https://www.wsj.com/market-data?mod=nav_top_subsection

https://bakerhughesrigcount.gcs-web.com/na-rig-count

https://www.census.gov/economic-indicators

https://advantage.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_071125.pdf

https://www.nar.realtor/sites/default/files/2025-07/ehs-06-2025-summary-2025-07-23.pdf

https://www.bls.gov/news.release/jolts.nr0.htm

https://www.bea.gov/sites/default/files/2025-07/pi0625.pdf

https://www.pmi.spglobal.com/Public/Release/PressReleases