Weekly update: Inflation fears reignite
Over the last week, inflation fears were back in focus as tariff risks, 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
- The S&P 500 slipped 0.61%.
- The Nasdaq 100 declined 1.62%.
- The Dow Jones Industrial Average edged down 0.38%.
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.