U.S. Indices traded mostly in the red on Friday as tentativeness was present across markets ahead of the Trump/Putin meeting. Despite US Retail Sales matching expectations in July alongside a stronger-than-expected control figure (a better gauge of core spending), stocks came under pressure ahead of and after the cash open. Sector gains were led in Healthcare due to Berkshire Hathaway’s Q2 13F unveiling a new stake in UnitedHealth (UNH, +12%). As such, Dow outperformed SPX (-0.3%), NDX (-0.5%), and RUT (-0.6%). On the flip side, Financials were hit the most alongside Tech, with the latter weighed by fresh Trump remarks on tariffs on chip imports, “I’m going to have a rate that is going to be 200%, 300%”. Also weighing on semiconductors was poor guidance offered by Applied Materials in their Q3 report (AMAT, -14%). Back to the data, Industrial Production unexpectedly declined, import prices were hot (note: the BEA excludes tariffs from import and export price index calculations), University of Michigan Sentiment unexpectedly worsened, and NY Fed Manufacturing surged above expectations. Thereafter, the Atlanta Fed GDPnow model continues to track Q3 GDP growth at 2.5%. The US data led Treasuries to continue their descent lower with the curve bear steepening into the weekend. Meanwhile, the Dollar pared most of the PPI-induced strength seen on Thursday, with the Japanese Yen weighing on the Dollar Index after a GDP (Q2) beat. Crude prices settled lower, ending the week in the red ahead of the Trump-Putin meeting in Alaska. Bloomberg reports that the US has readied a suite of options to punish Russia if talks fail; the US mulls Rosneft and Lukoil sanctions if Putin baulks on a ceasefire. Retail sales for July rose 0.5%, as forecasted, easing from the upwardly revised 0.9% in June. Ex-autos fell to 0.3%, in line with consensus, from 0.8% (initially 0.5%), and ex-gas/autos dropped to 0.2% from 0.8% (initially 0.6%). The closely watched retail control printed 0.5% from 0.8% (initially 0.5%), but above the forecasted 0.4%, which Pantheon Macroeconomics quips still looks reasonably healthy even in volume terms, given that the relevant components of the CPI rose by only around 0.1%. Pantheon adds the report will ease some of the worries about the health of consumers’ spending following the tariff shock, given the modest further gains in underlying sales volumes and the upward revisions to the earlier months’ numbers. Despite saying that, Pantheon notes growth in consumption still looks relatively weak, and the softening labour market and further likely pass-through of tariffs suggest a sharp reacceleration is unlikely. On the headline figure, just over half of the rise was due to a further 1.6% recovery in auto sales. PM adds that auto sales have held up relatively well recently, partly because the pass-through of tariffs to vehicle prices has so far been very limited, but that seems unlikely to last indefinitely. Import Prices rose 0.4% in July, above the 0.0% expected, with the prior 0.1% revised down to -0.1%. Import Fuel prices jumped 2.7% (prev. 0.8%), the largest increase since January 2025, driven by higher prices for import petroleum and import Natural Gas. Meanwhile, prices for non-fuel imports advanced 0.3% (prev. -0.3%) as higher prices for nonfuel industrial supplies and materials, consumer goods, and capital goods more than offset lower prices for automotive vehicles and foods, feeds, and beverages. Export Prices increased 0.1% as expected (prev. 0.5%). Agricultural export prices were unchanged (prev. 0.8) due to higher prices for meat and vegetables being offset by lower prices for corn and animal feeds. Exports-ex agriculture rose 0.1% (prev. 0.5%), due to higher prices for automotive vehicles and capital. Following the data, Citi’s July Core PCE now tracks at 0.27% M/M, and it was initially at 0.29% M/M after CPI and PPI data last week. The Preliminary University of Michigan for August saw sentiment fall to 58.6 (exp. 62.0, prev. 61.7), Conditions tumble to 60.9 (exp. 67.9, prev. 68.0), outside the bottom end of the forecast range, and Expectations fall to 57.2 from 57.7, but above the expected 56.5. In terms of inflation expectations, 1yr and 5yr ahead rose to 4.9% (prev. 4.5%) and 3.9% (prev. 3.4%), respectively. Joanne Hsu, Surveys of Consumers Director, said, “Consumer sentiment fell back about 5%, declining for the first time in four months and largely stems from rising worries about inflation. Buying conditions for durables plunged 14%, its lowest reading in a year, on the basis of high prices.” Hsu added, “Overall, consumers are no longer bracing for the worst-case scenario for the economy feared in April when reciprocal tariffs were announced and then paused. However, consumers continue to expect both inflation and unemployment to deteriorate in the future”. PPI was hot when release on Thursday. The headline M/M rose 0.9%, well above the 0.2% forecast and massively above the highest forecast of 0.3%. This saw the Y/Y at 3.3%, accelerating from 2.3%, above the 2.5% forecast and above the highest 3.0% forecast. The core measure rose 0.9%, above the 0.2% forecast, 0.0% prior, and above the 0.4% high estimate, with Y/Y at 3.7% (exp. 2.9%, prev. 2.6%, high 2.6%). Within the report, the BLS highlights that within final demand, over three-quarters of the broad-based advance in July can be traced to the index for final demand services, which rose 1.1%. It also noted that over half of the broad-based July increase is attributable to margins for final demand trade services, which rose 2.0%. Prices for final demand goods increased 0.7%. Within the report, the PCE components saw a notable increase in Portfolio Management fees, rising 5.8%, accelerating from 2.1% in June. However, this is primarily tied to asset prices and reflects the gains in equities seen over the last month. The PPI report will likely bolster the case for those on the Fed that they are further away from their inflation goals than their employment goals. However, there is still a lot of data to digest between now and September. Money markets are no longer fully pricing a 25bps rate cut in September after the PPI report. When looking towards the PCE report, Oxford Economics write “With the CPI and PPI components in hand, our forecast is for the PCE deflator to rise 0.2% m/m in July, while the core PCE deflator will rise 0.3%”. This is not as scary as the 0.9% PPI prints. Elsewhere, Oil closed 1.81% lower while Gold ended Friday with a 0.3% fall.
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