S&P 500 and Russell 2000 Hit Records Despite Mixed Macro Signals

US Index Records and Easing Rate Expectations

• S&P 500 and Russell 2000 at highs: The S&P 500 crossed the 7,800 mark in-session (intraday high at 7,816.79) before closing up +0.65% at 7,798.99 points. The Russell 2000 also hit an all-time high at 3,052.85 points (+0.2%).
• Moderate inflation: Flat Producer Price Index (PPI) reading for July (0.0% vs +0.2% expected), following a moderate CPI, reinforces expectations of a monetary policy pause.
• Fed outlook: Money markets now price in less than a 40% chance of a Federal Reserve rate hike in September. Citi analysts also expect the central bank to keep benchmark rates unchanged at the next meeting.

Weak Consumer Data and Geopolitical Pressures

• Drop in retail sales: US retail sales fell 0.6% in July (vs +0.1% expected), marking their sharpest decline in 14 months, partly influenced by the calendar shift of Amazon Prime Day.
• Slump in consumer sentiment: The University of Michigan consumer sentiment index fell to 51.0 in early August (down from 55.2 in July), impacted by Middle East inflation fears.
• Bonds and energy: The German 10-year yield rose to 3.19% (+5 bps) amid the naval blockade and US-Iran standoff in the Strait of Hormuz. Crude oil gained 5% over the week.

To watch today

• The effect of weaker US retail consumption on buying momentum for ES and NQ futures around record levels.
• Global sovereign bond yield and crude oil reactions to ongoing tensions in the Strait of Hormuz.