Weekly Economic Update: July 29, 2025

Records keep rolling

Another week, another set of records. The S&P 500 and Nasdaq kept the winning streak alive, notching fresh highs for the second consecutive week.^1,2 The Dow wasn’t left behind, gaining 1.26% and sitting just under highs from earlier in the year.³

What’s driving the optimism? Trade deals, for starters. The U.S. kept busy announcing new agreements with Japan, Indonesia and the Philippines.^4,5,6 The White House also announced a trade deal with the European Union over the weekend, just days ahead of the Aug. 1 deadline.⁷ Markets clearly like the sound of dealmaking over trade wars.

Big Tech had a tale of two stories last week. Alphabet shareholders were all smiles after the Google parent company beat expectations and delivered some encouraging AI commentary.⁸ Tesla investors weren’t as lucky, watching shares drop more than 4% after results didn’t quite hit the mark.⁹

The Economic Reality Check

Here’s where things get interesting. U.S. business activity actually picked up steam in July, with the key PMI Output Index jumping to 54.6.¹⁰ That’s the highest reading in seven months. Anything above 50 signals growth, so that’s good news, right?

Yes and no. All that growth came from the services side of the economy, which surged to 55.2. Manufacturing? Not so much. It actually shrank to 49.5, the weakest showing since December. Think of it as the economy running on one cylinder instead of two.

Housing markets are still feeling the pinch from stubborn mortgage rates. Home sales dropped 2.7% in June, while prices hit yet another record at $435,300.¹¹ It’s a classic case of too few sellers chasing too many buyers, even as high rates keep many people on the sidelines. Federal Reserve Chair Jerome Powell is sticking to his guns on interest rates, despite getting an earful from the Trump administration.¹² Markets are still expecting the Fed to cut rates twice this year, but that won’t land us anywhere near President Trump’s wish list of 1% rates.¹³

Coming this week

• Data gets started on Tuesday this week, with the latest reports on inventories and consumer confidence. We’ll also see the S&P Case-Shiller home price index for May.
• Employment is a big topic this week. We’ll get job openings on Tuesday, the ADP employment report on Wednesday, and the U.S. employment and wages reports on Friday.
• We’ll get a good look at how the economy is doing on Thursday, with the release of the latest personal consumption expenditures (PCE) reading as well as personal income and personal spending. That information will come too late to factor into the Fed’s interest rate decision, as the committee is scheduled to meet on Tuesday and Wednesday. Don’t expect a rate cut this week; the current forecast is a 97% probability for the Fed to keep rates where they are.¹⁴

Sources:

¹ Yahoo! Finance. “S&P 500 (ˆGSPC).” https://finance.yahoo.com/quote/%5EGSPC/. Accessed July 28, 2025.

² Yahoo! Finance. “NASDAQ Composite (ˆIXIC).” https://finance.yahoo.com/quote/%5EIXIC/. Accessed July 28, 2025.

³ Yahoo! Finance. “Dow Jones Industrial Average (ˆDJI).” https://finance.yahoo.com/quote/%5EDJI/. Accessed July 28, 2025.

⁴ Kit Maher and Elisabeth Buchwald. CNN. July 23, 2025. “Trump announces ‘massive’ trade agreement with Japan.” https://www.cnn.com/2025/07/22/business/japan-trade-agreement-us. Accessed July 28, 2025.

⁵ The White House. July 22, 2025. “Fact Sheet: The United States and Indonesia Reach Historic Trade Deal.” https://www.whitehouse.gov/fact-sheets/2025/07/fact-sheet-the-united-states-and-indonesia-reach-historic-trade-deal/. Accessed July 28, 2025.

⁶ Elisabeth Buchwald. CNN. July 23, 2025. “Trump announces trade agreement with the Philippines and terms of deal with Indonesia.” https://www.cnn.com/2025/07/22/business/trump-philippines-trade-deal. Accessed July 28, 2025.

⁷ Auzinea Bacon, et al. CNN. July 28, 2025. “Trump touts ‘biggest deal ever made’ as US and EU sketch trade framework.” https://www.cnn.com/2025/07/27/business/trump-us-eu-trade-deal. Accessed July 28, 2025.

⁸ Jennifer Elias. CNBC. July 23, 2025. “Alphabet beats earnings expectations, raises spending forecast.” https://www.cnbc.com/2025/07/23/alphabet-google-q2-earnings.html. Accessed July 28, 2025.

⁹ Lora Kolodny. CNBC. July 23, 2025. “Tesla reports sales miss as auto revenue drops for second straight quarter.” https://www.cnbc.com/2025/07/23/tesla-tsla-q2-2025-earnings-report.html. Accessed July 28, 2025.

¹⁰ S&P Global. July 24, 2025. “S&P Global US Flash PMI®.” https://www.pmi.spglobal.com/Public/Home/PressRelease/1af69f9287454749b8cf193c5acae2b0. Accessed July 28, 2025.

¹¹ Laurel Wamsley. NPR. July 26, 2025. “Home sales are down. So why are prices at an all-time high?” https://www.npr.org/2025/07/26/nx-s1-5478757/home-price-record-mortgage-rates. Accessed July 28, 2025.

¹² Polo Rocha. Investopedia. July 27, 2025. “What To Expect From The Fed’s Interest Rate Decision This Week.” https://www.investopedia.com/what-to-expect-from-the-fed-s-interest-rate-decision-july-11778885. Accessed July 28, 2025.

¹³ Howard Schneider. Reuters. July 14, 2025. “Why Trump’s push for a 1% Fed policy rate could spell trouble for US economy.” https://www.reuters.com/business/finance/why-trumps-push-1-fed-policy-rate-could-spell-trouble-us-economy-2025-07-14/. Accessed July 28, 2025.

¹⁴ CME Group. “FedWatch.” https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html. Accessed July 28, 2025.

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