US market rally to Earnings or Econ data ?

Will you be surprised to learn that US market actually rose to close off July 2026 ? I was.

For the week ending 31 Jul 2026, all 3 composite indexes rose ending the week on a ‘high’. (see below)

For the week:

• DJIA: +1.04% (+311.31 to 52,485.03).

• S&P 500: +1.05% (+25.52 to 7,489.72).

• Nasdaq: +1.59% (+137.67 to 25,373.85).

Key Factors.

Key factors that impacted US market included:

(1) Tech titans’ quarterly earnings.

4 of 7 "Mag 7" members namely, $Microsoft(MSFT)$, $Meta Platforms, Inc.(META)$, $Amazon.com(AMZN)$ and $Apple(AAPL)$ all reported earnings within a 48-hour window.

MSFT & AMZN supported the market, while AAPL fell sharply and META disappointed on cash-flow performance.

Their results generated heightened volatility around (a) AI-capex returns and (b) margin sustainability.

(2) FOMC policy decision.

As expected, the FOMC under new Fed chair Kevin Warsh, decided to keep Fed funds rate status quo at 3.50%–3.75%.

The Fed’s decision and statement shifted Treasury yields (driving them higher) and changed how the market was pricing future Fed moves, which in turn moved equity valuations.

(3) Middle East geopolitical tension.

Re-escalation in Middle East geopolitical tensions and renewed shipping disruptions around the Arabian Peninsula drove energy price volatility and raised renewed inflation concerns.

US Economic Reports’ Effect ?

With above key factors directly impacting US market sentiments throughout the week, did US economic reports released helped to exert similar or opposing effect on US market ?

For starters, below are the list of US economic reports released last week:

• Tue, 28 Jul 2026 - US Advanced trade balance in goods for June 2026.

• Tue, 28 Jul 2026 - US Consumer confidence for July 2026.

• Thu, 30 Jul 2026 - US Jobless claims - weekly & continuing.

• Thu, 30 Jul 2026 - US Gross domestic product (GDP) for Q2 2026.

• Thu, 30 Jul 2026 - Personal consumption expenditure (PCE) for June 2026.

• Fri, 31 Jul 2026 - US Consumer sentiments (Final) for July 2026.

US Advanced Trade Balance in Goods.

For June 2026, US advance goods trade deficit contracted by -4.2% to $101.5 billion, down -$4.4 billion from May 2026’s $105.9 billion.

Imports fell by -2.6% or $8.2 billion to $306.2 billion with a smaller decline in exports falling by -1.8% or $3.8 billion to $204.7 billion.

As for unsold goods that businesses hold in stock (inventories data), wholesale inventories rose by +0.3% to an end-of-month level of $945.9 billion; while retail inventories remained unchanged at $831.3 billion.

Excluding motor vehicles and parts, retail inventories actually fell by -0.2%, with analysts expecting a more conservative consumers spending landscape in the coming months.

The latest advance inventories data implies growing caution among businesses and softening domestic consumer demand.

The readings show a divergence between distributors (wholesale) and store shelves (retail), signaling that companies are balancing an economic cooling phase.

On the surface, the June 2026 Advance Goods Trade report is mixed but leans positive for short-term economic growth, as narrowing deficit directly boosts Q2 2026 GDP calculations.

However, the underlying reason of a shrinking overall trade volume, points to a broader cooling of both domestic & global economic momentum.

US Consumer Confidence.

For July 2026, US consumer confidence decreased, driven by weaker assessments of current business and labour market conditions.

The Conference Board’s main index slipped by -1.4 points to 90.8 from June 2026’s 92.2 with the drill down weighted indexes of :

• Present Situation Index falling by -3.6 points to 114.9, marking its 3rd consecutive monthly decline.

• Expectations Index for July 2026, remained unchanged at 74.7, staying in negative territory.

According to Conference Board, Chief Economist, Dana M Peterson, “consumer confidence moderated slightly in July 2026, continuing a general downward sloping trajectory since late 2021.

US Jobless Claims.

US labour market continued to exhibit resilience, and remains stable in a "slow hire, slow fire" mode, characterized by low layoffs despite a modest uptick in weekly initial claims.

Weekly claims.

For week ended 25 Jul 2026, weekly claims rose by +9,000 to a seasonally adjusted 197,000 - below the forecasted 200,000–201,000 but higher than prior week upwards revised 188,000 - partially reversing a prior drop to levels not seen since 1969.

Weekly claims 4-week average, decreased by -5,000 to 202,750, reaching its lowest mark since January 2024 and pointing to a solid underlying trend.

This indicates that layoffs remain historically low and healthy. (see below)

US Jobless claims - Weekly & Continuing

Continuing claims.

For week ended 18 Jul 2026, continuing claims fell by -7,000 to a seasonally adjusted 1.782 million vs market consensus of 1.80 million vs prior week’s downwards revised 1.789 million. (see above)

Continuing claims 4-week average slipped by -6,000 to 1,797,500, continuing a downward drift and remaining lower compared to the same period last year.

This signalled that unemployed individuals either managed to find ongoing work OR have exhausted benefits, keeping the pool of sustained insured unemployment relatively constrained.

US Gross Domestic Product (Q2 2026)

According to US Bureau of Economic Analysis (BEA), preliminary readings for Q2 2026, US economic growth slowed to an annual rate of 1.5% vs analysts’ consensus of 2.1% vs Q1 2026’s 2.1%. (see above)

Having said that, the underlying economic drivers looked solid with:

• A pick-up in consumer spending (at a stronger-than-expected +3.2%).

• And companies continued to invest heavily (especially) in AI build out, proving that the broader economy remains healthy despite drops in government spending & unsold inventory.

Actually, it was the generous tax refunds from Trump's "One Big Beautiful Bill" that fuelled consumer spending in Q1 2026.

With the ‘bonus’ funds run out, this will leave households without much of a cushion in the coming weeks, months & quarters, just when average gasoline prices rise back above $4 a gallon.

With Q2 2026 (itself) captured the tail-end of the spending surge, the dynamic sets up a possible sharp slowdown or contraction in consumer spending for Q3 2026 & beyond.

According to Pantheon Macroeconomics, Senior US economist Oliver Allen - underlying income growth is very weak and higher gas prices still are putting pressure on consumer spending elsewhere.

It does not help that US personal saving rate has declined to 2.7%, the lowest in 4 years, well below its long-run ⁠average.

Personal Consumption Expenditure (PCE).

For June 2026, both headline and core PCE reports are reporting opposing numbers. (see above)

Headline PCE:

• Monthly came in at -0.1% (weakest reading since April 2020) vs analysts’ estimates of -0.1% vs May 2026’s upwards revised 0.5%.

• Annual inflation cooled to 3.7% vs analysts’ estimates of 3.7% vs May 2026’s 4.1% (largest gain since April 2023)

Core PCE:

• Monthly inflation came in at 0.1% vs market consensus of 0.2% vs May 2026’s 0.3%.

• Annual inflation came in at 3.3% vs market consensus 3.3% vs May 2026’s 3.4%.

The drop in headline inflation was driven by a sharp pullback in energy and gasoline prices, tied directly to a brief mid-June ceasefire in the Middle East.

With the geopolitical truce broken down shortly after, policymakers view the soft monthly print as a temporary reprieve rather than a permanent trend.

Core inflation continues to drift down at a very slow pace and remains comfortably above the Fed's 2% target, indicating underlying price growth in services is still present.

US Consumer Sentiments.

The final July 2026 report from the University of Michigan Surveys of Consumers revealed consumer sentiment rose to a 5-month high of 55.2, beating initial estimates of 54.4 and June 2026’s 49.5.

This is the highest level since February 2026, before the US-Iran conflict drove gas prices higher.

The upward trend was driven by a sharp rebound in:

• The current economic conditions index to 54.8, together with

• An improvement in consumer expectations to 55.4.

These economic gains were broad-based, showing uniform improvements across all demographic categories, including varied income, education, age, and political groups.

Consumers' 5-year outlook for business conditions climbed to a 12-month high, though it remained well below its historical average.

Despite the improvement, overall sentiment is still 11% lower than a year earlier, reflecting continued concerns over elevated prices and the lasting effects of several years of high inflation.

Year-ahead inflation expectations eased to 4.2% from 4.6% in June, while long-run expectations held steady at 3.3%.

My viewpoints (mine only).

US conflict with Iran has directly and indirectly hurting the American economy.

Shipping disruptions in the Strait of Hormuz have raised manufacturing costs overseas, sending higher inflation back to the US through imported goods.

While the US job market looks ‘resilient’ on paper, official numbers hide the real picture because continuing jobless claimants are dropped from the statistics after receiving unemployment benefits for 26 weeks.

As AI rapidly advances and replaces entry-level job roles, unemployed workers face growing risks of permanent job displacement if they lack the required skills for new industries. Do you agree ?

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