Weekly Market Update: July 21, 2025

Progress on the inflation front has stalled a bit. This was reflected in the June Consumer Price Index (CPI), which showed an uptick in the pace of price growth at the consumer level last month. Specifically, the CPI and the core CPI, which excludes the food and energy components, rose 0.3% and 0.2%, respectively, on a month-to-month basis. Those readings were both up from the prior month’s increases of 0.1%. On a 12-month basis, the respective June CPI and core CPI increased 2.7% and 2.9%, also stronger than the May figures. 

The Federal Reserve is expected to hold the federal funds rate steady, in the range of 4.25% to 4.50%, at this month’s Federal Open Market Committee (FOMC) meeting. The CPI report somewhat validates the central bank’s concerns about a re-acceleration in the pace of price growth. However, the stronger inflation data also may indicate the economy rebounded from the first-quarter gross domestic product (GDP) contraction. In addition, with a budget in place (including a comprehensive tax plan) and regulation rollbacks continuing, economic expansion should continue over the remainder of 2025. 

Wall Street is closely watching second-quarter earnings season. It will likely provide more insight about the health of the business and consumer sectors amid the Trump tariffs. The consensus forecast is calling for mid-single-digit profit growth for the S&P 500 companies, which, if realized, would mark the lowest gain reported by the index since the final quarter of 2023. Investors will also be focused on what corporate leaders are saying about the impact of the uncertain global trade environment on their businesses. Our sense is that Corporate America may need to exceed these modest profit growth expectations to provide support for stocks that are already trading at heightened valuations. Strong quarterly results from the big money center banks were a good start. 

Conclusion: With the major averages near record highs entering the second half of the year, further notable gains may be tougher to achieve, especially absent the near-term resumption of interest-rate cuts. In the meantime, Wall Street continues to debate whether lower taxes and reduced regulations will offset the possible negative impact of more tariffs from the Trump Administration. 

Source: ValueLine.com