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This week's economic data revealed a fascinating disconnect: while markets rallied on expectations of Federal Reserve rate cuts, the underlying fundamentals tell a more complex story. The headline grabber was the U.S.-China tariff truce extension, but the real news was the unprecedented side deal requiring Nvidia and AMD to pay the government 15% of their China chip revenues—marking a shift from pure trade warfare to what experts call "monetized trade policy." Meanwhile, inflation data delivered mixed signals that challenge the case for aggressive monetary easing, with producer prices surging 0.9% monthly as businesses finally began passing tariff costs to consumers after months of absorption.

The S&P 500 rebounded this week, but markets remain stuck in a range as consumers grow more cautious. Spending is still happening — just at a slower pace — while inflation expectations are creeping higher and household debt delinquencies tick up. Add in new tariffs, mixed signals from the services sector, and a “no fire, no hire” job market, and the picture is one of an economy that’s stable for now, but facing cross-currents worth watching.

The S&P 500 fell 2.36% this week as markets grappled with tariff uncertainty and shocking employment revisions. May and June job gains were revised down by a combined 258,000—revealing the labor market was far weaker than previously reported. With reciprocal tariffs taking effect Wednesday and inflation already climbing to 2.6%, the Fed faces a challenging policy environment despite maintaining rates at 4.25%-4.5%.

The S&P 500 reached new record highs this week despite a backdrop of conflicting economic data. While labor markets remained robust with jobless claims falling to 217,000, manufacturing showed notable weakness as the Richmond Fed Index plunged to -20, signaling broad contraction across the Fifth District. Housing markets continued struggling under elevated mortgage rates, with existing home sales dropping to nine-month lows even as inventory conditions shifted in favor of buyers. With the Federal Reserve meeting this week and mixed second-quarter earnings reports, markets are navigating uncertainty around monetary policy timing and economic direction.

The S&P 500 gained 0.59% this week as solid corporate earnings offset early volatility from Federal Reserve speculation. While 88% of reporting companies exceeded expectations, underlying economic data reveals a more complex picture. June inflation patterns show an unusual divergence between consumer and producer prices, suggesting businesses are absorbing tariff costs rather than passing them to consumers. Meanwhile, GDP growth projections have weakened to below 1% for the first half of 2025, and consumer spending increasingly relies on credit. Despite elevated market valuations, investors remain optimistic about AI-driven productivity gains even as economic headwinds build. This excerpt captures the week's key developments while highlighting the tension between market performance and economic fundamentals—setting up readers for the detailed analysis that follows in your full post.

Markets remain surprisingly calm despite the Trump administration announcing the highest tariff rates in nearly a century. As the August 1 deadline approaches, investors seem desensitized to escalating trade rhetoric. But market complacency doesn't change economic reality—it's all speculation until these policies hit corporate earnings.