Markets Hit Records Amid Mixed Economic Signals
- Labor markets remained strong with jobless claims falling to 217,000.
- Manufacturing showed weakness as the Richmond Fed Index plunged to -20, indicating broad-based contraction across the Fifth District.
- Housing markets struggled under elevated mortgage rates. Existing home sales dropped 2.7% to a nine-month low and home prices reached a record $435,300. New home inventory surged to nearly 10 months of supply, shifting conditions toward buyers.
- Durable goods orders fell 9.3% due to volatile aircraft orders, though core orders excluding transportation rose 0.2%. And the band played on.
- The Federal Reserve meets July 29-30 with rates at 4.25-4.50%. One Fed governor called for immediate rate cuts, citing rates running too high.
- Second-quarter earnings reports to date show mixed results across sectors, with technology companies receiving varied investor reactions to their spending and growth plans.
Markets continue reaching new highs despite mixed economic signals and uncertainty around trade policy and the timing of Federal Reserve policy.
Economy Watch
Tuesday
Richmond Fed Manufacturing Index took a notable step backward in July, dropping to -20 from June's -8 reading—a much steeper decline than the -2 economists had expected. This marks five straight months of contraction for the Fifth District, which includes Maryland, North Carolina, Virginia, South Carolina, the District of Columbia, and most of West Virginia—collectively representing about 9% of our nation's economic output. The weakness was broad-based, with shipments, new orders, and employment all showing meaningful declines. New orders were particularly concerning, falling to -25, which suggests challenges may persist in the months ahead. The silver lining? Manufacturers remain cautiously optimistic about future conditions, with forward-looking indicators for shipments and orders showing improvement, even as employment expectations remain subdued.
Wednesday
Existing Home Sales continue to face headwinds, as the latest data from the National Association of Realtors shows sales dropped 2.7% in June to 3.93 million units—a nine-month low that came in below what economists were expecting. While home prices hit yet another record for June at $435,300 (marking an incredible 24 straight months of year-over-year gains), the reality is that fewer people are able to participate in the market. Sales fell across most of the country, with the Northeast seeing the steepest decline at 8%. The culprit remains familiar: mortgage rates hovering around 6.75% are simply pricing out too many potential buyers. There is some encouraging news, though—inventory has improved to a 4.7-month supply, and first-time buyers are holding steady at 30% of all sales. NAR's Chief Economist Lawrence Yun believes we could see more activity if rates drop closer to 6% later this year, which would help bring those 160,000 additional renters into homeownership.
Thursday
New Home Sales showed mixed signals in June, with the pace holding relatively steady at 627,000 homes on an annualized basis—just a slight tick up from May but still running about 7% behind last year's levels. What's particularly noteworthy is the growing inventory of available homes, which has climbed to nearly 10 months of supply. This represents a significant shift toward a buyer's market, giving purchasers more choices and negotiating power. We're also seeing some welcome relief on pricing, with the median new home price dropping to $401,800 in June—down from $422,700 in May and representing the most affordable new home prices we've seen in over a year. While elevated mortgage rates continue to keep many potential buyers on the sidelines, those who are actively shopping have considerably more options and pricing flexibility than they've enjoyed in recent years.
Friday
Durable Goods Orders pulled back sharply in June, falling 9.3 percent to $311.8 billion after May's eye-popping 16.5 percent surge. While that decline sounds alarming, here's what really happened: the Boeing effect worked in reverse. Transportation equipment drove the decrease, plummeting $32.6 billion or 22.4 percent to $113.0 billion. Strip out those big-ticket transportation orders, and core durable goods actually edged up 0.2 percent—a much steadier picture of underlying manufacturing demand. This perfectly illustrates how aircraft orders can whipsaw these monthly numbers. We simply had fewer transportation orders in June than in May. Remember, a single wide-body plane costs $200-400 million, so the difference between a big aircraft order month and a quiet one can make the whole manufacturing sector appear to swing wildly. The real story is in that modest 0.2 percent core increase. It suggests businesses are still placing steady orders for machinery, computers, and other equipment—just not the billion-dollar aircraft that can dominate the headlines. Meanwhile, shipments actually rose 0.5 percent, showing manufacturers are still delivering goods and working through their backlog. So while the headline looks scary, the underlying manufacturing pulse remains relatively stable.
By The Numbers
Employment Indicators
Employment data helps gauge whether consumers have jobs and money to spend. Consumer spending accounts for more than 70% of GDP.
| Indicator | Current Value | Status |
|---|---|---|
| Initial Claims for Unemployment | 217,000 | Stable |
| 4-Week Average of Initial Claims | 224,500 | Stable |
| Continuing Claims | 1.955M | Stable |
| Unemployment Rate | 4.1% | Stable |
Note: Values above 250K for the 4-Week Average, combined with rising unemployment, could signal a weakening economy.
Next unemployment report: August 1, 2025. Source: Department of Labor
Economic Growth (Real GDP)
| Period | Growth Rate | Status |
|---|---|---|
| Q3 2024 | 2.8% | Positive |
| Q4 2024 | 2.4% | Slowing |
| Q1 2025 | -0.5% | Contraction - Consider the average of Q1 & Q2 due to tariff distortions = 0.95% |
| Q2 2025 (est.) | 2.4% | Recovery - Consider the average of Q1 & Q2 due to tariff distortions = 0.95% |
GDP growth provides a broad measure of overall economic activity and signals whether the economy is expanding or contracting.
Source: Bureau of Economic Analysis; Estimate from Federal Reserve Bank of Atlanta
Inflation Measures (CPI Year-over-Year)
| Month | Rate | Trend |
|---|---|---|
| August | 2.53% | Improving |
| September | 2.44% | Improving |
| October | 2.60% | Deteriorating |
| November | 2.75% | Deteriorating |
| December | 2.89% | Deteriorating |
| January 2025 | 3.00% | Deteriorating |
| February | 2.82% | Improving |
| March | 2.39% | Improving |
| April | 2.31% | Improving |
| May | 2.35% | Deteriorating |
| June | 2.67% | Deteriorating |
| July (est.) | 2.73% | Deteriorating |
Source: Bureau of Labor Statistics; May estimate from Federal Reserve Bank of Cleveland
Note: While inflation has moderated, new tariffs may cause temporary spikes in monthly data. Once tariffs have been in place for a full year, inflation should revert closer to the underlying trend.
Interest Rate Outlook
Current Fed Funds Rate: 4.25-4.50%
| Expected Cut Date | Amount | Projected Rate After Cut |
|---|---|---|
| September 17, 2025 | 0.25% | 4.00-4.25% |
| December 10, 2025 | 0.25% | 3.75-4.00% |
| March 18, 2026 | 0.25% | 3.50-3.75% |
| July 29, 2026 | 0.25% | 3.25-3.50% |
Note: Changes in monetary policy expectations reflect market participants' views on how the Fed will likely respond to shifts in inflation or employment.
Source: CME FedWatch Tool
Corporate Earnings Outlook (S&P 500 Estimates for 2025)
| Date | 2025 Earnings Estimate | 2026 Earnings Estimate | Trend |
|---|---|---|---|
| June 28, 2024 | $276.29 |
|
|
| Sept 30, 2024 | $274.73 |
|
Deteriorating |
| Dec 31, 2024 | $271.25 |
|
Deteriorating |
| Mar 31, 2025 | $266.39 | $304.89 | Deteriorating |
| June 30, 2025 | $255.29 | $295.32 | Deteriorating |
| Current | $255.59 | $299.25 | Stabalizing |
Source: S&P Dow Jones Indices
Market Valuation
| Metric | Value | Assessment |
|---|---|---|
| S&P 500 P/E ratio on 2025 / 2026 estimated earnings | 25 Times Earnings / 21.4 Times Earnings | Expensive |
| Historical P/E (pre-1980) | 14.0 |
|
| Historical P/E (post-1980) | 19.0 |
|
Note: Equity valuations remain expensive by historical standards
Disclosure:
This material is provided by Todd Van Der Meid, MBA, CFP®, through Rhino Wealth Management, Inc., a Registered Investment Adviser, solely for informational purposes. It is not intended as investment, tax, legal, or accounting advice. Investors should consult qualified professionals before making financial decisions.
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