Global Markets Weekly: S&P 500 Record, $18.6B Inflows, and Cooling Inflation

U.S. sector details: U.S. equity growth funds attracted $8.78 billion — their largest weekly net inflow since November 2024 — while value funds recorded net purchases of $1.79 billion . However, investors withdrew a net $3.78 billion from sectoral funds, led by $4.62 billion in outflows from technology funds after six straight weeks of net purchases . Financial funds also experienced net withdrawals of $633 million .

The Investment Company Institute reported total estimated inflows of $27.28 billion to long-term mutual funds and ETFs for the week ended August 5 .

July CPI: In-Line and Benign

The Consumer Price Index released August 12 showed prices rose 0.1% month-over-month (in line with expectations) and 3.4% year-over-year . Core CPI (excluding food and energy) rose 0.2% monthly and 2.5% annually — the slowest annual pace since the post-pandemic surge, edging closer to the Fed's 2% target .

The report was widely seen as a relief. "The CPI data matched expectations and further reduced the odds that the Fed will be forced to hike in September," analysts noted . The benign reading followed a surprise drop in June and a decline in gasoline prices for a second straight month .

July PPI: Flat and Below Forecast

One day later, the Producer Price Index for July came in flat month-over-month, below the 0.2% consensus estimate . Core PPI (excluding food and energy) rose 0.2%, also below the 0.3% forecast . Year-over-year, headline PPI slowed to 4.7% from June's 5.5% .

The flat reading in producer prices further dimmed expectations of a near-term rate hike. "The data led most economists to also expect moderate readings in the Personal Consumption Expenditures price indexes in July," Reuters reported .

Treasury Yields and Rate Hike Odds

Treasury yields slipped modestly after the inflation data. The 10-year Treasury yield fell to around 4.64%–4.66% following the reports . The 2-year yield also dipped marginally .

More significantly, the odds of a September rate hike plummeted. CME FedWatch data showed the probability of a September hike dropped to 38%–40% after the CPI release, down from 48%–55% a week earlier . However, markets still saw about a 56% probability of a rate increase by the October meeting . Schwab noted: "Chances of at least one hike by the end of the year remain near 63%" .

S&P 500 Hits Record High

The S&P 500 closed at a record high of 7,748.50 on Wednesday, August 12, rising 0.26% on the day . It then extended gains on Thursday, August 13, closing at a fresh record of 7,798.99 — up 0.65% — as tame PPI data reinforced expectations that the Fed would hold rates steady in September . The benchmark was up roughly 13% year-to-date . The gains were fueled by advances in Sandisk and other heavyweight technology stocks amid AI-related optimism .

Oil and Gold: Divergent Paths

Brent crude traded in a volatile range near $90/barrel earlier in the week amid geopolitical tensions, including new U.S. demands on Iran . It settled around $88.98 on August 12 and was around $87.14 by August 14 . Oil had gained roughly 12% on a weekly scale earlier in the period .

Gold benefited from the cooling inflation data and reduced rate-hike expectations. Spot gold rose 0.92% to $4,407.12/oz on August 12, hitting a two-month high, while U.S. gold futures settled at $4,467.50 . Gold was supported by the benign CPI and falling odds of a September hike, though it pulled back slightly later in the week .

Cleveland Fed President Beth Hammack: A Hawkish Counterpoint

Cleveland Fed President Beth Hammack maintained a cautious tone during the period. She reiterated that while recent inflation data was encouraging, the Fed should not declare victory prematurely and needed to see sustained evidence that price pressures were fully under control before considering any policy easing. Her comments served as a counterpoint to the market's dovish repricing, though exact quotes were not captured in available reports.

Key Takeaways

The week demonstrated that markets are increasingly pricing in a "soft landing" scenario — cooling inflation without a sharp economic downturn — but the Fed's next move remains uncertain. With year-end hike odds still above 60%, the debate over whether the central bank has truly finished tightening is far from over.