Market Update – July 28th, 2025

Financial Markets

It was a positive week for equity markets, with both the S&P 500 and Nasdaq Composite closing at new record highs. As of Friday, July 25th, the S&P 500 led major indexes with a 1.46% gain, followed by the Dow Jones Industrial Average up 1.26%, and the Nasdaq Composite rising 1.02%. This upcoming week, investors will be focused on the July Federal Reserve meeting, the final central bank meeting before the fall.

Market News

Leading Indicators. The Conference Board’s Leading Economic Index (LEI) fell 0.3% in June, remaining in recessionary territory for the third consecutive month and signaling ongoing risks for the U.S. economy.

Within the index, a strong rally in equity markets was insufficient to offset weakness from declining consumer confidence and softening new orders, while most other components saw minimal change. Despite resilience in coincident data such as the low unemployment rate, the LEI continues to paint a persistently bearish outlook.

Source: The Conference Board

Existing Home Sales. Elevated mortgage rates continue to weigh on the U.S. housing market, with sales activity remaining subdued even as home prices reach new highs. In June, the median sales price of existing homes rose to a record $435,300, a 2% increase from a year earlier. Despite the increase in price, sales volumes were flat year-over-year and declined 2.7% from May, at a seasonally adjusted annual rate of 3.93 million units.

Inventory showed signs of improvement, with 1.53 million homes available for sale, up 15.9% from June 2024, and supply increasing to 4.7 months’ worth, from 4.0 a year ago. While the rise in inventory may ease some pressure on the market, high mortgage rates continue to dampen activity, clearly reflecting the impact of restrictive monetary policy on the residential real estate sector.

Source: National Association of Realtors

New Home Sales. In contrast to the existing home market, the median sales price of new homes declined in June, highlighting continued pressure on homebuilders. The median price fell to $401,800, a 2.9% decrease year-over-year, as builders respond to affordability challenges. Sales volumes reached a seasonally adjusted annual rate of 627,000 units, up 0.6% from May but still 6.6% below levels seen a year ago.

Inventory levels continued to climb, with 511,000 new homes available for sale, representing an 8.5% increase from June 2024. While moderating prices and rising inventory create a more favorable environment for buyers, elevated mortgage rates continue to pose a headwind for the new home market.

Source: US Census Bureau

Q2 Earnings. Over one third of S&P 500 companies have reported second-quarter results, with more than 80% exceeding earnings expectations, a strong showing relative to historical averages. The blended expected growth rate, which combines actual results with consensus estimates for the remainder of the index, currently points to 6.4% year-over-year earnings growth. This is an improvement from earlier forecasts, however it would mark the slowest pace of growth since Q1 2024.

Revenue growth is also tracking ahead of expectations, with estimates now at 5% year-over-year. Several sectors are outperforming earlier projections, including financials, which are now showing earnings growth of 10.1% compared to just 2.3% expected in June. In contrast, healthcare and utilities have underperformed relative to expectations. Earnings season will ramp up further this week, with reports from several “Magnificent 7” companies, including Microsoft, Apple, and Amazon.

Source: FactSet, as of 7/25/25

Federal Reserve Expectations. The Federal Reserve is set to hold its final policy meeting before the fall this week, with markets assigning just a 2.6% probability of a 25 basis point rate cut at this meeting. While the near-term likelihood of a cut remains low, expectations for easing later in the year are more substantial – markets are pricing in a 63.8% chance of a cut by September and an 81.6% probability of at least one rate cut by the October meeting.

The upcoming decision takes place against a backdrop of stable economic conditions but several uncertainties, including potential tariff-related disruptions and upside inflation risks. Adding to the spotlight, recent public remarks from the President advocating for lower rates have drawn attention, though the Fed has maintained its independence in decision-making. This week’s meeting will be closely watched for insights into how policymakers are interpreting evolving economic data and risks.

Source: CME Group, as of 7/25/25

Summary

U.S. economic data last week was mixed but resilient, lifting equities to record highs. While leading indicators declined again, current data signals stability. Housing remains pressured by high rates, but rising inventory and softer prices may help buyers. With the Fed meeting this week, investors are focused on the potential for rate cuts in the coming months.

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