By Megan Leonhardt | Thursday, July 17

Steady As She Goes. Data showing that Americans are spending at a healthy clip helped the S&P 500 and Nasdaq Composite post fresh record closes today.

The S&P  finished up 0.5% , marking its ninth record close for the year, while the tech-heavy Nasdaq was up 0.8%. It was the index's fourth consecutive record close and the longest streak in 8 months, according to Dow Jones Market Data. The Dow Jones Industrial Average also closed up 0.5% today. 

The strong performance came on the heels of a rebound in retail sales, according to report released Thursday by the Census Bureau. As my colleague Sabrina Escobar reports, retail sales increased 0.6% in June from May. Economists surveyed by FactSet expected a 0.2% increase following a 0.9% decline in May.

The surge in spending was likely helped by solid labor conditions—which seem to be continuing into July. The number of  Americans filing for unemployment benefits for the first time during the week of July 12 was 221,000, according to data released Thursday from the Labor Department. That was below forecasts for 232,000, and was even lower than the 228,000 people who filed the week prior. 

"The consumer came back to life in June after a weak performance in May. Other data like initial jobless claims and Philly Fed also painted the picture of a strong economy," wrote David Russell, global head of market strategy at TradeStation. 

DJIA: +0.52% to 44,484.49
S&P 500: +0.54% to 6,297.36
Nasdaq: +0.75% to 20,885.65

The Hot Stock: Snap-On +7.9%
The Biggest Loser: Elevance Health -12.2%

Best Sector: Financials +1.0%
Worst Sector: Healthcare -1.1%

Tariffs Are Quietly Doing Damage on Inflation

Inflation may have looked tame in June, but tariffs are starting to push up prices. Americans are likely in for more pain in the near term.

The headline readings of the consumer price index and producer price index data released this week revealed softer inflation gains than many feared. Yet economists say President Donald Trump’s tariffs are starting to creep into broad categories of products including core goods, which exclude food and energy.

“We are seeing initial effects of tariff increases on core goods prices,” New York Fed President John Williams said Wednesday night.

A lack of significant gains in auto prices and ample inventories may be masking the extent of the shift. Frugal consumers may also be making it hard for businesses to raise prices. The Federal Reserve’s latest Beige Book, released Wednesday, showed businesses’ margins are coming under pressure as a result.

Notable increases appeared in categories such as furniture, sports equipment, appliances, clothing, and toys in June. The breadth is important, said Omair Sharif, founder and president of research shop Inflation Insights. He points out that nearly all core goods prices outside of autos increased in June, suggesting that companies in general are starting to pass tariff costs on to customers.

This “belies” the narrative that tariffs aren’t flowing through into consumer prices, wrote Michael Hanson, economist for J.P. Morgan. “The three-month increases for a range of goods, including household appliances, window and floor coverings, sporting goods, and other household and recreational items, are approaching—if not already well above—10% annualized,” he said.

According to Freya Beamish, chief economist at TS Lombard, 25% of the tariffs in force in June were passed through to customers, up from 15% in May.

That would be boosting headline inflation, if not for a few patterns that are unlikely to last through the summer.

Declines in the costs of cars and travel are a factor. But that may not persist. Sharif expects airlines to align capacity more closely to demand, which could lead to firmer readings on core services prices in the second half of the year. 

Moreover, inventories built before tariffs took effect are being drawn down, though it will likely take until August to deplete those supplies, according to Andy Schneider, senior U.S. economist at BNP Paribas Securities.

“It’s important to note that it’s still early days for the effects of tariffs, which take time to come into full force,” Williams said. And it doesn’t appear that the piling on of tariffs is over.

Read here for more on how tariffs are starting to show in the data.