U.S. Stocks Pull Back as Gold and Oil Rise, Weak Retail Sales Fuel Fed Rate Outlook

Market Overview

U.S. equities retreated modestly from record highs on Friday but still finished the week in positive territory. The S&P 500 slipped 0.17% to 7,785.76, while posting a 0.36% weekly gain. The Nasdaq Composite fell 0.28%, and the Dow Jones Industrial Average declined 0.20%. Despite the broader pullback, storage and semiconductor stocks outperformed, with SanDisk surging 7.39% on Friday and delivering an impressive 35.38% gain for the week.

Precious metals recovered after recent weakness. Spot gold advanced 0.60% to $4,375.67/oz, ending the week 0.81% higher, while spot silver rose 0.40% to $64.667/oz.

Crude oil prices rebounded as renewed shipping risks in the Red Sea supported energy markets. Brent crude gained 2.00% to $88.89 per barrel, while WTI crude climbed 1.42% to $82.40 per barrel.

On the macro front, signs of weakening U.S. consumer demand emerged. July retail sales fell 0.6% month over month, marking the largest monthly decline in more than a year, while the preliminary University of Michigan Consumer Sentiment Index for August dropped to 51. Meanwhile, the 10-year U.S. Treasury yield unexpectedly rose 5.14 basis points to 4.690%, reflecting continued market uncertainty over inflation and the Federal Reserve's policy outlook.

In China, the People's Bank of China (PBOC) stepped up liquidity support by conducting RMB 1 trillion in outright reverse repurchase operations. Investors are now turning their attention to a series of key Chinese economic indicators, including July industrial production and retail sales, scheduled for release on Monday.

Market OutlookChina to Release a Wave of July Economic Data

China will publish a broad set of July economic indicators on Monday, including industrial production, retail sales, fixed-asset investment, and housing prices across 70 major cities. The State Council will also hold a press briefing on the latest economic data.

Following the PBOC's sizable liquidity injection and softer-than-expected aggregate financing figures, investors will closely assess the underlying strength of domestic consumption and investment. The data may also provide clues as to whether Beijing will introduce additional stimulus measures to support growth in the second half of the year.

Weakening U.S. Consumer Demand Clouds Fed Outlook

The unexpected decline in July retail sales and the drop in the University of Michigan Consumer Sentiment Index to 51 suggest that U.S. household spending is beginning to lose momentum.

However, the simultaneous rise in the 10-year Treasury yield indicates that investors continue to reassess the outlook for inflation and future Federal Reserve policy. The interaction between upcoming retail sales, employment, and inflation data will likely determine whether market expectations ultimately shift toward a more dovish or hawkish policy trajectory.

Key Events to Watch

• China: July industrial production, retail sales, fixed-asset investment, and housing price data for 70 major cities, along with the State Council's July economic briefing.

• United States: Whether weaker July retail sales and the decline in consumer sentiment prompt a further repricing of the Federal Reserve's interest rate outlook.

• Japan: Release of second-quarter GDP data and the direction of the Japanese yen as USD/JPY approaches the 160 level.

• Technology: DeepSeek's API pricing adjustment, effective August 17, and its potential impact on the AI and semiconductor supply chain.

• Geopolitics & Energy: Whether tensions in the Middle East and the Red Sea continue to disrupt shipping and energy supplies, and the resulting short-term implications for crude oil prices.