Weekly Market Navigator

Week of August 17, 2026

Published every Monday: Get a detailed snapshot of what moved the markets last week—and what to watch this week.

Stocks were marginally higher and bond markets were slightly lower.

Stocks were marginally higher, with strength in small-cap stocks and value-leaning sectors such as energy, consumer staples, health care, and financials. Bond markets were slightly lower. The 30-year Treasury yield moved to 5.25 percent, a level not seen since 2007.

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Weekly Quick Hits

Beyond the Headlines

Inflation moderates but remains above the Federal Reserve’s (Fed’s) target.

Report Releases

Weaker retail sales and modest improvement in inflation should keep the Fed in a holding pattern.

Financial Market Data

Stocks were marginally higher, with strength in small-caps and value-leaning sectors.

Looking Ahead

Highlights include housing market updates and minutes from the Federal Open Market Committee’s (FOMC’s) July meeting.

BEYOND THE HEADLINES:

Inflation Moderates but Remains Above the Fed’s Target

Inflation data delivered a reassuring message to investors. Price pressures for consumers and producers eased somewhat, which is encouraging given concerns about the impact of higher oil prices and their pass-through effects. Still, inflation rates remain well above the Fed’s 2 percent target. Improving trends, however, may have lessened the central bank’s need to raise interest rates in the near term.

Positive News in Most Areas
The good news on inflation was broad-based. The Consumer Price Index (CPI) report for July showed consumer prices rising just 0.1 percent, and annual inflation slowed from 3.5 percent to 3.4 percent. The Fed tends to focus on measures that exclude volatile categories such as food and energy. Core CPI, which excludes those categories, increased 0.2 percent but slowed to 2.5 percent year-over-year, marking a second consecutive month of slower growth.

For producers, the news was also encouraging. Producer prices were unchanged, below expectations for a modest increase, suggesting that companies are facing fewer cost pressures. This could support future consumer inflation trends and may assuage concerns that rising producer inflation could be passed on to consumers.

Fed Remains Data-Dependent
Despite three dissenting FOMC votes last month in favor of raising rates, the Fed bought itself some time by holding rates steady. The central bank has long held that it is data-dependent. The consumer and producer inflation reports indicate that the price acceleration following the start of the war in the Middle East may be fading.

At the same time, a weaker-than-expected employment report and the first decline in retail sales since October 2025 could indicate that the economy is beginning to weaken under the weight of higher oil prices. This doesn’t mean that the central bank will reduce interest rates in the near term. Inflation remains above the Fed’s long-term goal. As a result, the Fed is likely to remain focused on price stability and hold rates steady. This would give it time to assess additional data over the next several months and determine whether the trend of moderating inflation continues.

The Next Move Is Unclear
Even though the federal funds rate and 10-year Treasury yields remain well above levels from five years ago, the backdrop isn’t necessarily unfavorable for markets. Investors have been concerned that the Fed, under new Chair Kevin Warsh, would eventually raise rates because he has sounded hawkish on interest rate policy. Stable rates for the foreseeable future could reduce that concern and allow market participants to continue to focus on strong fundamentals from corporate America.

Full-year 2026 and 2027 S&P 500 earnings estimates have continued to move higher. With companies across multiple industries contributing to that growth, long-term fundamentals should remain supportive of equity markets.

“The Fed is likely to remain focused on price stability and hold rates steady. This would give it time to assess additional data over the next several months and determine whether the trend of moderating inflation continues.”

Report Releases: August 10–14, 2026

Consumer Price Index:
July (Wednesday)

Headline and core consumer inflation slowed modestly year-over-year. The growth rates, however, remain well above the Fed’s 2 percent target.

Prior monthly CPI/core CPI growth: –0.4%/+0.0%
Expected monthly CPI/core CPI growth: +0.1%/+0.2%
Actual monthly CPI/core CPI growth: +0.1%/+0.2%
Prior year-over-year CPI/core CPI growth: +3.5%/+2.6%
Expected year-over-year CPI/core CPI growth: +3.4%/+2.5%
Actual year-over-year CPI/core CPI growth: +3.4%/+2.5%

Producer Price Index (PPI):
July (Thursday)

Producer inflation also slowed last month. Although that was a welcome sign, price increases remain well above the Fed’s target.

Prior monthly PPI/core PPI growth: –0.1%/+0.4%
Expected monthly PPI/core PPI growth: +0.2%/+0.3%
Actual monthly PPI/core PPI growth: +0.0%/+0.2%
Prior year-over-year PPI/core PPI growth: +5.5%/+4.7%
Expected year-over-year PPI/core PPI growth: +4.9%/+4.1%
Actual year-over-year PPI/core PPI growth: +4.7%/+4.2%

Advance Retail Sales:
July (Friday)

Retail sales slumped last month, due in large part to slowing vehicle and non-store sales. Despite missing expectations, the report marked the first drop in sales growth since October 2025.

Expected/prior month retail sales monthly change: +0.1%/+0.2%
Actual retail sales monthly change: –0.6%

The Takeaway

The first decline in retail sales in nine months further calls into question the underlying strength of the U.S. economy.
Consumer and producer inflation rates improved modestly, making it more likely that the Fed will hold interest rates steady.

Financial Market Data

Equity

Stocks were marginally higher. The small-cap Russell 2000 led the way, rising more than 1 percent. The S&P 500 and Nasdaq Composite managed small gains, and the Dow Jones Industrial Average fell slightly. Oil prices rose about 5 percent, leading to a 7 percent rally in the energy sector. Utilities, consumer staples, health care, and financials each rose roughly 1 percent. Underperformers included consumer discretionary, which was down 2 percent, and communication services and materials, which were each down about 1 percent. International markets were positive, with developed markets rising more than 0.5 percent and emerging markets rising more than 2.5 percent.

Source: Bloomberg, as of August 14, 2026

Fixed Income

Bonds were mostly lower. The Treasury yield curve steepened as market participants pushed out expectations for a Fed interest rate increase. The 30-year Treasury yield once again reached levels not seen in 19 years, eventually closing at 5.26 percent. The 10-year yield closed at 4.69 percent. Core bonds, Treasuries, and mortgages were down 0.14 percent, 0.1 percent, and 0.13 percent, respectively. The municipal market was the lone positive, rising 0.12 percent.

Source: Bloomberg, as of August 14, 2026

The Takeaway

Stocks were marginally higher, with most of the strength in value-leaning sectors.
Fixed income markets were slightly lower. The 30-year Treasury yield once again reached levels not seen since 2007.

Looking Ahead

In a relatively quiet week for economic data, the housing market will be in the spotlight, with reports expected on home builder confidence, housing starts, and building permits.

The week kicks off on Monday with the National Association of Home Builders (NAHB) Housing Market Index report for August. Confidence is expected to fall modestly, which would leave the index in contractionary territory.
On Tuesday, we’ll see the housing starts and building permits report for July. Both are expected to fall modestly month-over-month.
Lastly, on Wednesday, we expect minutes from the FOMC’s July meeting. The minutes will be scrutinized by economists and investors because there were three dissenting votes in favor of increasing rates.

Disclosure: This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Diversification does not assure a profit or protect against loss in declining markets, and diversification cannot guarantee that any objective or goal will be achieved. Please contact your financial professional for more information specific to your situation.

Bonds are subject to availability and market conditions; some have call features that may affect income. Bond prices and yields are inversely related: when the price goes up, the yield goes down, and vice versa. Market risk is a consideration if sold or redeemed prior to maturity.

Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor’s. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The Dow Jones Industrial Average is computed by summing the prices of the stocks of 30 large companies and then dividing that total by an adjusted value, one which has been adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are reinvested to reflect the actual performance of the underlying securities. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index. The Bloomberg US Aggregate Bond Index is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. The U.S. Treasury Index is based on the auctions of U.S. Treasury bills, or on the U.S. Treasury’s daily yield curve. The Bloomberg US Mortgage Backed Securities (MBS) Index is an unmanaged market value-weighted index of 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (FHLMC), and balloon mortgages with fixed-rate coupons. The Bloomberg US Municipal Index includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than 2 years) selected from issues larger than $50 million. One basis point is equal to 1/100th of 1 percent, or 0.01 percent.

Authored by the Investment Research team at Commonwealth Financial Network^®.

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