Stocks Hold Near Peak As Retail Sales Dim Fed Bets

Wall Street is ending the week with stocks hovering near all-time highs as bets the Federal Reserve will remain on hold in September were reinforced by a decline in retail sales.

While the S&P 500 edged only mildly higher on Friday, the index headed toward its third straight weekly advance. That would be the longest winning streak since May. Short-dated Treasuries outperformed. The dollar fell. Oil wavered as the US threatened to impose multiple economic measures against Iran in a bid to force its hand to reopen the Strait of Hormuz.

US retail sales fell in July by the most in more than a year as consumers pulled back on purchases at online stores and auto dealers. So-called control-group sales — which feed into the calculation of goods spending for gross domestic product — saw the biggest drop since the start of 2025.

Unexpected weakness in consumer spending isn’t good news for the wider economy, but markets may embrace the data in the near term because it strengthens the case for avoiding rate hikes, according to Ellen Zentner at Morgan Stanley Wealth Management.

“Overall, it was a troubling update on the overall health of the consumer,” said Ian Lyngen at BMO Capital Markets. “This will contribute to the case for a Fed pause next month.”

The retail sales report suggests consumers took a breather after a stronger first half of 2026. It also follows data showing moderating inflation, which may give the Fed some time to wait as it debates whether to lift borrowing costs at its Sept. 15-16 meeting.

Economic weakness is a steep price to pay to avoid a quarter-point hike, particularly when markets have largely shrugged off that concern and earnings remain resilient, noted Bret Kenwell at eToro.

“For the economy to stay resilient, consumers will need to do the same,” he added.

The economy is highly dependent on consumer spending, so it’s a case of be careful what you wish for, because a big slowdown could end up hurting corporate profits and the stock market, according to Chris Zaccarelli at Northlight Asset Management.

“But in an environment where inflation can cool down and the Fed can keep rates on hold as a result of that, would be very good for this bull market,” he said.

This article was provided by Bloomberg News.