Stocks closed lower on Friday and for the week.

The Dow gave up the most, shedding -1.02%. But for context, it was up 6.23% over the previous 3 weeks. The Nasdaq gave up the least, ticking down by just -0.08%. But they were up 6.15% over the previous 3 weeks. The other indexes (S&P 500, small-cap Russell 2000, and mid-cap S&P 400) were down less than -1% last week, but were all up between 5% and 7% over the previous 3 weeks.

Stocks were pacing for another up week last week, until the 90-day pause on reciprocal tariffs ended on Wednesday, July 9^th. No new tariffs went into effect just yet. But more than 20 countries were given notice that their tariffs would be resetting back to their previous tariff rate, which was announced back on April 2^nd.

Counties like Japan and South Korea, which were thought to be close to a deal, were told their tariff rate would be 25%, sans a deal, come August 1^st. Brazil would be charged 50%. (There were additional reasons for upping their rate besides no deal.) And on Thursday, it was announced Canada would be hit with 35% on goods not currently covered under the USMCA trade deal.

The pullback after those reports was relatively modest. The market likely sees that onerous tariffs, in and of themselves, isn't the end goal, but rather better trade deals. Nonetheless, there will clearly be some bumps in the road (as we've already experienced) on the way to those better deals.

But so far, the 10% tariffs have not had a detrimental effect on the economy (or the market). Inflation has been subdued (it's actually gone down vs. where it was several months ago), and the economy and jobs market has been remarkably resilient.

As an aside, it's worth noting that just last month, tariffs brought in $27 billion dollars to the U.S. Treasury, resulting in a monthly surplus. In May, tariffs generated $23 billion.

Nonetheless, fairer trade is the end goal. But the additional revenue to the U.S. doesn't hurt.

Earnings season officially begins this week when Alcoa reports on Wednesday, 7/16, after the close. But it has already unofficially begun. And even prior to Wednesday's Alcoa kickoff we'll get a parade of big bank earnings, which includes JPMorgan Chase, Wells Fargo, BlackRock, and Citigroup on Tuesday, and Bank of America, Morgan Stanley and Goldman Sachs on Wednesday.

Earnings season is always an exciting time since stocks typically go up during earnings season.

We'll also get another look at inflation with the Consumer Price Index (CPI, retail inflation) on Tuesday, and the Producer Price Index (PPI, wholesale inflation) on Wednesday.

The Fed meets again on July 29-30. The odds are still against a rate hike as early as July with only a 6.7% likelihood of a cut. But that increases to 63.8% for September, 85.1% for October, and 96.9% for December.

The Fed has said they still expect 2 rate cuts this year (presumably by 25 basis points each). And with only 4 more meetings left in the year, that would mean half of those would result in cuts.

But if we can get another couple of favorable inflation reports this week, that would increase the chances for a rate cut sooner rather than later.

Should be a busy week this week.

See you tomorrow,