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Market News
Market analysis
July 27, 2026
Strong consumer activity and corporate profits support markets, while renewed U.S.-Iran tensions, higher oil prices and rising interest rates increase near-term risks.
Number of the week:
187,000
The number of initial jobless claims reported by the U.S. Department of Labor for the week ending July 18, the lowest since 1969.
Term of the week:
Initial jobless claims
A statistic reported by the U.S. Department of Labor that counts individuals filing to receive unemployment insurance benefits.
Quote of the week:
Company updates still point to healthy consumer and business activity. Airlines, large banks and credit card companies described steady spending despite higher gasoline prices and persistent inflation in selected categories. Their comments offered little evidence of a broad deterioration in borrowers' ability to repay debt. Texas Instruments also reported stronger automotive demand, particularly
― Terry Sandven, Portfolio Manager, Chief Equity Strategist, U.S. Bank
U.S. Bank Asset Management Group
Daniel Farley, CFA
Chief Investment Officer
Kaush Amin, CFA
Head of Private Market Investing
Chad Burlingame, CFA, CAIA
Head of Impact Investments
Thomas Hainlin, CFA
National Investment Strategist
Robert Haworth, CFA
Senior Investment Strategy Director
William Merz, CFA
Head of Capital Markets Research
William Northey, CFA
Senior Investment Director
Terry Sandven
Chief Equity Strategist
Global economy
Quick take: The U.S. economy continues to expand as employment and business activity hold firm, while new tariffs and the U.S.-Iran conflict increase risks to inflation and global energy supplies.
- U.S.-Iran tensions kept energy risks in focus, but weekend diplomacy offered a possible off-ramp. Oil prices ended last week at their highest level in more than a month after renewed fighting restricted energy supplies. Over the weekend, the United States paused overnight strikes on Iran after an Omani delegation arrived in Tehran to discuss reopening the Strait of Hormuz. Iran also refrained from new attacks on U.S. bases or Gulf states. The pause reduced escalation, but Houthi attacks on Saudi-linked shipping and energy infrastructure keep regional supply risks elevated. Inflation eased in June before the latest oil increase, but a lasting rise in fuel and transportation costs could slow further progress.
- The labor market continues to support household spending. Initial claims for unemployment benefits fell to 187,000, the lowest weekly reading since 1969, while continuing claims declined to 1.8 million. Hiring has slowed since spring, but layoffs remain historically limited. This combination supports household income and helps explain why overall consumer spending remains solid. Consumers do not all share the same financial position, however, and higher gasoline prices could place greater pressure on lower-income households that devote more of their budget to necessities.
- New tariff announcements renewed attention on trade policy. The White House announced higher tariffs on selected Canadian goods and said new rates of 10% to 12.5% would apply to as many as 60 economies after the prior global tariff expired. The administration also outlined future tariffs on generic drugs to encourage domestic production and threatened an investigation after the European Union fined Google. The measures could raise costs for some businesses and consumers, although the timing and economic impact will depend on implementation, exemptions and trade responses.
- Business surveys pointed to broader global growth in July. A combined measure of U.S. manufacturing and services activity rose to 53.6 from 51.9, with readings above 50 indicating expansion. Comparable measures also improved in Japan, the United Kingdom and the eurozone. Services led the gains, while manufacturing is more uneven. The improvement suggests global growth entered the second half of the year with momentum, even as companies navigate tariffs, higher energy costs and geopolitical uncertainty.
Equity markets
Quick take: Stocks were mixed last week, with strong second quarter results and higher profit forecasts offsetting pressure from rising oil prices, elevated Treasury yields and uncertainty surrounding the Middle East conflict.
- Second quarter corporate results continue to exceed forecasts. With 27% of S&P 500 companies reporting through Friday, revenue growth reached 12.6%, ahead of the 11.9% estimate, while profit growth reached 69.8%, well above the 23.1% forecast. Results will broaden quickly, with 35% of the index scheduled to report this week and another 28% next week. Growth will likely moderate as more companies outside technology and communication services release results, but the early reports provide a solid starting point.
- Company updates still point to healthy consumer and business activity. Airlines, large banks and credit card companies described steady spending despite higher gasoline prices and persistent inflation in selected categories. Their comments offered little evidence of a broad deterioration in borrowers' ability to repay debt. Texas Instruments also reported stronger automotive demand, particularly for electric vehicles and hybrids. Major retailers will provide a more complete view in late August, including whether higher fuel costs are changing household priorities.
- Large technology companies continue to increase investment in artificial intelligence. Alphabet, the parent of Google, raised its 2026 spending plan for property and equipment to $195 billion to $205 billion from $180 billion to $190 billion and indicated another meaningful increase next year. The plan supports demand for computer chips, data centers and related infrastructure. It also raises the standard for future profit growth, because investors will want evidence that this spending produces attractive returns. Reports from Meta Platforms (Facebook), Microsoft and Amazon should add perspective on demand and investment plans.
- Higher profit forecasts support the longer-term outlook, but price and interest rate risks remain. Analysts now expect S&P 500 profits of $350 per share in 2026 and $402 in 2027, representing growth of about 27% and 15%, respectively. Stock prices remain above long-term averages relative to expected profits, though below previous cycle peaks. A lasting move in the 10-year Treasury yield toward 5%, especially if driven by higher oil prices and inflation, could make stocks less attractive compared with bonds. Continued profit growth therefore remains important for future returns.
Bond markets
Quick take: Treasury yields reached their highest levels since early 2025 last week as strong employment data, higher oil prices and firm Federal Reserve commentary increased expectations that interest rates may remain elevated.
- Federal Reserve officials kept the possibility of higher rates in view. Several policymakers emphasized that inflation remains above the central bank's goal and argued that rates may need to stay high or rise modestly. Financial markets ended Friday assigning about a 37% probability to a 0.25 percentage point increase at the July 29 meeting, up from roughly 15% earlier in the week. The European Central Bank held rates steady but also expressed concern that higher Middle East energy costs could lift inflation. Incoming inflation and employment data will guide the next steps for both central banks.
- Treasury yields rose across short and long maturities. Two-year and 10-year yields reached their highest levels since early 2025, while the 30-year yield remained above 5% for its longest stretch since 2007. Because bond prices fall when yields rise, longer-term Treasuries lost more than 1% last week. Shorter-term Treasuries declined less than 0.2%. Strong labor data and higher oil prices contributed to the move. The difference highlights how bonds with longer repayment periods generally react more sharply to changing inflation and interest rate expectations.
- Corporate borrowers remain on sound footing. Moody's upgraded more corporate bonds than it downgraded over the past year, the first such period since late 2022. Defaults also declined from a year earlier, and Moody's expects further improvement during the second half of 2026. Investors continue to show strong demand for company debt, helping businesses borrow at favorable terms even as issuance increases to finance artificial intelligence infrastructure. The additional income available on lower-quality bonds remains modest by historical standards, so careful selection remains important.
- Specialized income strategies helped offset pressure from rising rates. Highly rated securities backed by diversified business loans and investments linked to insurance risks gained last week because their income adjusts with short-term rates; they have limited sensitivity to Treasury moves. Home loan bonds without government backing fell 0.4%, but they have outperformed many bond categories this year. Strong homeowner equity and low mortgage rates locked in during prior years continue to encourage borrowers to remain current. These areas can broaden income sources, although their risks differ from traditional government and corporate bonds.
Real assets
Quick take: Real assets advanced last week, with higher oil prices lifting commodities and energy infrastructure, while property investments gained on improving company results and demand tied to digital development.
- Publicly traded real estate gained, although results varied by property type. Real estate investment trusts, which own income-producing properties, rose 1.0% last week. Healthcare and data center properties gained more than 1%, while telecommunications tower and industrial properties fell more than 3%. Early second quarter reports showed improving business conditions. Several logistics landlords cited record leasing activity and raised full-year forecasts, supported partly by data center construction and related power needs. Telecom tower operators also expect mobile data use to strengthen future demand, although higher interest rates are a near-term challenge. Property income can also help offset periods when price gains are limited.
- Infrastructure investments rose, led by energy and utilities. Global infrastructure gained 0.7% last week. North American energy infrastructure advanced more than 1% as crude oil prices climbed, while utilities rose more than 1.5% on steady demand. Industrial infrastructure also gained nearly 1.5%, consistent with stronger business surveys. Pipelines and other energy assets can benefit when oil and natural gas activity increases, while utilities often provide relatively stable revenue. Together, these businesses offer some balance as the Middle East conflict increases inflation concerns. Their essential services can support recurring cash flow across economic cycles.
- Oil led a broad commodity advance. Broad commodity investments rose 3% last week, with Brent crude gaining 11% amid renewed U.S.-Iran fighting and Houthi threats to Saudi shipping. Gold added nearly 1% as geopolitical uncertainty and inflation concerns increased. Copper rose 1.4%, supported by signs of improving global business activity. These gains show how real assets can respond differently from stocks and bonds when energy supplies tighten. They can help diversify portfolios, but commodity prices can reverse quickly if supply conditions improve or global demand weakens. Position size remains important because short-term price swings can be substantial.
This information represents the opinion of U.S. Bank. The views are subject to change at any time based on market or other conditions and are current as of the date indicated on the materials. This is not intended to be a forecast of future events or guarantee of future results. It is not intended to provide specific advice or to be construed as an offering of securities or recommendation to invest. Not for use as a primary basis of investment decisions. Not to be construed to meet the needs of any particular investor. Not a representation or solicitation or an offer to sell/buy any security. Investors should consult with their investment professional for advice concerning their particular situation. The factual information provided has been obtained from sources believed to be reliable but is not guaranteed as to accuracy or completeness. U.S. Bank is not affiliated or associated with any organizations mentioned.
Based on our strategic approach to creating diversified portfolios, guidelines are in place concerning the construction of portfolios and how investments should be allocated to specific asset classes based on client goals, objectives and tolerance for risk. Not all recommended asset classes will be suitable for every portfolio. Diversification and asset allocation do not guarantee returns or protect against losses.
Past performance is no guarantee of future results. All performance data, while obtained from sources deemed to be reliable, are not guaranteed for accuracy. Indexes shown are unmanaged and are not available for direct investment. The S&P 500 Index consists of 500 widely traded stocks that are considered to represent the performance of the U.S. stock market in general.
Equity securities are subject to stock market fluctuations that occur in response to economic and business developments. International investing involves special risks, including foreign taxation, currency risks, risks associated with possible differences in financial standards and other risks associated with future political and economic developments. Investing in emerging markets may involve greater risks than investing in more developed countries. In addition, concentration of investments in a single region may result in greater volatility. Investing in fixed income securities is subject to various risks, including changes in interest rates, credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications and other factors. Investment in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities. Investments in lower-rated and non-rated securities present a greater risk of loss to principal and interest than higher-rated securities. Investments in high yield bonds offer the potential for high current income and attractive total return but involve certain risks. Changes in economic conditions or other circumstances may adversely affect a bond issuer's ability to make principal and interest payments. The municipal bond market is volatile and can be significantly affected by adverse tax, legislative or political changes and the financial condition of the issues of municipal securities. Interest rate increases can cause the price of a bond to decrease. Income on municipal bonds is free from federal taxes but may be subject to the federal alternative minimum tax (AMT), state and local taxes. There are special risks associated with investments in real assets such as commodities and real estate securities. For commodities, risks may include market price fluctuations, regulatory changes, interest rate changes, credit risk, economic changes and the impact of adverse political or financial factors. Investments in real estate securities can be subject to fluctuations in the value of the underlying properties, the effect of economic conditions on real estate values, changes in interest rates and risks related to renting properties (such as rental defaults).
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