Happy Friday investors. Uncertainty has shaped most of this year, and yet it’s been accompanied by remarkable tailwinds for stocks. The economy keeps chugging along and policy uncertainty hasn’t dented the outlook for equities.

But economic strength offers a double-edge sword.

It’s still a bull market

The stock market keeps climbing even though expectations for Fed rate cuts are falling. 

That’s not what usually happens. 

Economic data ranging from inflation and labor market numbers to consumer trends continue to come in better-than-expected.

That has the dual impact of making investors more optimistic while also delaying any move from the Federal Reserve. 

On Thursday, the government reported lower-than-expected initial jobless claims and a sizable upside surprise on retail sales. As a result, the odds for a September rate cut fell to 52.7%, down from 65.4% a week ago.

The same day saw the S&P 500 notch its 9th record close of the year and the Nasdaq Composite logged its 10th. 

Now, it would make sense for stocks to fall as the prospect for rate cuts weakens. If borrowing costs stay higher for longer than anticipated, that can weigh on corporate profits and sentiment. 

But momentum is a strong factor right now, according to Sonu Varghese, global macro strategist for Carson Group.

It’s simply hard to stop buying stocks when stocks keep rising and earnings look this good. 

“I think the possibility of no cut in September is having an impact [on stocks] at the margin,” Varghese told Opening Bell Daily. “Large-caps have outperformed small-caps the last week, and long-term yields are also higher.”

In other words, even though the Fed may delay cuts — which would normally cool the market — solid earnings and AI enthusiasm are buoying investor confidence, especially for Big Tech names that dominate the indexes.

Wall Street, in effect, is turning increasingly confident that markets and the economy can withstand tighter policy without tipping into a recession. 

Investors seem content to wait, so long as the economy keeps delivering.

To be sure, a meaningful rebound in inflation would change the calculus for the Fed and investors alike. The data don’t show that yet, though that has been the central bank’s base case all year.

For now, optimism is proving sticky for markets and each new record high reinforces it. 

Momentum, it seems, works as its own kind of stimulus. 

Market snapshot

Elsewhere

✅ The House passed the crypto bill. Lawmakers voted to establish the first comprehensive set of rules for the cryptocurrency industry. It also establishes a new category of registered digital assets, a green light for traditional finance. (Axios)

✂️ Fed Governor Waller says he will vote for a rate cut in July. In a speech Thursday evening, the policymaker argued that economic data suggests monetary policy should be less restrictive than current levels, and he said tariffs will not cause inflation beyond a temporary surge. (Full speech)

📈Retail sales rose more than expected in June. It’s the latest data point that shows tariffs haven’t weighed on consumer spending habits. Headline retail sales rose 0.6% in the month, above economists’ forecast for 0.1%. (Yahoo Finance)

📉 Jobless claims declined last week. The number of Americans who newly filed for unemployment dropped to 221,000 in the week to July 12, below expectations for 234,000 claims. While monthly job creation has slowed, unemployment has yet to rise meaningfully. (AP)

Rapid-fire

• Netflix stock has roughly doubled over the last year (Barron’s)

• Lucid stock soared 35% after inking a deal with Uber (Yahoo Finance)

• This foreign stock will compound for years as it sells ‘scarcity’ to global media giants (Best Ideas Club)

• Jittery markets and geopolitics helped Wall Street banks notch a banner quarter of profits (WSJ)

• Homebuilders are slashing prices at the highest rate in 3 years (CNBC)

• Key pieces of crypto legislation moved through Congress Thursday (Barron’s)

• A Florida first-responders pension fund has averaged 14.5% returns since 1974 (Barron’s)

• Nvidia could recoup as much as $15 billion in revenue with H20 sales to China restarting (Yahoo Finance)

• Investors used the market to signal they don’t want Trump to fire Jerome Powell (Opening Bell Daily)

Last thing

About me

📰 I’m Phil Rosen, co-founder and editor-in-chief of Opening Bell Daily. I’ve published books, lived on three continents, and won awards for my journalism, which has appeared in Business Insider, Fortune, Yahoo Finance, Bloomberg and Inc. Magazine.

I write our flagship newsletter to prepare you for each trading day — unpacking markets, economic data and Wall Street with analysis you won’t find anywhere else.

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