S&P 500 logs 3rd weekly gain as Fed hold bets firm

Cooling inflation, a softer labor market, and weaker consumer spending have pushed September rate-hike odds to about 30 percent.

The S&P 500 topped 7,800 for the first time, logging a third straight weekly gain on bets the Federal Reserve holds rates steady in September.

"As long as oil prices remain stable around $80 per barrel, the Fed is very likely not to raise rates in September," Jeremy Siegel, senior economist at WisdomTree and professor of finance at the Wharton School, said.

July CPI rose 0.1 percent month over month, slowing the annual rate to 3.4 percent from 3.5 percent in June, with core inflation at 2.5 percent and energy prices down 1.5 percent. The cooling price data followed a July labor report showing nonfarm payrolls fell by 23,000 against a consensus estimate of a 95,000 gain, with revisions to the prior two months cutting a further 103,000 jobs. Retail sales dropped 0.6 percent month over month in July, the largest decline since May 2025.

The data has shifted market pricing toward a September hold, with traders assigning roughly a 30 percent probability to a hike and prediction markets favoring a hold at 68.2 percent. Treasury yields moved lower across the curve, though the 30-year auction cleared at 5.216 percent, the highest borrowing cost since 2001, keeping long-end pressure from fiscal deficits in view.

Technology led the advance, with AI-driven efficiency gains and an earnings season that has defied expectations supporting risk appetite even as the broader economy cooled. The S&P 500's record close on Aug. 7 and its push past 7,800 this week came as investors looked past the weak jobs report, reading it as evidence the Fed can hold policy steady rather than resume hikes. The three-month average monthly jobs gain has fallen to just 20,000, the lowest since February, a level that historically has coincided with a cooling labor market. Stocks initially opened higher Friday as investors interpreted the unexpected weakness in consumer spending as further evidence the central bank will stand pat.

Rates, Oil Anchor the Hold Case

The transmission ran through rates and commodities. Treasury yields broadly moved lower on Aug. 13, with short-end bonds outperforming as traders priced a September hold. West Texas Intermediate crude pulled back more than 3.5 percent at one point Thursday, easing concerns that the earlier oil-price shock from the U.S. attack on Iran would re-accelerate inflation. Goldman Sachs lowered its forecast for the PCE price index after the latest data, now expecting a 0.2 percent monthly rise. The pullback in oil, which had spiked after the U.S. strike on Iran, has been central to the market's reassessment, since energy costs were the main driver of the earlier inflation bump.

The softer data has reframed the Fed's policy choice from whether to resume hikes to whether to hold, a shift that supports rate-sensitive sectors and keeps the soft-landing trade intact. Consumer spending, which accounts for roughly 70 percent of U.S. GDP, is now showing signs of strain, with the July retail sales decline the steepest in more than a year. The next test comes at the September FOMC meeting, where a hold would mark the first extended pause since the central bank's tightening cycle began. Any oil-price rebound above $80, or a resurgence in inflation, could still disrupt that path and force traders to reprice the September decision.

This article is for informational purposes only and does not constitute investment advice.