Last week, the S&P 500 briefly hit record highs, and the Nasdaq drew fresh enthusiasm for AI infrastructure spending. However, Friday reversed some of that optimism, as sluggish retail sales and rising oil prices tied to Strait of Hormuz tensions pointed to a slowing consumer colliding with a potential energy shock.

 

 

Here’s how the major indexes performed.

 

Stock Index Performance

• The S&P 500 edged up 0.36%.
• The Nasdaq 100 climbed 1.09%.
• The Dow Jones Industrial Average slipped 0.56%.

 

 

What’s Driving the Numbers

The consumer signal. Employment cooled sharply in July, coming in well below expectations, while inflation eased to its slowest annual pace in years. At the same time, retail sales posted their sharpest drop in over a year, and consumer sentiment sank well below forecasts. What matters is not that inflation is tamed. It’s that the consumer may be faltering just as energy costs rise.

 

Oil and the Strait of Hormuz. Tanker traffic through the strait slowed to near a standstill after attacks on additional vessels, and U.S.-Iran talks made no progress. Oil prices climbed sharply last week as a result. Since the strait carries a significant share of global oil and gas flows, the impact goes well beyond energy markets. Higher oil prices squeeze consumer spending and complicate the Fed’s next move, all while lifting inflation expectations.

 

Narrow leadership, concentrated risk. Earnings kept the broader market resilient, with S&P 500 revenue growth tracking near its highest pace since late 2021. But equity gains stayed concentrated in AI infrastructure names, where strong results and upbeat spending forecasts drove sharp rallies. The Dow’s decline against gains in the S&P 500 and Nasdaq underscores that narrowness, with the market still favoring AI and growth exposure over more economically sensitive corners of the market.

 

 

 

The Week Ahead

Tuesday’s (August 18th) housing and industrial data, plus Friday’s (August 21st) flash Purchasing Managers’ Index (PMI) report, will show if the recent weakness in jobs and retail numbers was a warning sign or a blip.

 

The Fed’s July meeting minutes, due Wednesday (August 19th), should shed some light on how Fed officials weighed rising oil prices tied to Strait of Hormuz tensions. A dovish tone would favor Treasuries and rate-sensitive stocks.