For the week ending July 25, 2025.

If you only looked at the headlines about manufacturing and housing last week, you would have thought the economy was in trouble. But that was only half the story. While those sectors showed clear signs of slowing, the much larger service industry was expanding and the job market remained firm. This tug-of-war between the goods-producing and service-providing sides of the economy was the main event for investors, who ultimately decided to bet on the strength of services to carry the market higher.

U.S. Stock Market

U.S. stocks moved up for the week, with the S&P 500 gaining 1.52%. Investors seemed to fix their attention on the good news, particularly the Services PMI which, at 55.2, showed healthy expansion. The strong job market numbers, with Initial Jobless Claims falling to 217,000, also provided a dose of confidence. This focus on the positive overshadowed more concerning signals, like the U.S. Leading Index falling by 0.3% and the Richmond Manufacturing Index dropping to a dismal -20. But the optimism wasn't spread evenly. While large and mid-sized companies saw their stocks move higher, small-cap growth stocks were nearly flat. The sharp 9.3% drop in Durable Goods Orders may have made investors more cautious about smaller, domestic-focused companies that are more exposed to cuts in business spending.

U.S. Market Sectors

Healthcare stocks led the pack last week, climbing 3.52%. The real surprise came from Industrial stocks, which rose 2.33%. This happened even as the national Manufacturing PMI report fell to 49.5, officially signaling a contraction for the factory sector. This disconnect might mean investors think the largest industrial companies, with their global sales, are protected from a purely domestic U.S. slump. It could also mean they are betting the worst of the manufacturing downturn is already over. Real Estate stocks also advanced 2.03%. Even with Existing Home Sales falling to a 3.93 million annual rate, a tiny 0.8% bump in weekly mortgage applications may have been enough to give investors hope that the housing market is finding a bottom.

International Markets

Stocks in the Pacific region climbed 3.58%, and European stocks gained 2.10%. This was helped by the U.S. Dollar falling 0.84% for the week. When the dollar weakens, it boosts the returns on foreign investments when converted back to dollars. The signs of a manufacturing slowdown in the U.S. may have also prompted investors to look for better growth stories in other parts of a world.

Bonds, Currencies, and Commodities

The bond market was fairly calm. The U.S. Aggregate Bond Index saw a small gain of 0.35%, but at the same time, riskier high-yield bonds also rose. Gold lost 0.32% for the week. When investors are more interested in chasing stock market gains fueled by good news on jobs and services, a non-yielding asset like gold becomes less attractive. The broader commodities index fell 1.28%, reflecting perceived weakness in the industrial indicators. The big drop in Durable Goods Orders and the contraction in manufacturing both point to less demand for raw materials like industrial metals in the months ahead.