U.S. stock markets continued their upward momentum this week, with major indexes hitting record highs following a July inflation report that came in lower than some analysts anticipated.

The report showed that while prices for certain goods affected by tariffs rose, other categories — such as appliances and apparel — experienced slower increases. Service-related costs, including airfare and auto insurance, were among the largest contributors to last month’s inflation.

Economists note that while tariffs can eventually push prices higher, current data suggest immediate inflationary pressures are limited. Some companies have absorbed part of the costs, while others have adjusted supply strategies, including stockpiling goods or delaying price changes.

Market analysts say investors are betting that the Federal Reserve may lower interest rates at its next meeting, potentially providing further support to equities. Rate cuts generally reduce borrowing costs for businesses, which can boost corporate profitability.

Stock performance has been largely driven by gains in a small number of major technology companies, with seven firms accounting for a significant share of the S&P 500’s growth this year. While this concentration has boosted market averages, it also increases the risk that a downturn in a few companies could impact overall performance.

Small businesses, according to survey data from the National Federation of Independent Businesses, remain more exposed to cost pressures from tariffs and have reported tighter margins compared to larger firms.

Upcoming data on wholesale inflation, scheduled for release Wednesday, could provide additional insight into price trends and influence both market sentiment and Federal Reserve decision-making in the months ahead.

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