Market Recap

July 20, 2026

The Markets

Rethinking expectations for inflation and artificial intelligence (AI).

It was a rough week for Wall Street. The Standard & Poor’s 500 Index (S&P 500) fell about 1.5 percent, the Nasdaq Composite dropped 2.8 percent, and the Dow posted its weakest weekly performance since late March, reported Naomi Buchanan of Barron’s. Here’s what happened:

Price increases slowed. The week started with encouraging news. Price pressures eased in June, in part because of lower energy costs, according to the Consumer Price Index report released by the Bureau of Labor Statistics. Inflation was up just 3.5 percent year over year in June, which was significantly lower than May’s 4.2 percent. Investors welcomed the news because lower inflation made it less likely the Federal Reserve will raise rates to bring prices lower, reported Jeff Cox of CNBC.

The U.S.-Iran conflict resumed. Inflation relief was short-lived as hostilities between the United States and Iran ramped up, causing oil prices to rise significantly last week. “The average price of diesel fuel in the U.S. has increased again to more than $5 a gallon, according to the AAA, and the average price of gas is almost $4, returning to their highs before the June memorandum of understanding between the U.S. and Iran,” reported Aram Roston of The Guardian.

Investors reassessed AI. Last week, a Chinese start-up company introduced a new AI open-weight model that was said to outperform even the most advanced models offered by American companies and do the work at a lower cost. That led investors to re-evaluate the outlook for AI. Nate Wolf of Barron’s explained, “Enterprises have increasingly used cheap open-weight models for simple tasks to save on token prices. But if [the Chinese AI model] can mimic advanced U.S. models at a fraction of the cost per token, it begs questions about the sustainability of the entire AI investment boom...”

While many investors have been laser-focused on all things related to AI, other sectors of the market have been performing well. You don’t see it in the performance of the capitalization-weighted S&P 500 Index because technology stocks are very large and have an outsized impact on the Index. However, you can see it in the performance of the equal-weighted S&P 500 Index, which assigns an equal weight to every company. Joel Leon of Bloomberg reported:

“Even as chip stocks dragged the S&P 500 lower on Thursday, a majority of stocks in the benchmark rose, signaling healthy market breadth. The S&P 500 Equal Weighted Index finished at an all-time high on Thursday.” It’s a reminder of the value of diversification.

Last week, major U.S. stock indexes finished lower, and U.S. Treasuries gained value as yields declined. The yield on the 30-year Treasury bond moved lower to end the week at 5.06 percent.

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Sources:

https://www.barrons.com/livecoverage/stock-market-news-today-071726?mod=hp_LEDE_C_1 or go to https://resources.carsongroup.com/hubfs/WMC-Source/2026/07-20-26-Barrons-Dow-Ends-Worst-Week%20-%201.pdf

https://www.bls.gov/opub/ted/2026/consumer-prices-up-4-2-percent-over-the-year-ended-may-2026.htm

https://www.cnbc.com/2026/07/14/consumer-price-index-inflation-report-june-2026.html

https://www.theguardian.com/world/2026/jul/16/us-gas-prices-rise-strait-of-hormuz

https://www.barrons.com/articles/moonshot-ai-alibaba-tech-stocks-189f80f2?mod=hp_LEDE_C_1_B_1 or go to https://resources.carsongroup.com/hubfs/WMC-Source/2026/07-20-26-Barrons-Moonshot-AIs-Latest-Model%20-%205.pdf

https://www.investopedia.com/articles/exchangetradedfunds/08/market-equal-weight.asp or go to https://resources.carsongroup.com/hubfs/WMC-Source/2026/07-20-26-DJIA-S&P-Nasdaq%20-%206.pdf

https://www.bloomberg.com/news/articles/2026-07-17/us-stock-index-futures-slide-as-jitters-grow-on-chip-selloff?srnd=homepage-americas or go to https://resources.carsongroup.com/hubfs/WMC-Source/2026/07-20-26-Bloomberg-US-Stocks-End-Week-Lower-%207.pdf

https://www.barrons.com/market-data?eafs_enabled=false

https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value=202607

https://www.cbsnews.com/texas/news/state-fair-of-texas-2025-numbers-less-visitors/