US stocks closed lower on Friday, August 15, 2026, as weak retail sales and consumer sentiment data overshadowed a strong start to Q2 earnings season. The S&P 500 ($SPX) fell 0.17%, the Dow Jones Industrial Average ($DOWI) slipped 0.20%, and the Nasdaq 100 ($IUXX) dropped 0.13%. E-mini S&P futures (ESU26) declined 0.27%, while September E-mini Nasdaq futures (NQU26) fell 0.16%.
The losses came after the Commerce Department reported that July US retail sales fell 0.6% month-over-month, sharply missing the +0.1% consensus estimate. Excluding autos and gas, sales declined 0.2% versus expectations for a 0.3% gain. The weak report suggested that consumers are pulling back due to high prices, increased gasoline costs, and a lack of confidence in their finances. Some of the decline was attributed to technical factors, including the timing of Amazon Prime Day and World Cup spending that boosted June figures.
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Adding to the gloomy picture, the University of Michigan’s preliminary August consumer sentiment index plunged 4.2 points to 51.0, well below the expected 55.0. The report also showed that consumers expect 1-year inflation at 4.3%, up from 4.2% in July, while 5-10 year inflation expectations held at 3.3% — both far above the Fed’s 2% target.
Rate Hike Odds Drop, But Inflation Worries Persist
The soft economic data slightly reduced the odds of a 25 basis point rate hike at the Federal Reserve’s September 15-16 FOMC meeting to 32%, down from 35% on Thursday and 51% as recently as Tuesday. However, the market’s inflation concerns remained elevated, as the 10-year T-note yield rose 4.0 basis points to 4.682% despite the weak reports. The 10-year breakeven inflation expectation rate also climbed 2.3 basis points to 2.282%.
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Thursday’s 30-year Treasury bond auction carried a yield of 5.216%, the highest since 2001, reflecting investor demands for higher compensation due to the government’s massive budget deficit, persistent inflation, and uncertainty about the Fed’s policy path under Chair Warsh.
Mixed Chip Action, Oil Rises on Hormuz Tensions
US chip stocks were mixed on Friday. The iShares Semiconductor ETF (SOXX) closed slightly lower by 0.1%, with Broadcom (AVGO) and Applied Materials (AMAT) each falling more than 5%. Applied Materials delivered above-consensus guidance but failed to meet elevated AI expectations. In contrast, AMD (AMD) rallied more than 6%, and GlobalFoundries (GFS) gained over 3%. SanDisk (SNDK) surged more than 7% after JPMorgan initiated coverage with an overweight rating.
Oil prices rose 1.42% on reports that two Abu Dhabi oil vessels were attacked by Iran in the Strait of Hormuz. However, prices remained below Tuesday’s two-week high as the Trump administration signaled a shift toward economic pressure rather than fresh military strikes. Treasury Secretary Bessent said the administration would soon announce historic economic measures against Iran, adding to the existing naval blockade. An Iranian military spokesperson dismissed President Trump’s claims of control over the strait as “nothing more than lies.”
Strong Q2 Earnings Provide Underlying Support
Despite Friday’s decline, stocks retained support from a reliable earnings season. The S&P 500 is tracking for Q2 earnings growth of nearly 32%, well above the 23% projection and nearly four times the average growth rate outside the Covid period since late 2013, according to Bloomberg Intelligence. AI infrastructure stocks are expected to contribute nearly 60% of the index’s earnings-per-share growth. Of the 446 S&P 500 companies that have reported, 85% beat estimates.
Overseas markets were mixed, with the Euro Stoxx 50 down 0.09%, China’s Shanghai Composite up 0.01%, and Japan’s Nikkei 225 up 0.59%. European bond yields rose, with the 10-year German bund yield up 7.3 basis points to 3.204% and the UK gilt yield up 8.4 basis points to 5.037%.
In other notable moves, Reddit (RDDT) jumped more than 12% after news it will replace AvalonBay Communities (AVB) in the S&P 500 before the open on August 18, following the AVB-Equity Residential merger. Drone-related stocks rallied after the administration announced a 100% tariff on imported drones, with Unusual Machines (UMAC) surging 24%.
Investors will now turn their attention to the upcoming FOMC meeting and any further developments on the Iran front. The combination of softening consumer data and persistent inflation expectations leaves the Fed in a delicate position, and market participants will be watching for any signals from policymakers in the weeks ahead.
This article is for informational purposes only and does not constitute financial advice. Market conditions are volatile and uncertain; readers should conduct their own research before making investment decisions.
