The ongoing debate between hard data—actual datapoints grounded in statistics and physical output—and soft data—sentiment indicators measuring the “feelings” of economic stakeholders—remains a key undercurrent for many traders and economists. This week, sentiment data continues to trend weak, though the market appears largely desensitized to this softness for now.

Last week, the Cleveland Fed Inflation Expectations benchmark ticked higher, while both the Empire State and Philadelphia Fed Manufacturing Indexes—which measure purchasing manager sentiment across a range of industrial activity—remained in contraction territory. Meanwhile, the University of Michigan Consumer Sentiment Index dropped to its lowest level since June 2022, marking the second-lowest reading on record.

Yet despite these pessimistic signals, markets continued to grind higher, seemingly buoyed by optimism surrounding potential tariff resolutions and a flurry of deal-making activity led by the Trump administration in the Middle East.

As for hard data, results were mixed but leaned slightly favorable for those advocating Federal Reserve rate cuts. The Producer Price Index (PPI) for Final Demand Goods—a closely watched metric—came in significantly below expectations, with headline PPI falling -0.5% month-over-month versus a projected +0.1%. Energy prices were the primary driver of the deflationary surprise, as oil continues its downward trend amid concerns about global demand and a growing supply glut.

Housing starts remained relatively robust despite elevated home prices, suggesting resilience in construction activity. Initial jobless claims showed no signs of major deterioration in the labor market.

Looking ahead, next week’s economic calendar is relatively light. Traders will likely shift their attention to earnings reports from major retail and technology companies, which may offer the market a chance to digest recent price action and potentially discover a new narrative to support continued bullish sentiment.

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