Sales Miss | Tech Earnings Inflated | China Reroutes

Stocks slipped today after hitting all-time highs Thursday.

The S&P 500 still had a strong week. But the economic picture underneath it is getting softer. Consumer spending missed. Sentiment fell again. Treasury yields climbed despite weaker data, which is its own story.

What's driving that gap between soft data and resilient markets is exactly what today is about. Four stories, each one peeling back a different layer of what's really going on beneath the surface right now.

• Consumer sentiment dropped to 51 in August's early reading.
• Reddit (RDDT) is joining the S&P 500 on Monday.
• A tanker was attacked leaving the Persian Gulf today.
• DeepSeek raised model prices fourfold while still undercutting rivals.

Consumers Pulled Back. The Soft Streak Hit Four.

Retail sales fell 0.6% in July. First decline since October. Biggest drop in 14 months. Economists expected a small gain. The miss went beyond cheaper gas prices. Even the core measure that feeds into GDP dropped. That had not happened once this year until now.

Consumer spending is two-thirds of the US economy. When it slows, everything else follows. The economy grew at 1.5% last quarter. Consumer spending added 3.2% to that in Q2. The July pullback raises an obvious question. One month or a trend?

Michigan consumer sentiment dropped to 51 in August's early reading. Shoppers cited persistent prices and the Iran war. Republican sentiment fell sharply from pre-war levels. That group had been holding overall confidence up.

Four soft prints in two weeks. None are alarming on their own. Together they shift the September hold from probable to expected.

The August Test

The August jobs report and the August CPI, both arriving in early September, will either confirm this trend or break it. Two soft months in a row on inflation starts to look like a pattern, not a coincidence.

SIGNAL 1: $121 Billion in Tech Profits That Haven't Actually Been Realized.

Alphabet (GOOGL) and Amazon (AMZN) reported roughly $121 billion in combined gains last quarter. Most of it came from marking up their stakes in Anthropic and SpaceX (SPCX). That made up 71% of Alphabet's quarterly profit and 66% of Amazon's.

These gains are real under accounting rules. But they have not been sold. They depend on those company valuations staying high. Every time SpaceX stock goes up, Alphabet's stake on paper goes up with it.

S&P 500 earnings are up 31% year-over-year. Remove Alphabet and Amazon and that number drops to 24%. The index trades at roughly 27 times trailing earnings. The historical average is closer to 16 times. A meaningful piece of this year's earnings story is a paper gain on companies not yet sold.

The Mark Goes Both Ways

If Anthropic's valuation falls during or before its IPO, those gains reverse. Both companies take the hit at the same time.

SIGNAL 2: Copper Is Now Pricing In Tariff Risk on Every Trade.

Copper hit a record near $6.90 per pound last week. The gap between US and London copper futures has widened. Analysts estimated that gap implies roughly a 15% chance of a 15% tariff by early 2027. That rises to 37% odds of a 30% tariff by 2028.

The US imported more than 200,000 metric tons of copper in July. Highest monthly total in 12 years. Buyers are stocking up ahead of an expected tariff decision. Traders are simultaneously shipping copper to China to ease tightness there. Both pulls are hitting the same supply pool.

Copper runs through data centers, power grids, and defense systems. Policymakers have called it a national security material. The tariff investigation reflects that. Until a decision lands, the futures premium is how traders are expressing their guess.

The Decision Is the Catalyst

Any specific Commerce Department Section 232 decision in the next 60 days confirms the tariff-probability framework at the specific policy-resolution layer. Any specific COMEX premium above the 20%-implied-tariff level in the next 30 days converts the framework from tariff-probability pricing to specific sustained-supply-shift test."

SIGNAL 3: China Is Moving $19 to $26 Billion in Tariffs Through 40 Countries.

A White House report said more than 40 countries are being used to route Chinese exports around US tariffs. Vietnam, Malaysia, Canada, Mexico, and the EU are on the list. The estimated revenue gap runs $19 to $26 billion annually. The report proposed AI-powered cargo scanning and tighter origin rules.

Separately, China's car exports have exploded. Under 600,000 vehicles shipped in 2019. Forecasts for this year hit 10 million. Car carrier charter rates are up 65%. Ships are booked years ahead.

Both stories share a root cause. The stated tariff rate on Chinese goods and the effective rate are meaningfully different. Enforcement is the gap between them.

Enforcement Is the Test

Any named country facing a specific transshipment enforcement action in the next 60 days converts this from a White House report into active trade policy with real supply chain consequences.

The August CPI and August jobs report land in early September. Both will either confirm the soft data streak or break it. A copper tariff decision from the Commerce Department is the single catalyst the market has been waiting on. Any Alphabet or Amazon markdown on their AI stakes in Q3 earnings turns this quarter's paper gains into a headwind. A named transshipment enforcement action tells you how serious the tariff crackdown actually is.

Retail sales fell for the first time in nine months. Big Tech's earnings included $121 billion in gains that have not been realized. Copper is pricing tariff probability into every contract. China shipped 10 million cars this year while routing tens of billions in tariffs through third countries. The consumer data, the earnings composition, and the commodity squeeze all converge on the same question. Every framework the letter has tracked this week points to the August CPI and jobs data landing in early September. The gap between what Big Tech is marking its AI stakes at and what those stakes are actually worth sits alongside the gap between stated Chinese tariff rates and effective ones. Both gaps widen or narrow in the specific August-data window.

The consumer pulled back. Big Tech's profits included $121 billion in unrealized gains. Copper is pricing tariff risk. China is exporting at record scale while routing around tariffs.

The August CPI, a copper tariff decision, and any transshipment enforcement action are the three signals that determine whether today's soft trend holds, breaks, or gets a policy response before September.