After two weeks of slow and jolting market performance, a bounty of positive news calmed investors and lifted stock markets higher last week.

"Investors seem to have come to the realization that while the economy may be in fact slowing, the Federal Reserve is going to take action to address that by cutting interest rates on Sept. 18…with a September rate cut a near certainty, the mood in the market has turned on a dime," reported Paul R. La Monica of Barron's.

Here's what happened:

Inflation continued to move lower. In July, prices rose 2.9 percent year to year, according to the latest Consumer Price Index report. That was an improvement on June's 3.0 percent increase. The price of gasoline, new and used vehicles, and medical care moved lower, while the cost of shelter, motor vehicle insurance and recreation moved higher.

"It was the first time that the annual pace of inflation was below 3 [percent] since spring of 2021. Even though June's inflation reading was slightly better, the pricing data from last month will likely help convince Fed officials to cut interest rates by at least a quarter of a percentage point at their next policy meeting in September," reported Megan Leonhardt of Barron's.

Consumer spending remained strong. Consumer spending is the engine that drives the American economy. After slowing (down 0.2 percent) in June, retail sales accelerated (up 1.0 percent) in July, according to the U.S. Commerce Department's Advance Monthly Sales for Retail and Food Services.

"The retail sales numbers were a blowout versus consensus [expectations], but more importantly it should lay to rest (at least for the moment) all of the 'doom and gloom' that was expressed at the beginning of this month," said a source cited by Rita Nazareth of Bloomberg.

Consumer sentiment brightened. In August, for the first time in five months, consumer sentiment improved, according to the University of Michigan's Consumer Sentiment Survey. Joanne Hsu, the Survey of Consumers Director, wrote:

"Overall, expectations strengthened for both personal finances and the five-year economic outlook, which reached its highest reading in four months, consistent with the fact that election developments can influence future expectations but are unlikely to alter current assessments. Survey responses generally incorporate who, at the moment, consumers expect the next president will be. Some consumers note that if their election expectations do not come to pass, their expected trajectory of the economy would be entirely different. Hence, consumer expectations are subject to change as the presidential campaign comes into greater focus, even as consumers expect that inflation—still their top concern—will continue stabilizing."

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