The stock market strengthened last week after evidence of a slowing economy assuaged fears of further rate hikes, but lingering signs of inflation challenged the view that the Federal Reserve will halt its tightening campaign in August. As a result, investors were left waiting for confirmation in the coming week that the monetary gods can answer their prayers for a soft landing. Employment data, a monthly report from the Fed and a weaker-than-expected reading on GDP growth have all combined recently to bolster the case for what many investors have suspected: U.S. growth is slowing. On Friday, the Commerce Department said GDP grew in the second quarter at an annual rate of just 2.5%, marking a sharp slowdown from the 5.6% pace set in the previous quarter. These days, investors welcome such news as a signal that the central bank can stop worrying about inflation and quit making credit more expensive by raising interest rates. Following the report, the S&P 500 rallied up 1.2% to cap a 3.1% gain for the week. Still, stocks are below their May highs, and the recent optimism is guarded because inflationary data hasn't disappeared. The GDP report showed that core prices, an important gauge of inflation that excludes food and energy-related products, jumped in the quarter to a 2.9% annual rate. That figure, an increase from 2.1% in the first quarter, strays far outside the Fed's stated comfort zone of 2%, and it represents the highest reading since the third quarter of 1994. However, it's important to remember that the core-prices number refers to a period that ended in June, so it's viewed as a lagging indicator rather than a harbinger of things to come. Like the last monthly employment report from the Labor Department, the GDP report contained hints of a worst-case scenario in which the U.S. revisits the stagflation nightmare of the 1970's with the economy slowed and inflation spiraling.