Markets Update - 8/12/26

Quick Summary

• US equity indices opened Wednesday’s session higher as they reacted to a mostly in-line CPI report which saw a modest drop in Fed rate hike expectations and Treasury yields.
• The indices would trade in relatively narrow ranges led by a push higher from the small-cap Russell 2000 index +0.6%. The S&P 500 rose 0.3%, the Nasdaq Composite +0.5%, and the Dow Jones Industrial Average finished just in the red.
• The inflation report was the main macro catalyst. Headline CPI increased +0.1% and core CPI rose +0.2%, both matching expectations, while the year-over-year readings eased slightly from June, with the core y/y slowing to the least since March 2021. That helped reduce immediate concerns about another Fed hike, with the CME FedWatch tool showing the odds of a September hold rising to roughly 60%.
• With CPI not changing the broader setup, attention shifted back toward AI and semiconductor-related names. Technology shares boosted the market as the PHLX Semiconductor Index jumped +2.5% after strong reactions to earnings from CoreWeave and Super Micro Computer. CoreWeave shares jumped 18% after the cloud infrastructure mainstay’s second-quarter adjusted operating income margin of 5% exceeded expectations, while its revenue doubled from a year ago. Super Micro Computer added 17% following a strong earnings and revenue forecast for the first quarter.
• But it wasn’t all an AI story with eight of eleven sectors finishing higher and the equal-weighted S&P 500 at another all-time high. Also helping the broader market, unlike most of the past week, oil and the US-Iran backdrop were not major drivers. WTI crude finished lower at around $83, with few meaningful new developments around the Strait of Hormuz.
• The market now turns to Thursday’s PPI report, with investors still balancing the softer jobs backdrop, calmer CPI data, elevated oil prices, and Fed hike odds that remain lower but certainly not eliminated.

But it wasn’t all an AI story with eight of eleven sectors finishing higher and the equal-weighted S&P 500 at another all-time high.

Also helping the broader market, unlike most of the past week, oil and the US-Iran backdrop were not major drivers. WTI crude finished lower at around $83, with few meaningful new developments around the Strait of Hormuz.

The market now turns to Thursday’s PPI report, with investors still balancing the softer jobs backdrop, calmer CPI data, elevated oil prices, and Fed hike odds that remain lower but certainly not eliminated.

US equity indices opened Wednesday’s session higher led by the Nasdaq and would meander through the session ending a little below where they started ex-RUT which rallied most of the day to finish +0.6%.

Nasdaq +0.5%, SPX +0.3%, DJIA slightly negative.

Market commentary

On the CPI print:

“The big surprise with a report that had no surprises is that a situation where inflation isn’t reaccelerating, coupled with the most recent, weak jobs report gives the Fed more time to wait,” said Chris Zaccarelli at Northlight Asset Management. Typically, the market would be buoyed by the thought of rate cuts, but in a world where many are expecting rate hikes, anything that can delay – or squash the need for – rate hikes will be viewed positively, he added.

“Contained core inflation adds to the encouraging signs in last month’s release of a moderation in underlying inflation, helping strengthen the case for a September hold,” said Lindsay Rosner at Goldman Sachs Asset Management.

“In-line inflation will keep the ‘no need to hike rates’ narrative that took hold after last week’s jobs report intact,” said Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management. “There will be another round of inflation data before the September FOMC meeting, so the storyline could still change. But unless those numbers tell a much different story, the Fed will likely still be in a position to leave rates unchanged next month.”

“Wednesday’s CPI was in-line with expectations, which is welcome news, but it is becoming clear that the CPI data is moving in lockstep with oil prices, and the Federal Reserve has no control over the Strait of Hormuz, and this paints a long and unknown road for inflation to get back towards the 2% target,” said Skyler Weinand at Regan Capital.

“July’s CPI report was modest enough to lower chances of a September rate hike, but not low enough to write it off completely. With core CPI matching its five-year low from February, and July payrolls declining, it’s hard to make an urgent case to hike.” — Anna Wong and Troy Durie

Seema Shah, chief global strategist at Principal Asset Management:

“Today’s CPI print, alongside July’s drop in payrolls, should lower expectations for a September hike, but does not put it completely to bed. Unless August’s inflation print also shows subdued price pressures, a September hike is a clear risk. With the Strait of Hormuz still shut, upside inflation risks will remain top of mind for the foreseeable future. We expect no change in rates this year but cannot dismiss the elevated risk of a hike later in the year if energy disruptions are sustained, while the threat of an AI-induced rise in inflation also cannot be ignored.”

“I think the combination of CPI and payroll takes September off the table,” Sage Advisory’s Rob Williams said. “The markets are gravitating towards December because you need a little space and have a couple more prints of both employment and CPI.”

In today’s Markets Update:

A deeper look at Wednesday’s stock and sector breakdown, including the return of Technology leadership with renewed AI and semiconductor strength, mixed megacap participation, and the continued relative strength in small caps and the equal- weighted SPX.

A look at after-hours movers and selected corporate headlines from CNBC and Bloomberg, including AI infrastructure, software, restaurants, and selected earnings reactions.

Updated technical charts across the SPX, Nasdaq, Russell 2000, and equal-weighted SPX.

A review of market breadth and participation, including large individual winners and losers, the Russell 2000’s new high, and the equal-weighted SPX’s continued relative strength.

A look at the rates and Fed backdrop, including Treasury yields, updated Fed hike expectations, the CPI reaction, and CPI-related analysis from Morgan Stanley’s Gapen and JPMorgan.

A look at volatility and market structure, including the declines in VIX, VVIX, and 1-day VIX.

A review of cross-asset trends, including WTI crude, crude inventories, the dollar, gold, copper, natural gas, and bitcoin.

Yardeni on the S&P outlook and earnings, Citadel’s Rubner on flows and the market setup, Daily Chartbook/S&P on institutional risk appetite, and BoA on hedge-fund buying.

Stock and sector breakdown

With the highly anticipated CPI report offering little reason to alter the broader market outlook, attention quickly shifted back toward individual stocks and sectors. That was particularly evident in the information technology sector (+1.1%), which led the market as enthusiasm returned to semiconductor and AI-related names. The PHLX Semiconductor Index jumped 2.5%, with strong post-earnings reactions to AI infrastructure plays.

The defensive utilities sector (+1.1%) tied the information technology sector for the day’s top performance.

A wrap-up on the CPI clearing event, the AI trade, breadth, yields, and the near-term market setup.

A look ahead to Thursday’s calendar, including US economic data, Fed speakers, Treasury auctions, SPX earnings, and ex-US highlights.

economic posts.

With the highly anticipated CPI report offering little reason to alter the broader market outlook, attention quickly shifted back toward individual stocks and sectors. That was particularly evident in the information technology sector (+1.1%), which led the market as enthusiasm returned to semiconductor and AI-related names. The PHLX Semiconductor Index jumped 2.5%, with strong post-earnings reactions in CoreWeave (CRWV 107.73, +17.41, +19.28%), Super Micro Computer (SMCI 37.55, +5.95, +18.83%), and Lumentum (LITE 932.47, +111.88, +13.63%) reinforcing enthusiasm surrounding continued AI infrastructure spending.

[Note: % changes above may differ from chart as chart uses futures.] The number of large SPX winners (up over 3%) improved to ~40 from ~20 Tuesday (but under the ~50 Monday), while large losers (down over 3%) were little changed at 17 from 14.

Other corporate news

• Jack in the Box — The fast food chain gained more than 1% on better-than-expected earnings for the company’s fiscal third quarter. Jack in the Box earned 96 cents per share, topping a FactSet estimate of 88 cents per share.
• Red Robin Gourmet Burgers — The restaurant chain posted second-quarter results that beat analyst expectations, sending shares higher by nearly 7%.
• Coinbase Global — The cryptocurrency exchange beat both top- and bottom-line second-quarter estimates, with transaction revenue reaching $1.5 billion versus consensus of $1.4 billion.
• StubHub — The secondary marketplace for event tickets lost more than 15%. Adjusted gross margin in the second quarter came in at 82.2%, while the StreetAccount consensus called for 84.3%. The company also reaffirmed its full-year outlook for adjusted EBITDA.
• Cisco Systems — Shares fell 3%. Adjusted gross margin for the fourth quarter came in at 64%, down from 65.8% a year ago.

Outside the information technology sector, SpaceX (SPCX 146.22, +12.93, +9.70%) was another momentum standout, surging after introducing Grok 4.6.

The real estate sector (+1.1%) matched information technology for the day’s best performance amid some modest easing in Treasury yields.

Participation elsewhere was more mixed, however, with strength in semiconductor and AI-related names contrasting with weakness across several non-semiconductor mega-cap stocks. The consumer discretionary sector (-1.4%) finished at the bottom of the sector standings as Amazon (AMZN 267.28, -4.99, -1.83%) and Tesla (TSLA 327.51, -5.30, -1.59%) moved lower. Large apparel names also faced pressure, while homebuilders and related construction names struggled even as yields eased. The iShares U.S. Home Construction ETF fell 2.3%.

The communication services sector (-0.9%) was another laggard, with Meta Platforms (META 578.85, -20.27, -3.38%) among the weakest “Magnificent Seven” components. Charter Comm (CHTR 150.22, -7.47, -4.74%) also finished sharply lower despite little in the way of company- specific news.

The energy sector (+0.2%) finished with a modest gain.

[Note: % changes above may differ from chart as chart uses futures.]

The number of large SPX winners (up over 3%) improved to ~40 from ~20 Tuesday (but under the ~50 Monday), while large losers (down over 3%) were little changed at 17 from 14.

[chart from finviz.com] Biggest after-hours movers from CNBC:

Jack in the Box — The fast food chain gained more than 1% on better-than-expected earnings for the company’s fiscal third quarter. Jack in the Box earned 96 cents per share, topping a FactSet estimate of 88 cents per share.

Red Robin Gourmet Burgers — The restaurant chain posted second-quarter results that beat analyst expectations, sending shares higher by nearly 2%. Red Robin earned 12 cents per share, excluding certain items, on revenue of $277.6 million. Analysts expected the company to break even on revenue of $265.8 million.

Coherent — The photonics company lost almost 3% in extended trading after adjusted gross margin for the fourth quarter was roughly in line with estimates. Non-GAAP gross margin was 40.2%, while the StreetAccount consensus estimate anticipated 40%. Guidance for first quarter earnings and revenue surpassed analysts’ expectations.

Cerebras Systems – Shares of the artificial intelligence chip manufacturer tumbled 14%. Revenue in the second quarter came in at $180 million, versus the $194 million LSEG consensus estimate.

StubHub – The secondary marketplace for event tickets lost more than 15%. Adjusted gross margin in the second quarter came in at 82.2%, while the StreetAccount consensus called for 84.3%. The company also reaffirmed its full-year outlook for adjusted EBITDA.

Cisco Systems – Shares fell 3%. Adjusted gross margin for the fourth quarter only narrowly beat estimates, coming in at 66.3% versus the StreetAccount consensus call for 66%.

Other corporate news

Super Micro Computer Inc. gave a revenue forecast for the current quarter that topped analysts’ estimates, a sign the booming artificial-intelligence market continues to bolster sales of the company’s servers.

CoreWeave Inc., a provider of computing that powers AI systems, topped analysts’ estimates for second-quarter sales after signing up more customers.

Nebius Group NV reported a 514% jump in second-quarter sales for its cloud business following strong demand for AI computing power.

Cava Group Inc.’s sales rose faster than expected as the restaurant chain’s salmon and pita chips drew in diners, showing that Americans are willing to spend when cost and taste converge.

Wendy’s Co. jumped after the Financial Times reported that Nelson Peltz’s Trian Fund Management is preparing a bid to take the struggling fast-food chain private

Note on all charts the colored lines are moving averages (the average price over the lookback period (days on the daily charts, weeks on the weekly charts)): 20 = green 50 = purple 100 = blue 200 = brown

Note on all charts the colored lines are moving averages (the average price over the lookback period (days on the daily charts, weeks on the weekly charts)): 20 = green, 50 = purple, 100 = blue, 200 = brown. Exception is monthly charts where blue is 10-month moving average and brown is 20-month moving average.

MACD = Moving average convergence/divergence line, a measure of momentum that compares longer term and shorter term momentum to gauge if a move is strengthening or weakening. This is probably my favorite individual indicator (it’s also the favorite of Katie Stockton, a very fine technician).

RSI = Relative Strength Index (basically what it sounds like) = measures the strength of the move comparing gains to losses over the given lookback window (I use the standard 14 periods).

Exception is monthly charts where blue is 10-month moving average and brown is 20-month moving average.

MACD = Moving average convergence/divergence line, a measure of momentum that compares longer term and shorter term momentum to gauge if a move is strengthening or weakening. This is probably my favorite individual indicator (it’s also the favorite of Katie Stockton, a very fine technician).

RSI = Relative Strength Index (basically what it sounds like) = measures the strength of the move comparing gains to losses over the given lookback window (I use the standard 14 periods).

Turning to the charts, the SPX remains just a little below Friday’s all- time high. Otherwise chart looks solid (perhaps a bull flag?), so as I said Monday “some momentum behind it.”

Nasdaq similar to the SPX.

The Russell 2000 (RUT) though made a new all-time high.

The equal-weighted SPX also made another all-time high. Technicals also strongest here.

Yields were mixed with most maturities seeing some softening but the 30-year a small increase Wednesday

Two-year Treasury yields continued their chop back and forth over the past week ending at 4.20%. They are down 23 basis points from the peak close July 23rd, which was the highest since February of last year but remain over the nearly three year downtrend line that they’ve been over for the most part for the past three weeks.

They are approximately 60 basis points above the Effective Fed Funds rate (red line), continuing to call for rate hikes. These should see the most movement tomorrow following the PPI print.

In that regard, Fed rate hike bets similarly didn’t see a big move despite the moderate CPI print. The largest change was September and October hike probabilities falling to 40 and 55% respectively. But December remains at 75% and there was very little change to 2027 rate hike pricing.

Yields were mixed with most maturities seeing some softening but the 30-year a small increase Wednesday:

Two-year Treasury yields continued their chop back and forth over the past week ending at 4.20%. They are down 23 basis points from the peak close July 23rd, which was the highest since February of last year but remain over the nearly three year downtrend line that they’ve been over for the most part for the past month.

They are ~54 basis points above the Effective Fed Funds rate (red line), continuing to call for rate hikes.

10-year yields eased a little to 4.69% but remain just under the highest close since January 2025.

30-year yields though edged higher to 5.25%, just below the highest level since 2007. We get a 30-year auction tomorrow.

In that regard, Fed rate hike bets similarly didn’t see a big move despite the moderate CPI print. The largest change was September and October hike probabilities falling to 40 and 55% respectively. But December remains at 75% and there was very little change to 2027 rate hike pricing.

10-year yields eased a little to 4.69% but remain just under the highest close since January 2025.

30-year yields though edged higher to 5.25%, just below the highest level since 2007. We get a 30-year auction tomorrow.

VIX fell to 14.6, the lowest close since early January.

The indicator remains at the bottom of its “normal” range post-GFC, consistent with ~0.92% average daily moves in the SPX over the next 30 days.

VIX fell to 14.6, the lowest close since early January.

The VVIX (VIX of the VIX) again though not confirming at 88.5, although the bottom of its range this week.

The current level is consistent with “moderate” daily moves in the VIX over the next 30 days (historically, normal is 80-100, but we’ve been above 90 most of the time since July ’24). Above 100 is the level flagged by Charlie McElligott as indicating higher stress.

And the 1-day VIX fell to 9.

The indicator remains at the bottom of its “normal” range post-GFC, consistent with ~0.92% average daily moves in the SPX over the next 30 days.

The VVIX (VIX of the VIX) again though not confirming at 88.5, although the bottom of its range this week.

The current level is consistent with “moderate” daily moves in the VIX over the next 30 days (historically, normal is 80-100, but we’ve been above 90 most of the time since July ‘24). Above 100 is the level flagged by Charlie McElligott as indicating higher stress.

And the 1-day VIX fell to 9.5, one of the lowest closes of the year consistent with a move of just 0.59% in the SPX next session.

The DXY dollar index (which is fixed weighted with a heavy (57%) weighting vs the euro and yen) continues to push lower with the index now back to where it was pre-Liberation Day. The Fed rate cut expectations over the past week ticked up slightly after the weak jobs print and in-line CPI, helping the dollar weaken.

WTI edged back -0.8% (still up 11% over the past week).

WTI edged back -0.8% (still up 11% over the past week).

EIA: "reduced oil shipments through the Strait of Hormuz [will] lower global oil inventories further in the coming months and keep crude oil prices near levels from the first week of August."

"We now forecast the Brent crude oil spot price to average around $85 per barrel (b) in the third quarter of 2026 (3Q26) [WTI $81/b].

"As inventories rebuild, with most production expected to recover by early 2027, we expect the Brent spot price to gradually fall to an average of $69/b in 2027 [WTI $65/b]."

After a mild rise of 2.5mb in the prior week off the lowest levels since 2018, US commercial crude inventories jumped 17.4mb the week through August 7th, the third most in the past decade and vs expectations for a drop of 0.6mb.

That took them from -3.9% below the prior year and -6% below the 5-year average for this time of year to -0.5% and -2% respectively.

The increase was driven by a 1.77mb/day swing in net imports driven by a 1.1mb/d jump in imports to 7.34mb/d, the most since November 2024 in turn driven by imports from Venezuela said Matt Smith, an analyst with Kpler. Exports meanwhile fell by 0.63mb/d to 3.06mb/d, the least since last November. Diesel diesel exports though climbed to a record according to Smith.

The DXY dollar index (which is fixed weighted with a heavy (57%) weighting vs the euro) rebounded to the highest close in a week.

The daily MACD as noted two weeks ago flipped to quite negative while the RSI was under (now back over). As I said then, “clearly consolidating, but too early to call it a downtrend. But if it resumes its decline, that might be enough for me.”

Gold futures (/GC) again couldn’t get through the key 200-DMA. Still the highest close in over two months. As noted last Thursday “still has a good technical setup with positive daily MACD and RSI,” with the latter now the strongest since January.

US copper futures (/HG) modestly lower. It continues though to have “supportive technicals,” although they’re starting to soften some.

US natural gas futures (/NG) pushed to the highest close in two weeks just over the 20-DMA, but lots and lots of resistance above. The daily MACD though as mentioned Monday has flipped to more bullish while the RSI is not far from 50.

Bitcoin futures continue to trade in their range over the past month+, also at the same levels they were at in early June. As I mentioned over a month ago, “the daily technicals continue to look better than the price action, so maybe there’s a chance?” That never translated into more than a modest move higher, and now they are starting to turn more negative. I would though still probably be a buyer if they saw a strong move above $67,500.

Other research

Small business optimism

NFIB’s small business sentiment index jumped 2.4 points to 99.8 in July, the highest level since August 2025, with 8 of the index’s 10 components improving from June.

Some notables:

- a net 20% of owners plan to create new jobs over the next three months, up 9 points from June, to the highest level since October 2022, 9 points above the historical average.

- 25% of small business owners plan to make capital outlays in the next six months, up 5 points from June and the highest reading since December 2024.

MarketWatch/Yardeni: Yardeni Research has taken its year-end S&P 500 price target up to 8,400 from 8,250.

The firm boosted its S&P 500 earnings estimates to $375 per share for this year, from $330, and $415 next year, from $375.

"Our key assumption is that the economy will remain resilient, and so will earnings. That's been our mantra since we first started writing about the Roaring 2020s during the summer of 2020. We could certainly have another recession scare along the way, as we did in early 2025 and 2026," said the firm.

"We are maintaining our 10,000 target for the end of 2029, though we are likely to raise it if the Roaring 2020s continue to go our way."

"We're leaving our May 10 call of the subjective probability of a continuation of the Roaring 2020s at 80%, up from 60% before merging it with our meltdown scenario (previously at 20%). We think any pullback (and even a meltdown) will be a buying opportunity and won't trigger a recession or bear market similar to the 1999-2000 Tech Bubble and Tech Wreck. We are sticking with 20% odds of a recession that causes a bear market."

"Joe and I have never seen anything like this."

EIA: "Global oil markets remain tight given ongoing Strait of Hormuz disruptions, with elevated prices expected to persist through the third quarter."

"We expect Brent to average $87/b in 3Q26 [WTI $83/b] before moderating as supply normalizes in late 2026."

"U.S. crude production is forecast to grow modestly through 2027, with Permian and Gulf of Mexico leading the expansion."

One of the nice things about the @dailychartbook daily email is all the links to things you might have missed. One was S&P's Risk Appetite Index, which is their survey of 300 institutional investors managing funds in excess of $3.5T. It was taken Aug 1-7.

That rose to the "most bullish level since January 2026" (chart).

"The foundation for the improvement in investor sentiment lies with better-than-expected earnings from the latest reporting season, which has encouraged investors to revise up their expectations for next season to ... the second-highest ever recorded of the survey, building on May's survey high," (chart).

"Equity fundamentals are consequently now providing the biggest perceived boost to equities since December 2021, with shareholder returns providing additional support."

Citadel's Rubner:

This remains a difficult market. The macro risks are real, and the path will not be linear. But after working through [my] checklist, one thing stands out: The balance of flows is shifting in a more constructive direction.

Earnings are beating while multiples compress. The leverage reset has largely run its course, creating room for systematic strategies to add exposure as volatility falls. Retail is buying again. Passive demand remains relentless. More than $1 trillion of corporate buyback authorizations are coming back into an open window. Breadth is improving, correlation is near record lows, and investors are increasingly willing to pay for upside.

Not every signal is bullish, and none of them determines the market on its own. What matters is that more of them are now reinforcing one another.

Lower volatility creates capacity for systematic strategies to add exposure. Additional buying can strengthen trends. Stronger trends can draw investors back into the market. Broader participation can create another source of demand.

That is how a market that spent much of the year absorbing selling pressure can begin to rebuild buying capacity.

For August, that may be the underappreciated risk. The market does not need everyone to become bullish. It needs enough incremental buyers to keep showing up as prices move higher.

September may be a different conversation. Seasonality gets harder, positioning may be fuller, and if August turns into a chase, some of today's buying capacity will already have been deployed.

For now, the buyer checklist keeps getting longer.

Goldman’s Panic Index (measure of pressure for downside protection) remained near pre-2024 lows, signaling little hedging demand despite elevated valuations.

BofA says their hedge fund clients continued piling back into the market last week:

"Buying was driven by hedge fund clients, who had their biggest buying week in our data history since '08 (9th biggest/99th percentile week when normalized by S&P 500 mkt. cap), following a near-record buying week the week prior."

"Institutional and retail clients were net sellers (both for the 2nd straight week). The Institutional selling comes after hitting a record for 4-week inflows in late July."

MS Gapen did a pretty good job on his CPI call and looks for more disinflation ahead:

On the put-call skew side, Goldman also notes that Monday and Tuesday of last week “brought a historic flattening in Put-Call Skew. The cumulative 2d change in near-term SPX Normalized Put-Call Skew was the second largest in magnitude that we’ve seen in the last 20 years.”

Demand for downside puts (Ratio SPX 1m 25 Delta Put BVOL to SPX 1m 50 Delta BVOL) has plunged versus calls, suggesting the protective demand has been largely unwound.

MS (Gapen) on CPI:

After June's downside surprise, we expect July core CPI to normalize rather than reaccelerate. We forecast core CPI at 0.24% m/m (2.5% y/y) and headline CPI at 0.10% m/m (3.4% y/y), with the rebound driven primarily by core services returning toward their underlying trend and a pickup in core goods. Headline inflation should remain softer than core, reflecting continued weakness in energy prices.

We see three key themes in next week's report:

-First, lower oil prices should begin exerting downward pressure on core inflation through airfares, although the timing and magnitude of the pass-through remain uncertain.

-Second, while tariff-related pressures continue to fade, core goods inflation is likely to accelerate temporarily in July. We expect some firming in electronics prices following Apple's late-June price increases for PCs and tablets. Even so, we estimate that any chip-related inflationary impulse will have only a modest effect on aggregate CPI, given the small weight of the affected categories.

Third, June shelter normalization appears to reflect a genuine easing in rent inflation rather than statistical noise, reinforcing our view that shelter inflation should continue to decelerate gradually over the coming months.

Taken together, these dynamics point to an inflation backdrop that remains broadly consistent with ongoing disinflation over the medium term, even as monthly core readings move back toward the 0.2% m/m range after June's unusually soft print.

Schwab Trading Activity Index (STAX)

Schwab investors continued to buy in July despite a choppy market backdrop, lifting the Schwab Trading Activity Index (STAX) for a third straight month to its highest level since January 2022.

“Options were another area of strong activity in July, with trading again skewing toward put selling, particularly in technology stocks and the chip and memory industries.”

“The strongest buying interest came from two clear groups: Gen X clients, who continued to lead net buying by age cohort, and self-directed traders, whose bullish activity accelerated during the month. Bullish activity and sentiment among traders outpaced investors by the widest margin since March.”

And JPM a pretty good job with their scenario analysis (Core was +0.22%, and we just got the bottom of the +0.25% to +0.75% prediction):

Wrap-up

As I wrote Sunday:

So will the now “on again” AI trade continue? The evidence is there, with momentum building, expected earnings continuing to ratchet higher, and positioning not yet “extreme” according to DB.

And the overall setup remains favorable as well, with systematics biased to buy according to BofA, discretionary and hedge fund positioning light according to DB and Goldman, buybacks almost back to full strength, retail re-engaging, the economy remaining resilient even if pay growth continues to ease — something we’ll need to keep an eye on — and earnings growth spectacular.

Sentiment is not really a tailwind but not yet a headwind — “it takes bulls to have a bull market” — seasonality is not great, and rates are pushing up toward levels that may cause some indigestion, but none of those are yet at levels that I would consider “red flags.”

And as discussed at the top, it appears from the most recent indications that President Trump has no appetite for dialing things up militarily at this point, which means it’s likely things will drag on with little change through the midterms unless or until Iran decides it wants to reopen the Strait.

I had said last Sunday I was becoming more constructive, and that continues into the coming week.

And as I said Monday:

the good news is we certainly didn’t break down, but we also certainly didn’t extend as I thought might happen to start the week. The Iran conflict appearing to become even more never-ending, which pushed up oil prices and Treasury yields, certainly didn’t help. And perhaps traders are unwilling to step in front of Wednesday’s CPI report.

If that’s the case, we could very well get another session like today, particularly with no economic or earnings catalysts to really propel things in either direction ahead of that.

And as noted last night we got our “clearing event” this morning, and while we didn’t see quite the positive response I was expecting, we did see a gain and, perhaps more importantly, expanding breadth as the resurgence of the AI-trade didn’t suck all the oxygen out of the room. Perhaps it’s the start of a trend? It will take some time to know, but some softening in yields would be helpful.

Otherwise we start to move into a less catalyst-heavy part of the calendar (PPI is unlikely to move the needle much, although I guess retail sales could if it comes in very weak). So if earnings announcements continue to come in overall very solid (we get Applied Materials tomorrow), perhaps that, plus the other items mentioned this weekend, can continue to push us higher.

The Day Ahead

US economic data brings us the second piece of the PCE prices (the Fed’s preferred inflation metric) puzzle with PPI. We’ll also get weekly unemployment claims.

In terms of Fed speakers we have our uber-hawk Beth Hammack (again) as well as non-voter Tom Barkin.

US Treasury auctions wrap up the week for non-Bills (>1yr in maturity) with a 30-yr auction.

In terms of SPX Q2 earnings as noted in the Week Ahead we’re very much in the windup phase now with just two SPX components reporting Thursday although one $100B in market cap in AI- beneficiary Applied Materials (AMAT).

Ex-US highlights include UK GDP, EU industrial production, Japan PPI, and policy decisions in Norway, Peru, and Serbia.

We’ll also get the Clacton parliamentary by-election in England, triggered by Reform UK leader Nigel Farage’s decision to quit as an MP and recontest the seat in which he will face a novelty candidate known as Count Binface (he wears a trashcan on his head). All expectations are that Farage will win easily, so it would be quite the shocker if Binface made it even close.

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Options market and MarketWatch article

MarketWatch: Todd Salamone, senior vice president of research at Schaeffer’s Investment Research, said equity options buyers on S&P 500 component stocks are “usually positioned wrong” at key turning points. The current setup suggests that the S&P 500’s rally to record highs still has legs.

“The sentiment in the options market looks more like a market that is breaking below support than breakout out to an all-time high, suggesting there is fuel to sustain the rally,” Salamone wrote in a note to clients.

Goldman also published analysis noting that non-dealer Nasdaq futures positioning turned net short for the first time since May 2025, with shorts accounting for 72% of the $21.6B in futures sold during the July 28-August 4 rally period.

Thursday, August 13

08:15 AM Cleveland Fed President Beth Hammack (FOMC voter) speaks

Cleveland Fed President Beth Hammack will speak at the Dayton Area Chamber of Commerce's Government Affairs Breakfast series in Kettering, Ohio. Moderated Q&A is expected.

08:30 AM PPI final demand, July (GS +0.4%, consensus +0.2%, last -0.3%)

PPI ex-food and energy, July (GS +0.4%, consensus +0.3%, last +0.2%)

PPI ex-food and energy, and trade, July (GS +0.4%, consensus +0.3%, last +0.1%)

08:30 AM Initial jobless claims, week ended August 8 (GS 200k, consensus 202k, last 219k)

Continuing jobless claims, week ended August 1 (consensus 1,800k, last 1,801k)

08:40 AM Richmond Fed President Tom Barkin (FOMC non-voter) speaks

Richmond Fed President Tom Barkin will speak on the economic outlook and monetary policy at the Chamber of Commerce in Greenville, South Carolina. Speech text and audience Q&A are expected. On August 7, after the release of the July employment report, President Barkin noted that the employment data were 'consistent with how I've been seeing the labor market--which is it's not loose, it's not tight, it's sort of in a weak balance.'

Wednesday August 12

Data: US July CPI (already released), UK June GDP, EU June industrial production, Japan July PPI, and policy decisions in Norway, Peru, and Serbia.

Earnings: Tencent, Cisco, Commonwealth Bank of Australia, Coherent, Cerberus, Vestas.

Auctions: US 10-yr Notes ($42bn), US 30-yr Bonds ($25bn).