August 12th Market Overview

Happy Tuesday

Markets moved higher today after July CPI came in cooler than expected. Inflation hit 2.7% versus the 2.8% Wall Street was looking for, which pushed rate cut odds from 85% to 94% and sent both the S&P and Nasdaq to fresh highs.

Worth noting small caps ($IWM ( ▼ 0.49% )), tripling the big index gains as traders positioned for a world where borrowing gets cheaper fast.

Let's dig in...

Market Summary

Rate Cut Certainty
July CPI at 2.7% versus 2.8% expected gave the Fed green light for September cuts. Traders now price in 100 basis points of easing through December, shifting the entire rate outlook.

Small-Cap Leadership
Russell 2000 outperformed by nearly 3x as investors rotated into rate-sensitive names. Lower borrowing costs benefit debt-heavy smaller companies more than large caps.

Broad Market Strength
S&P 500 and Nasdaq hit fresh records with strong internals - 21 components at 52-week highs versus only 10 at lows. Market breadth confirms the rally’s health.

Trade War Pause
Trump’s 90-day tariff extension on China removes immediate uncertainty while opening door for Nvidia to sell downgraded chips, potentially worth billions in revenue.

Market Overview

U.S. Stock Indexes, Past Three Sessions

Stock Spotlight

AST SpaceMobile $ASTS ( ▼ 0.87% ) laid out plans for 45-60 satellite launches by 2026 with $1.5 billion secured for U.S. nationwide service by late 2025. International expansion targets U.K., Japan, and Canada in Q1 2026. Partnerships with 50+ mobile operators covering 3 billion subscribers validate the space-to-smartphone concept despite Q2 earnings missing estimates.

Hanesbrands $HBI ( ▼ 0.31% ) received a $5 billion takeover offer from Gildan Activewear $GIL ( ▲ 0.23% ) per Financial Times. The deal reflects ongoing consolidation in textiles as companies seek scale advantages.

Circle Internet Group $CRCL ( ▲ 7.2% ) posted its first public quarterly results with $658 million revenue. The stablecoin issuer’s USDC circulation hit $61.3 billion as institutional crypto adoption accelerated.

Big Name Updates

Intel $INTC ( ▲ 2.93% ) gained after Trump called CEO Lip-Bu Tan a “success” days after demanding his resignation. The reversal removes leadership uncertainty as the chip giant executes its foundry turnaround.

Tesla $TSLA ( ▼ 1.5% ) faced continued Wall Street skepticism with Guggenheim maintaining its $175 sell rating despite Austin Robotaxi progress. Analysts acknowledge the autonomous potential but question current valuations.

Nvidia $NVDA ( ▼ 0.86% ) could unlock significant China revenue after Trump signaled openness to downgraded Blackwell chip sales. The policy flexibility suggests billions in potential market access.

Apple $AAPL ( ▼ 0.51% ) continues its historic buyback program that’s reduced share count by 44% over 12 years. The aggressive capital return strategy keeps driving per-share metrics higher.

Other Notable Company News

Sonos $SONO ( ▼ 1.67% ) gained after CEO Thomas Conrad bought 92,300 shares, signaling management confidence in the turnaround.

Starbucks $SBUX ( ▼ 2.0% ) received a Baird upgrade to outperform with $115 target on turnaround momentum under new leadership.

Palo Alto Networks $PANW ( ▲ 2.04% ) earned a Piper Sandler upgrade to overweight on platformization success and the CyberArk acquisition filling portfolio gaps.

Cardinal Health $CAH ( ▼ 0.41% ) announced a $1.9 billion Solaris Health acquisition, expanding to 3,000 providers across 32 states.

Sector Watch

Bond Market

Bonds are pricing in a new Fed reality. The 10-year yield dropping to 4.293% means cheaper money is coming, which explains why growth stocks outperformed today. The curve steepened as traders bet on aggressive near-term cuts while keeping long-term growth expectations intact.

• Dollar weakness to 95.30 makes U.S. exports more competitive but hurts multinational earnings

• Credit spreads tightened across the board - investors are getting comfortable with risk again

Policy Watch

September rate cuts moved from likely to locked-in at 94% probability. Jackson Hole on August 26-28 becomes the key event - listen for whether Powell signals 25 or 50 basis point moves and how deep this cycle goes.

• Trump's 90-day China tariff pause removes a major near-term risk for multinationals

• Semiconductor export flexibility could unlock billions for Nvidia and peers if China deals materialize

• Trade policy is shifting from blanket restrictions to targeted negotiations - bullish for affected sectors
  

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What to Watch

Thursday's PPI Report
The wholesale inflation data will show whether today's CPI relief was a one-off or part of a trend. A softer print reinforces the Fed's easing path, while a hot number could slow September cut expectations.

Small-Cap Momentum 
Today's Russell 2000 outperformance needs follow-through to matter. Small caps historically lead when rate cut cycles begin, but one-day moves don't make trends. Watch if this rotation has staying power.

Fed Communications 
Any Fed official speaking before Jackson Hole will get outsized attention. Markets are pricing in aggressive cuts, so even cautious comments could shift expectations. The bar is set pretty high for dovish surprises.

China Semiconductor Policy
Trump's comments about Nvidia selling downgraded chips to China need actual policy details. The semiconductor sector has massive China exposure, so clarity on export rules could move the entire group.

Thanks for reading 🙂

- John

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