August 12th Market Overview

Happy Wednesday

No surprises today. July inflation landed right on forecast, stocks held their gains, and bond yields eased. When the number matches the estimate, nobody has to rethink anything, and we saw that mantra reflected in the market today

Let’s dig in...

Today's Big Picture

1. Rent And The Power Bill Are Doing The Work Now

Shelter costs barely moved last month and still made up about two thirds of the entire increase, hidden behind a steep drop in hotel rates. Electricity ran more than four percent above last year during the hottest month on record. You can wait out a gas price. Rent and the power bill you just pay.

2. Nobody's Estimates Assume AI Comes For Them

Apollo's Torsten Slok went through more than 200 public software and white collar services companies. Ten expect both revenue and profit to fall over the next two years. Ten. Every dollar of AI upside is in the numbers and none of the displacement is, and that gap is where I'd look for surprises this fall.

3. The Buildout Needs Electricians Not Just Chips

Bernstein's Chad Dillard put the electrical, mechanical and plumbing trades at 1.8 million workers, then cut that to roughly 790,000 once you keep only non residential construction, and fewer still clear the training bar a data center requires. Thirty percent of that labor lives where seventy percent of the projects are going. Chips get delivered. Buildings get scheduled, and schedules slip.

Market Overview

Index Performance

Stock spotlight

Wendy's $WEN ( ▲ 12.38% )  
moved on a Financial Times report that Nelson Peltz and Trian are putting together a bid to take the burger chain private, with Flynn Group and BlueFive Capital alongside. No offer yet and no timeline, but sponsors circling a franchised business with steady cash flow is a signal worth filing.

Quantinuum $QNT ( ▲ 27.69% )  
guided full year revenue to $28 million to $32 million against about $26.5 million expected. The reaction says more about what people will pay for quantum optionality than about five million dollars of revenue.

H&R Block $HRB ( ▲ 16.03% )  
guided fiscal 2027 to $6.04 to $6.24 a share on revenue near $4.13 billion, both ahead of the street. Tax prep is boring, which is exactly why that guide got paid today.

Velo3D $VELO ( ▲ 10.81% )  
lifted its full year revenue range to $65 million to $75 million. The new floor sits about where Wall Street's midpoint already was.

Big name updates

Intel $INTC ( ▲ 5.04% )  
got cover from the sell side on its $20 billion equity raise. Bank of America kept a buy and a $145 target and called the dilution manageable, while UBS said the raise removes the balance sheet question that had been sitting on the stock.

SpaceX $SPCX ( ▲ 10.29% )  
took a target cut from Daiwa to $140 from $175 on a neutral rating. The analysts like the revenue growth and not the capital it takes to get there. Shares went up anyway, which tells you where the marginal buyer is right now.

General Motors $GM ( ▼ 2.41% )  
will develop next generation battery cells with Samsung SDI and sold the Korean maker its half of their Indiana joint venture. Both sides pointed to slower electric vehicle demand than the plant was built for.

Other notable company news

National Vision $EYE ( ▼ 10.43% )  
fell after full year guidance landed under expectations on both earnings and revenue.

Aecom $ACM ( ▼ 8.76% )  
dropped on fiscal third quarter revenue of $3.59 billion, with the Americas business well short of forecasts.

Kontoor Brands $KTB ( ▲ 8.53% )  
raised full year earnings guidance on a small beat, though revenue came in light.

Blue Chip Stocks
MarketBeat names and lists “7 Blue-Chip Stocks to Add To Your Forever Portfolio”

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Sector Watch

Bond market

Yields eased after the print, with the ten year near 4.67 percent and the two year around 4.21 percent. Today's ten year auction went off without a fuss.

Policy watch

Fed

Nick Timiraos laid out the bind. For a year, officials have forecast inflation back to target without more hikes, on the theory that tariffs and energy were one time shocks that fade. The shocks stayed, and they now sit on top of an AI buildout pushing up prices for technology equipment and software. That is a new source of pressure, and a rate hike does not fix it.

• Governor Lisa Cook said she is ready to act if inflation does not come down, while noting a hike may not be needed with some disinflation already running.

• Futures now put most of the hike risk in December rather than September.

• Participation among workers 55 and older is 36.9 percent, down from 40.3 before the pandemic. Bank of America ties the drop to portfolio gains. Some of that weak July payroll number is people retiring on a good market, not employers cutting.

Washington

• Officials are floating a cut to the capital gains tax on home sales.

• The 2027 Social Security raise is tracking lower as inflation cools.

International

The Strait of Hormuz is still the entire energy story. The White House says Gulf exports are running near 15 million barrels a day. Ship trackers counted 14 crossings on Tuesday against roughly 120 a day before the war. One of those numbers is wrong, and we find out at the pump in about six weeks.

• The yen sat near 159 to the dollar. Credit Agricole argues the rate gap with the US is only half of it, and that money keeps flowing here because this is where the AI spending is happening.

What to Watch

The AI Infrastructure's Backbone
10 Stocks Powering the AI Buildout

Producer Prices Tomorrow

The wholesale number is the input side of what we saw today. Whatever is building in the pipeline reaches the consumer print before the Fed meets again.

Beth Hammack Tomorrow

The Cleveland Fed president voted to hike last month. She is the cleanest read on whether this report moved anyone in that camp.

Thanks for reading - you are now the more informed 🙂

- John

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