What Happened Yesterday
Close | Move | Mood | |
|---|---|---|---|
S&P 500 (SPY) | 777.88 | +0.70% | Record, briefly |
Nasdaq 100 (QQQ) | 732.07 | +1.16% | Excitable |
Dow (DIA) | 537.91 | +0.14% | Technically attended |
Russell 2000 (IWM) | 303.50 | +0.26% | Tagging along |
VIX | 14.63 | +0.55% | Napping |
Gold (GLD) | 398.96 | -1.47% | Un-hedging |
Oil (USO) | 125.03 | -1.78% | Calmer, for now |
10-year Treasury | 4.647% | -5.4 bp | Finally listening |
Bitcoin | $63,402 | -$0.26 | Comatose |
Bitcoin moved twenty-six cents in twenty-four hours. Everything else had a far more interesting day than the closing prices let on.
The inflation number we warned about showed up soft
Yesterday we said a hot core PPI was the thing that could ruin everyone's day. It did the opposite, which is the least useful way for a warning to be wrong.
The Bureau of Labor Statistics put July producer prices at 4.7% year over year, against the 4.9% expected and down from 5.5% in June. Producer prices are what companies charge each other before anything reaches a shelf, so this is the inflation that has not gotten around to you yet, and for one month it decided not to bother. Core PPI rose 0.2% against 0.3% expected.
Rate traders did the obvious thing. CME FedWatch odds of a quarter-point hike at the September 15-16 meeting fell to about 35%, from roughly 40% on Wednesday and 51% on Tuesday. The Fed is holding at 3.50% to 3.75%, and the live risk still points up, so "cooling" here means the odds of getting hit have gone down, not that anyone has put the bat away.
Two cool inflation prints in two days is the best week the disinflation story has had in a while, and the market celebrated by spending the entire windfall before lunch.
Everybody bought the news. Almost nobody kept it.
Here is the part the green closes hide.
CoreWeave traded as high as 117.49 and closed at 106.29. That is 9.53% below its own intraday high, and it finished down 1.34% after Wednesday's 19.28% moonshot. Super Micro ran to 42.30 and closed at 39.16, still up 4.12% but 7.42% off the high, which is the trading equivalent of winning an argument and then apologizing. AMD got to 497.98 and closed at 483.01, up 0.02%, a full round trip back to exactly where it started. Micron alone held most of it, up 4.23% on an overnight memory-chip rally in Seoul.
Two names actually broke. Cisco fell 8.40% on 1.69 times Wednesday's volume after guiding down on AI networking gear, which stings because Cisco sells the plumbing that connects the expensive chips to each other, and plumbing demand was supposed to be the easy part. Applied Materials fell 2.48% during the session and then reported after the bell, so it walked into its own earnings already bleeding, and it is indicated lower again this morning.
Tape that gaps up on good news and sells it all day is not disagreeing with the news, it is telling you who was already long and needed somebody to sell to.
The Magnificent Seven un-did Wednesday, mostly
Wednesday, six of the seven closed lower. Thursday, six of the seven closed higher. We pulled all seven both days, because "six of seven" is the kind of claim that deserves receipts.
Tesla +3.80%. Meta +2.78%. Apple +1.00%. Microsoft +0.90%. Alphabet +0.82%. Nvidia +0.54%. Amazon was the lone holdout at -0.80%, taking Wednesday's shift and doubling down.
Now the honest math, because a bounce is not a recovery. Run it from Tuesday's close through Thursday's, and Meta is still down 0.69%, Microsoft down 1.38%, and Amazon down 2.62%. Nvidia is up 3.59% over the past two days because it was counted as a chip stock rather than a mega-cap this week, which was the better outcome.
The rotation everyone called a regime change on Wednesday lasted about one session, which is roughly the shelf life of every regime change called on a Wednesday.
Then Treasury tried to borrow for thirty years
While equity traders priced in a friendlier Fed, the government went to the same market and got quoted a worse price.
The 30-year bond auction cleared at 5.216%, up from 5.058% at the last one. That is 15.8 basis points more expensive in a month, and a basis point is one hundredth of a percent, a unit that exists so "we are paying a lot more" can be said in a calm voice.
Meanwhile, the 10-year yield fell 5.4 basis points to 4.647% on the same PPI print. The middle of the curve believed the inflation news and the far end charged more anyway. Those are not contradictory; they are two different questions: the 10-year votes on inflation, the 30-year votes on how much paper is coming.
Oil fell due to the absence of new military strikes rather than any actual progress. On the Strait of Hormuz, still nothing enacted. No deal, no route arrangement, no toll, no reopening. That is the eleventh straight edition we have cut a version of the concluded-deal claim, and by now the streak is more informative than the story.
The stock market spent Thursday celebrating cheaper inflation while the long bond quietly repriced the cost of financing all of it, and only one of those two markets has to be right by Christmas.
What to Watch Today
The main event
7:30 AM CT, July retail sales from the US Census Bureau. Consensus is +0.1% on the month, down from +0.2%, with the annual pace seen slowing to 6.0% from 6.7%. This is the number that says whether the consumer is still the load-bearing wall.
9:00 AM CT, University of Michigan preliminary August sentiment, seen at 54.5 from 55.2. The sleeper is one-year inflation expectations, seen at 4.1% against 4.2%. Two cool inflation reports mean little if households have not noticed.
The rest
Overnight: the UK Maritime Trade Operations agency issued a notice today confirming a commercial tanker was struck by a drone on Wednesday during an outbound transit of the Strait of Hormuz. Minor damage, all crew safe, no spill, and no word on who fired it. Oil fell yesterday on quiet, and that is what quiet looks like out there.
2:30 PM CT: CFTC positioning. The prior reading had speculators net short 27,300 S&P 500 contracts, an awkward place to be standing when the index prints a record.
Earnings are basically nothing today. The real week starts Thursday with Walmart, Deere, Ross Stores and Alibaba, so enjoy the quiet.
The one thing that could ruin everyone's day: a hot retail sales print. Thursday's rally was built on the idea that the economy is cooling just enough to keep the Fed parked. A consumer still spending at a 6% annual clip hands the September hikers a clean argument that nothing here needs help, and the 35% odds everyone just celebrated go straight back up before the Michigan number even lands.
Wholesale inflation got cheaper Thursday, and the government's thirty-year borrowing got more expensive the same afternoon. Somebody will have to explain that, and it will not be at 7:30 this morning.
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