US Stock Rally Pauses on Inflation Data; Intel Surges on Potential Government Stake

Market Reaction to Inflation Data

• 📉 The blistering run in stocks hit a wall as a pick-up in inflation lifted bond yields and the dollar.
• 📊 The S&P 500, after a 30% surge from its April lows, barely budged, with over 350 shares falling.
• 📈 Two-year yields climbed six basis points to 3.73%, and money markets adjusted expectations for Federal Reserve rate cuts.

US Wholesale Inflation Accelerates

• ⚠️ US wholesale inflation accelerated in July by the most in three years, suggesting companies are passing along higher import costs.
• 📈 The producer price index increased 0.9% from a month earlier and 3.3% from a year ago, with services costs jumping 1.1%.
• 🧐 While consumer price data showed milder pass-through, firm wholesale inflation may give Fed officials pause.

Intel Surges on Potential Government Stake

• 🚀 Intel shares jumped more than 7% on news that the Trump administration is considering taking a stake in the chipmaker.
• 💡 This potential investment is seen as a new era of government involvement in American companies, aiming to support domestic manufacturing.
• 💰 The move is considered unconventional for Republicans and contrasts with criticism of the CHIPS Act by the current administration.

Company Earnings and IPOs

• 📊 Applied Materials reported better-than-expected sales and adjusted EPS, but the stock moved down in after-hours trading.
• 📈 MYX, an exchange operator, had a strong first day of trading, closing with a nearly 34% gain.
• 📉 John Deere tumbled as it trimmed its annual earnings outlook due to lower grain prices and tariff costs.
• ⚠️ Coherent shares fell significantly after an underwhelming outlook and the sale of its aerospace and defense business.
• 🛍️ Tapestry, parent company of Coach, saw shares fall due to tariff costs and weakness in the Kate Spade brand, despite its Coach brand performing well.

Bond Yields and Market Outlook

• 📉 The bond market saw a flattening of the curve, with the two-year real yield rising more than longer-term yields.
• 🧐 Investors are pricing in less aggressive Fed rate cuts, with expectations for a September cut being adjusted.
• 🗓️ Key events to watch include Jackson Hole, further data reports, and upcoming jobs and CPI data.