Nothing to See Here, Please Move Along

What happens when an anticipated market catalyst fails to catalyze?  Apparently, not much.  We had been mired in summer doldrums for the first two trading days of this week, partly because the bulk of earnings season is behind us, partly because of a lack of obvious near-term catalysts, and partly because many investors are taking well-deserved summer vacations.  Since I haven’t taken mine yet, I was hoping that this morning’s CPI report might spur some volatility.  It didn’t, though other news spurred some rotation.

The economists nailed today’s report.  The monthly and yearly increases in headline and Core CPI for July all came in exactly as expected by consensus, at 0.1% and 0.2%, respectively, for monthly headline and Core, and 3.4% and 2.5%, respectively, for the annual figures. 

Pre-market equity index futures rose sharply in the immediate aftermath of the report, accelerating the modest gains that were in place before the numbers.  The Nasdaq 100 (NDX) rose as much as 1% shortly after the bell rang, but as the morning wore on, the gains in both NDX and the S&P 500 (SPX) faded back roughly to the levels that prevailed prior to the CPI report.  Bond yields dipped by a couple of basis points even as oil futures were essentially unchanged.  The Cboe Volatility Index (VIX) slipped below 15, less because investors are more sanguine than because one of the few near-term catalysts is now behind us.

There is one theme that we can point to today: the “makers versus takers” trade is back, at least for today.  Double-digit percentage gains after solid reports from CoreWeave (CRWV) and Super Micro Computer (SMCI) refocused investor attention on the recipients of the aggressive AI buildout and away from those doing the spending.  SMCI’s earnings blew past analyst estimates, while CRWV reported a narrower loss than expected.  Both showed higher-than-expected revenues, and it is no secret where a key source of those revenues might be coming from.  Following along with that trend, the Philadelphia Semiconductor Index (SOX) is up nearly 3% while the “Fab Four” hyperscalers are all trading lower.  Sectoral performance is mixed, with few standouts, and more stocks are advancing than declining.  It all fits with the modest index gains.

Hoping vainly for a broad market catalyst, we get to move on to tomorrow’s July PPI report.  The monthly headline increase is projected to rise by 0.2%, well above last month’s energy-influenced drop of 0.3%, with an annual expected increase of 4.9%.   Excluding Food and Energy, economists project a monthly increase of 0.3%, up slightly from last month’s 0.2%.

Dare I say that I’m hoping for some surprise, positive or negative, in tomorrow’s PPI report?  It’s much less difficult to write a daily piece when there is something compelling to discuss.