US MARKET WRAP: Stocks gain on bullish tech earnings while CPI prints in line

SNAPSHOT: Equities up, Treasuries steepen, Crude flat, Dollar up, Gold up REAR VIEW: US CPI matches expectations in July; Trump says think will keep control over Strait of Hormuz; Pakistan says there are talks of a 60-day ceasefire extension; Iranian source says no talks are being held to extend the ceasefire with the US; Fed's Collins prepared to raise rates if data calls for it; Average US 10yr auction; SMCI, CRWV, LITE, NBIS all rally on better-than-expected earnings. COMING UP: Data: UK GDP (Jun/Q2), Trade Balance (Jun), Swedish/Spanish Inflation Final (Jul), EU Industrial Production (Jun), US Initial Jobless Claims (Aug/08), PPI (Jul). Events: Norges Bank Policy Announcement (Aug). Speakers: Fed's Hammack, Barkin; Norges Bank's Bache. Supply: US. Earnings: Applied Materials, RWE, Antofagasta, Maersk. MARKET WRAP Stocks traded higher on Wednesday, with the Nasdaq outperforming as strong earnings from CoreWeave (CRWV), Lumentum (LITE), Super Micro Computer (SMCI) and Nebius (NBIS) supported the AI trade. The equal-weight S&P 500 (RSP) posted more modest gains, while sectors were predominantly firmer. Real Estate, Technology and Consumer Staples outperformed, while Consumer Discretionary, Materials and Communication Services lagged. The major macro event of the session was the July CPI report, which came in line with expectations. The report saw money markets increase confidence in a September hold, while still maintaining expectations for a 25bps hike by year-end. Overall, the inflation data gives the Fed greater scope to remain patient, particularly following last week's weak July jobs report, although it was not soft enough to eliminate the prospect of further tightening later in the year. The Treasury curve bull steepened, led by declines in front-end yields, although the immediate reaction to CPI saw some two-way price action. Elsewhere, the 10-year note auction was not as strong as the previous offering but remained better than recent averages, pointing to healthy underlying demand for duration. In FX, the Dollar initially weakened following the CPI report before gradually paring the move, broadly tracking the recovery in the 2-year Treasury yield. The NZD and CHF underperformed among G10 peers. Energy prices settled little changed amid mixed reporting on the geopolitical backdrop. Pakistani mediators struck a more optimistic tone, suggesting there is scope to extend the 60-day MoU, while Iranian sources pushed back, stating there are currently no discussions over extending the ceasefire between the US and Iran. Meanwhile, both the US and Iran continue to claim control of the Strait of Hormuz, leaving the geopolitical outlook uncertain. Precious metals continued to advance, with increased confidence in a September Fed hold following CPI providing support as front-end Treasury yields declined. US US CPI (JULY): Headline CPI rose 0.1% M/M in July, in line with expectations, following the 0.4% decline in June, which had been driven by a notable 5.7% drop in energy prices. The Y/Y rate eased to 3.4% from 3.5%, also matching forecasts. Core CPI rose 0.2% M/M, in line with consensus and accelerating from June's unchanged reading, while the Y/Y rate cooled to 2.5% from 2.6%, as expected. Overall, the report was encouraging, with both annual inflation measures ticking lower and no upside surprise in the monthly core reading. Money markets subsequently increased the probability of an unchanged rate decision in September to around 60% from 50% beforehand, with the weak July jobs report also supporting the case for patience. Looking at the drivers, shelter rose 0.1% M/M and accounted for around two-thirds of the overall monthly increase in the all-items index. Food prices also rose 0.1%, including a 0.3% increase in food away from home, while energy prices declined 1.5%. Within the core components, prices increased for medical care, airline fares, communication, education and recreation, while motor vehicle insurance was among the major indexes to decline in July. However, there is still plenty of data due before the September 16th FOMC, including another CPI and NFP report, which will further shape rate expectations given the Fed's continued lack of explicit forward guidance. Policymakers will receive the July Core PCE report before the meeting, with Pantheon Macroeconomics now expecting a 0.16% M/M increase following today's CPI data, while Oxford Economics looks for 0.2% and Goldman Sachs 0.23%. The August PCE report, however, will not be available before the September decision. Regional Fed inflation measures were somewhat mixed. The Atlanta Fed's Sticky-Price CPI accelerated to a 3.5% annualised M/M rate from 0.8%, with the core measure also rising to 3.5% from 0.7%. However, the less volatile Y/Y measures were more encouraging, with headline sticky CPI unchanged at 2.8% and core easing to 2.7% from 2.8%. Meanwhile, the Cleveland Fed Median CPI rose 0.3% M/M from 0.2%, while the Y/Y rate was unchanged at 2.7%. The sharp swings in the annualised monthly Atlanta Fed measures warrant some caution, while the more stable Y/Y readings suggest underlying inflation remains relatively sticky but is broadly moving in the right direction. FED's COLLINS (2028 voter) said businesses and households in the US north-east were being squeezed by inflation. Collins noted she supported the decision to hold rates in July, describing policy as mildly restrictive, expecting disinflation gradually to be sustained. Ahead, the 2028 voter would back a hike as soon as September if data beforehand supports the decision. On last week's NFP report, the Boston Fed President said we shouldn’t be surprised if there are periods of volatility in the figures. She noted that the overall jobs data is quite mixed and in an "unusual balance", while risks to inflation are greater with inflation too high. FIXED INCOME T-NOTE FUTURES (U6) SETTLED 2 TICKS HIGHER AT 108-17+ Treasuries little changed after an in-line CPI report sees traders boost bets for a September hold. At settlement, 2-year -2.5bps at 4.197%, 3-year -2.2bps at 4.270%, 5-year -2.1bps at 4.373%, 7-year -1.7bps at 4.521%, 10-year -1.2bps at 4.682%, 20-year -0.7bps at 5.248%, 30-year +0.1bps at 5.248%. THE DAY: Treasuries ultimately settled little changed on CPI day, despite the report seeing markets increase expectations for the Fed to remain on hold in September. Headline CPI rose 0.1% M/M, in line with expectations and rebounding from the 0.4% decline in June, which had been driven by a notable 5.7% drop in energy prices. The Y/Y rate eased to 3.4% from 3.5%, also matching forecasts. Core CPI rose 0.2% M/M, in line with consensus and accelerating from June's unchanged reading, while the Y/Y rate cooled to 2.5% from 2.6%, as expected. Overall, the report was welcome, with both annual inflation measures ticking lower and no upside surprise in the monthly core reading. Money markets subsequently increased the probability of an unchanged September FOMC decision to around 60% from 50% beforehand, with the weak July jobs report also keeping the case for patience firmly in play. Treasuries saw two-way price action immediately after the release, with the curve eventually bull steepening as the long-end lagged. Risks of a September hike clearly remain, but participants will continue to scrutinise incoming data ahead of the September 16th FOMC for clearer direction. Elsewhere, the 10-year note auction produced a similar result to Tuesday's 3-year offering: demand was not as strong as at the previous auction but remained better than average. The marginal 0.1bps tail took some shine off the result, but the above-average bid-to-cover, strong indirect participation and below-average dealer allocation pointed to healthy underlying demand for duration. Direct participation also improved notably from the prior auction, helping offset some of the decline in indirect demand. Attention on Thursday turns to US PPI, before the 30-year bond auction later in the session. SUPPLY Notes/Bonds US sold USD 42bln of 10-yr notes; Tail 0.1bps US to sell USD 25bln of 30yr on August 13th; all settling on August 17th Bills US sold 17-wk bills at high-rate 3.755%, B/X 3.16x US to sell USD 110bln of 4-wk bills and USD 100bln 8-wk bills on August 13th; all to settle August 18th STIRS / OPERATIONS Fed Hike Pricing via CME Fed Watch: Sept 10bps (prev. 12.5bps), Dec 27.1bps (prev 29.5bps). EFFR at 3.63% (prev. 3.63%), volumes at USD 109bln (prev. USD 108bln) on August 11th SOFR at 3.64% (prev. 3.63%), volumes at USD 2.961tln (prev. USD 2.964tln) on August 11th NY Fed RRP op demand at 0.72bln (prev. 1.25bln) across 1 counterparty (prev. 2) on August 12th CRUDE WTI (U6) SETTLED USD 0.07 HIGHER AT USD 83.27/BBL; BRENT (V6) SETTLED USD 0.07 HIGHER AT USD 88.98/BBL The crude complex was little changed as major developments in the Middle East were few. Recapping, in the European morning, Pakistan's Foreign Ministry said they continue to activate direct and indirect diplomatic channels between the US and Iran and that the ceasefire deadline, which ends in 5 days, could be extended. However, later reports citing an Iranian source said there has been absolutely no progress on the potential return of the US to the MoU. Middle East updates thereafter were pretty light, although US President Trump offered the usual rhetoric, remarking that the US has total control over the Strait of Hormuz and that it'll keep it. Away from geopols, IEA OMR forecasted an oil market deficit of around 1.8mln BPD in Q3, more than double its prior 800k BPD forecast, and noted that inventory buffers are rapidly depleting, increasing the urgency of reopening the Strait. The OPEC MOMR, meanwhile, was uneventful. In the weekly EIA data, which saw short-lived downside in crude, was a very hefty and unexpected crude build, in line with the private metrics last night. US crude inventories rose by 11.308mln bbl w/e Aug 7th (commercial: +17.423mln bbls, SPR: -6.115mln bbls). Gasoline and Distillates saw slightly shallower draws than expected. Overall, production was up 1k W/W to 13.805mln. For the record, WTI traded between USD 82.40-84.35/bbl and Brent USD 88.10-90.07/bbl. EQUITIES CLOSES: SPX +0.26% at 7,748, NDX +0.74% at 29,743, DJI -0.04% at 53,775, RUT +0.61% at 3,045 SECTORS: Consumer discretionary -1.4%, Materials -1.19%, Communication services -0.94%, Industrials flat, Financials +0.16%, Energy +0.21%, Health +0.23%, Consumer staples +0.47%, Utilities +0.53%, Technology +1.06%, Real estate +1.08% EUROPEAN CLOSES: Euro Stoxx 50 -0.24% at 6,535, Dax 40 -0.17% at 26,346, FTSE 100 -0.10% at 10,833, CAC 40 -0.46% at 8,675, FTSE MIB -0.01% at 53,699, IBEX 35 -0.05% at 20,204, PSI +0.68% at 9,274, SMI -0.86% at 14,449, AEX -0.40% at 1,112 STOCK SPECIFICS: CoreWeave (CRWV): EPS & rev. beat, raised FY outlook, supported by accelerating AI infrastructure demand, a growing backlog & strong pricing for newer NVDA systems. Super Micro Computer (SMCI): Profit beat w/ stellar guidance. Lumentum (LITE): Strong Q metrics alongside strong next Q outlook. H&R Block (HRB): Q beat & FY outlook topped forecasts, as well as raising dividend. Oracle (ORCL): Plans further job cuts this month, potentially reaching double-digit percentages on some teams. Nebius (NBIS): Q2 metrics largely impressed. Aehr Test Systems (AEHR): Received a USD 22mln follow-on production order from its lead wafer-level AI processor customer. Google's (GOOGL) new phones are USD 100 more expensive than last editions; raised prices of new phones on "severe" memory crunch; announced Google Pixel Tag. Meanwhile, Amazon's (AMZN) AWS VP Levy has left the Co., to join Alphabet. Separately, Google co-founder Sergey Brin reportedly urged staff to focus on bringing the Gemini model back to the frontier of AI, according to sources. Nelson Peltz is preparing a takeover bid for Wendy's (WEN), FT reports citing sources, with the support of a consortium. Bid could be made in the coming weeks. Gap (GAP): Downgraded at Jefferies. FX USD was firmer following an in-line July CPI report. The initial reaction was lower, which held for a short time, before reversing to the upside as seen in the US 2yr yield. The report will keep debates over hikes in play, however coming shortly after a poor NFP report, September bets on a Fed hike have slightly pulled back given the bar has been raised for the next inflationary readings before the next FOMC to shift the Fed in a more hawkish direction. Money markets shifted dovish following the CPI release, pricing in a 40% chance of a 25bps Fed rate hike at the September meeting (prev. 50%), however, a 25bps hike is still fully priced by year end. Separately, ING notes recent reports of Trump weighing capital gains tax cuts to boost mid term performance would prove a mild dollar negative from a pro-risk perspective. DXY trades around highs of 100.02 against CPI-induced 99.613 lows. G10FX generally traded lower against USD, led by CHF and NZD. Meanwhile, AUD relative outperformance remained as recent hawkish RBA Governor comments helped limit weakness. Elsewhere, EUR/USD was muted towards the unrevised Italy and Germany CPI figures; EUR/USD hit highs of 1.1563 on the US CPI report. The pair now trades around 1.1522.