U.S. Market Recap-August 12

I. CPI Data: Cooling Headline Inflation, Sticky Core Keeps Rate-Cut Hopes Alive

Ahead of the open on Tuesday, July CPI data showed a mixed picture:

• Headline CPI: +2.7% YoY (vs. 2.8% est.), +0.2% MoM (vs. 0.3% prior). Cooling driven by falling gasoline prices and flat food prices.
• Core CPI: +3.1% YoY (above 3.0% est.), +0.3% MoM (in line with expectations but above June’s 0.2%), led by services inflation—airfares surged 4% in a single month (3-year high), while medical and dental services hit record prices.

Following the release, September rate-cut expectations strengthened sharply. Futures spiked pre-market, and after a brief pullback at the open, all three major indices closed up over 1% (Dow +1.04%, S&P 500 +1.23%, Nasdaq +1.42%).

II. Market Action: Broad Gains, Distinct Sector Rotation

Sentiment & Volatility:
VIX dropped sharply below 15, its lowest since January, as traders unwound downside hedges—signaling reduced short-term crash concerns and a risk-on tone.

Sector Leaders:

• Cyclicals & Financials: Regional banks, asset managers outperformed.
• Airlines: Rallied across the board on airfare spike (Delta +9%).
• Health Insurers: Lifted by higher medical pricing (UnitedHealth +3.7%).

Small-Cap Surge:
Russell 2000 ETF (IWM) jumped nearly 3%, outperforming the S&P 500 as FOMO drove flows into higher-risk segments.

Technical Picture:

• S&P 500 closed at a record high of 6,445; next resistance 6,450–6,470, with potential to reach 6,550 on a breakout. Support sits at the 50-day MA (6,200–6,180), with a deeper pullback to 6,150–6,130 possible on a break.
• Nasdaq 100 remains strong, though its widening outperformance gap vs. the S&P 500 could hint at a short-term top.

III. Key Events & Policy Signals

• Trump vs. Powell: Trump threatened to “send Powell to jail” if rate cuts aren’t delivered, reflecting urgency amid a $291B July budget deficit (+10% YoY). While tariff revenues surged 273% to $28B, they remain insufficient to offset fiscal shortfalls.
• Corporate “Revenue Remittance” Rumors: Nvidia and AMD may be required to remit 15% of China chip sales revenue (H20, MI308 series) to the U.S. government in exchange for export licenses, potentially accelerating a “quasi-nationalization” process.

IV. Sector & Stock Highlights

1. Airlines & Healthcare – Direct Winners from Services Inflation

• Delta Air Lines (DAL): Q2 beat estimates; combined with a 4% MoM airfare spike, shares rallied 9% to lead the airline sector.
• UnitedHealth (UNH): Rose 3.7% as higher medical/dental pricing buoyed insurer sentiment.

2. Crypto & Tech – Earnings-Driven Divergence

• Coinbase (COIN): Holds over 100,000 ETH ($500M+); watch for unlock-related risk.
• Circle (CRCL): Q2 revenue $658M (slightly above estimates), but net loss $482M (driven by IPO stock-based comp). Announced a 10M-share secondary offering, interpreted as early unlock. Shares spiked 16% pre-market before fading.
• Bitfarms (BMNR): +5.5% as ETH broke $4,400; plans to acquire 5% of global ETH supply via up to $20B in stock issuance.

3. AI & Software – Misses and Hype

• BigBear.ai (BBAI): Q2 loss of $0.49/share (vs. $0.06 est.), revenue $32.5M (-18% YoY, below $41.17M est.), cut FY revenue guide to $125–$140M from $160–$180M. Shares fell 30% as investors questioned DoD contract credibility.
• CrowdVision (CRWV): Q2 revenue $1.213B (+210% YoY, beat $1.08B est.); loss narrowed to $291M, but EPS ($0.60) missed. With 83% of Class A shares unlocking Aug 15, stock fell after-hours as funds sold into strength.

4. Traditional Industries & Emerging Themes – Mixed Signals

• Intel (INTC): Trump praised CEO after meeting, sparking speculation it may follow NVDA/AMD in revenue-sharing-for-policy model.
• On Holding (ONON): Swiss sportswear brand beat Q2 sales estimates, raised FY outlook; shares +18% pre-market but retraced half the gains.
• Celanese (CE): Specialty chemicals name plunged on warning of weaker H2 end-market demand.
• Sea Ltd. (SE): Q2 revenue $5.26B (+38.2% YoY), net profit $414M (multi-fold increase).

5. Retail Favorites – Risk-On, But Fragile

IWM: +3% as small caps attracted risk capital; traders should note these are fundamentally weak, short-term vehicles. Potential style rotation in September if rate cuts trigger profit-taking in megacap tech.

V. Outlook & Strategy: Ride the Theme, Manage the Risk

Market Tone: CPI removed a major overhang, boosting rate-cut bets. But rapid gains raise short-term pullback risk.

Positioning:

• Core Focus: AI with tangible earnings (Nvidia ecosystem), ETH-linked crypto plays, rate-cut beneficiaries in financials/housing (e.g., GSEs).
• Avoid: Post-earnings small-cap spikes (e.g., CRCL, CRWV), overvalued IWM trades, cyclicals with deteriorating fundamentals (e.g., CE).
• Risk Controls: Keep exposure flexible; use 5-day MA (6,200–6,180) as tactical support. Trim if broken.

Key Events: Nvidia earnings (Aug 27) as next major catalyst; September Fed decision with follow-on CPI data as confirmation for the rate path.

Disclaimer: This commentary reflects the author’s market observations and does not constitute investment advice. All investments carry risk.