1. PPI Surprise as a “Black Swan”: Cooling Rate-Cut Bets, Rapid Market Repricing
On Thursday, Aug 14, U.S. equities opened sharply lower after July’s Producer Price Index (PPI) data came in far hotter than expected. The report—described by the Bureau of Labor Statistics as the “first release under a revised data collection methodology”—shocked markets and disrupted expectations for a larger September Fed rate cut.
How big was the upside surprise?
- Headline PPI YoY jumped from June’s +2.3% to +3.3% (vs. consensus +2.5%).
- Core PPI YoY rose to +3.7% (Feb high; consensus +3.0%, prior +2.6%).
- CPI linkage: Upstream wholesale price pressures flowed through directly to the consumer level—July CPI and core CPI both rose +0.9% MoM (vs. consensus +0.2%, prior 0%).
Data credibility debate: Some analysts linked the spike to the BLS dropping 350 categories of detailed input cost data, questioning accuracy. However, markets still treated the print as a key policy input.
Fed impact – 50 bps cut odds collapse:
Prior to the release, markets had priced a meaningful probability of a 50 bps September cut, backed by Treasury Secretary Besant and a BlackRock executive considered a Fed chair contender. After the data, that narrative vanished. Fed officials quickly pushed back—SF Fed’s Daly rejected a 50 bps move as “unnecessary emergency signaling.” Still, a 25 bps cut in September remains almost fully priced (~95%).
Labor market resilience offers support: Initial jobless claims fell by 3,000 to 224,000 (vs. consensus 225k), continuing claims down 15,000 to 1.953M—helping ease concerns after last week’s disappointing nonfarm payrolls.
2. Equity Performance: Indices Hold, Underlying Weakness Persists
Despite the PPI headwind, major indices recovered from early losses to finish nearly flat (S&P 500 closed marginally higher). This resilience was largely index-level “masking” as megacap tech (e.g., Amazon) was bid up to offset broader weakness—most stocks still closed lower.
Flows & positioning: Investors focused on the 3–6 month easing outlook rather than one month’s inflation spike. Rotation continued out of high-valuation growth into policy beneficiaries and large-cap leaders.
3. Notable Stock Moves – Buffett Effect, AI Frenzy, and Policy Pain
1. Buffett’s New Buys:
- UnitedHealth (UNH) surged over 10% after-hours as 13F filings showed Berkshire Hathaway initiated a 5M-share position in Q2 (~$411 avg. cost), making it the firm’s 18th largest holding.
- Lennar (LEN) benefited from prior bullish calls and Berkshire’s Q2 buying activity, reinforcing the homebuilder resilience theme.
2. AI & Cloud Infrastructure:
- Alphabet (GOOGL) and NASA to co-develop a “space AI medical assistant” for astronauts and remote areas—praised as a potential data/compute leadership move, though shares remain capped by technical resistance.
- DLocal (DLO) beat on Q2 revenue ($256M, +50% YoY) and raised FY guidance, soaring 31% (likely short-covering).
- TeraWulf (WULF) pivoted from crypto mining to AI, securing $1.8B from Google (8% stake) and a $3.7B 10-year hosting contract—shares spiked nearly 60%.
- CoreWeave fell another 33% in two days on competitive concerns from WULF and pre-lockup selling pressure.
3. Tesla (TSLA):
Shares retested the 200-day MA after breaking out of a consolidation triangle; holding the line could fuel a rebound, while a breakdown risks $300 retest. Political chatter around Musk re-aligning with Trump camp added sentiment volatility.
4. Meme Stock Selloffs – Dilution, Policy, Tariffs:
- ATNF fell 29% on a $500M stock offering.
- LUNR dropped 14% on a $300M convertible debt raise—its second in recent weeks.
- CRCL slid 9.1%, nearing a June gap-fill.
- Enphase (ENPH) lost ~6% on uncertainty over Treasury tax credit rules; shares are down 91% from 2022 highs.
- Tapestry (TPR) beat on Q2 profit but lowered guidance due to tariff headwinds—shares sold off sharply.
4. Market Takeaways: Steady Indices, Shifting Internals
Beneath the “flat close” lies a clear rotation into large-cap leaders and policy-favored names. The PPI shock narrowed expected September easing from 50 bps to 25 bps, but easing remains on track. Megacap tech provided near-term index stability, but stock-level bifurcation is widening.
Investor positioning guidance:
- Focus on earnings visibility and policy alignment (AI leaders, established blue chips).
- Avoid extended plays in structurally weak or policy-vulnerable sectors.
- Monitor key flows—especially in AI infrastructure, homebuilders, and healthcare—while being alert to profit-taking risk after sharp rallies.
(This commentary is for market observation purposes only and does not constitute investment advice. Equity markets carry risk—investors should act with caution.)
