US Inflation Eases
US headline CPI rose 0.1% in July, bringing annual inflation to 3.4% from 3.5% in June
Tesla Inc. (NASDAQ: TSLA ) and Palantir Technologies Inc. (NASDAQ: PLTR ) fell Wednesday even as a benign July inflation report lifted the broader tech market and sent the odds of a September Federal Reserve rate hike to 33%.
Headline CPI rose 0.1% in July, bringing annual inflation to 3.4% from 3.5% in June.
Core CPI rose 0.2%, leaving the annual core rate at 2.5%, its lowest since March 2021.
The S&P 500 edged higher at the open to test record levels, alongside a 0.6% gain for the Nasdaq.
Tesla slipped about 2% while Palantir dropped around 1.3%.
Fed Hike Odds Slide After the Print The report was not a downside surprise, but it eased fears that inflation would force the Fed into another hike.
CME FedWatch put September hike odds at roughly 38%, down from 48.4% Tuesday.
On Polymarket, the probability of a quarter-point September hike fell to 33% after trading in the mid-40s earlier in the week, while the odds of a hold climbed toward 67%.
Palantir Caught in a Software Rotation Palantir’s weakness may have less to do with inflation than with where tech money is flowing.
Software stocks broadly lagged Wednesday as investors rotated back into AI hardware, with Microsoft Corp. (NASDAQ: MSFT ) down about 2% and Salesforce Inc. (NYSE: CRM ), ServiceNow Inc. (NYSE: NOW ) and Workday Inc. (NASDAQ: WDAY ) also trading lower while semiconductor and networking names rallied.
AI infrastructure names surged after earnings, with Nebius Group N.V. (NASDAQ: NBIS ) jumping almost 30%, CoreWeave Inc. (NASDAQ: CRWV ) gaining around 19% and Super Micro Computer Inc. (NASDAQ: SMCI ) climbing roughly 18%.
That leaves Palantir pulled by two competing forces: a friendlier rate backdrop and an unfavorable rotation out of software into hardware.
Tesla Misses the Relief Rally Tesla entered Wednesday threatening to snap a four-session winning streak, and no fresh negative headline appears to explain the decline.
The stock is simply failing to benefit from a macro development that would normally support rate-sensitive growth names.
The muted reaction echoes what Cato Institute economist Jai Kedia told in an exclusive interview Tuesday. “It is unlikely that any meaningful change to those stocks would occur from a singular inflation report,” Kedia said, arguing only a “serious shock” in the data would produce a sustained market effect.
Kedia’s call on the stock reaction proved closer to the mark than his rate prediction.
He expected hike odds to rise after CPI; instead, they fell sharply.
Core PCE Could Still Run Hotter Economist Peter Schiff warned the benign July CPI may not last, pointing to a sharp rebound in oil and gasoline prices later in the month.
Janney Montgomery Scott chief fixed income strategist Guy LeBas said the Fed’s preferred inflation gauge may also tell a less comforting story.
His preliminary estimate has July core PCE tracking at 0.27% month over month.
LeBas added that Thursday’s PPI report will supply key inputs and could shift the number materially before PCE lands Aug.
26.
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