Morning Dose #266: Inflation Spike, Market Sprint: The Earnings Override – Thursday 5/14/2026

Situation Awareness

Today’s Market Narrative

The market opened higher this morning, tracking towards new all-time highs as the S&P 500 and Nasdaq Composite extended their record-breaking run. The primary driver of today’s session is the overwhelming strength in mega-cap technology and semiconductor names, which have successfully shrugged off a hotter-than-expected Producer Price Index (PPI) report released yesterday. While the PPI data initially sparked a sell-off with headline inflation rising 1.4% month-over-month, the market quickly pivoted to a “buy the dip” strategy, driven by a series of impressive earnings beats and raised guidance from key industry leaders. The narrative has shifted decisively from “inflation panic” to “earnings resilience,” with investors willing to pay a premium for companies demonstrating robust demand, particularly in the AI infrastructure space.

Cisco Systems (CSCO) has emerged as the star of the pre-market session, surging more than 15% after reporting a significant beat-and-raise on both earnings and revenue. The company’s guidance for the fourth quarter was well above consensus, citing broad-based, record-high demand and raised expectations for AI infrastructure spending from hyperscalers. This performance has set a bullish tone for the broader technology sector, reinforcing the idea that corporate earnings growth remains the primary engine for the market. Alongside Cisco, NVIDIA (NVDA) continues to lead the charge after reports confirmed that the U.S. government has approved H200 chip sales to ten Chinese companies, alleviating a major regulatory overhang and fueling renewed AI enthusiasm.

Beyond the tech giants, the market is seeing significant breadth in specific thematic areas, particularly in healthcare and consumer discretionary. Biogen (BIIB) is trading higher in the pre-market after announcing compelling results from its Phase 2 CELIA study, which showed a reduction in tau pathology and cognitive benefits for early Alzheimer’s patients. This biotech catalyst, combined with strong earnings from companies like Dillard’s (DDS) and YETI Holdings (YETI), suggests that consumer spending remains resilient despite the inflationary backdrop. The geopolitical landscape also provided a tailwind, with the summit between President Trump and President Xi yielding positive outcomes regarding the Strait of Hormuz and a commitment to a constructive bilateral relationship, further reducing the risk of a global supply chain disruption.

Macro & Policy

The macro backdrop remains a complex mix of sticky inflation and resilient growth, creating a challenging environment for the Federal Reserve. The April PPI report, which came in at 1.4% versus the expected 0.4%, has significantly increased the probability of a rate hike being the Fed‘s next move. With the 2-year note yield settling at 3.99% and the 10-year note yield at 4.48%, the bond market is pricing in a more restrictive policy stance for the foreseeable future. The probability of a 25-basis-point rate hike at the March 2027 meeting has risen to 56.8%, while the likelihood of a cut anytime soon has effectively evaporated. This “higher for longer” rate environment is pressuring rate-sensitive sectors like utilities and real estate, which lagged yesterday’s session.

However, the bond market has shown signs of stabilization overnight, with Treasury futures climbing and yields pressing lower from their recent highs. The 10-year yield is currently trading at 4.444%, down 4 basis points, as the market digests the geopolitical progress from the U.S.-China summit. The agreement to keep the Strait of Hormuz open and the “constructive relationship” narrative have provided a psychological floor for risk assets, allowing equities to decouple from the yield curve’s upward pressure. The U.S. Dollar Index is up slightly at 98.57, reflecting a modest risk-on sentiment, while the USD/JPY pair hovers near 157.95, indicating continued pressure on the yen as the Bank of Japan signals a potential rate hike.

Geopolitically, the day’s events have been dominated by the Trump-Xi summit, which delivered no surprises but solidified a framework for strategic stability. Both leaders agreed that the Strait of Hormuz must remain a free waterway, a critical development for global energy markets and supply chains. While Vice President JD Vance noted progress on Iran talks, the market is focusing on the tangible outcomes of the summit, which include the potential for increased U.S. oil exports to China and the renewal of beef import licenses. These developments suggest a thawing of trade tensions that could support global economic growth, even as domestic inflation concerns persist.

Economic Calendar Today

• 08:30 ET: April Retail Sales — Expected: 0.4% | Prior: 1.7% — This is a critical read on consumer health; a miss could reignite recession fears, while a beat supports the “soft landing” narrative.
• 08:30 ET: Initial Jobless Claims — Expected: 208K | Prior: 200K — A key labor market indicator; a spike could signal cooling demand, while stability supports consumer spending.
• 08:30 ET: Retail Sales ex-auto — Expected: 0.4% | Prior: 1.9% — Provides a clearer view of discretionary spending trends.
• 10:00 ET: Business Inventories — Expected: 0.3% | Prior: 0.4% — Indicates supply chain dynamics and potential inventory buildup.
• 10:30 ET: EIA Natural Gas Inventories — Expected: NA | Prior: +63 bcf — Impacts energy sector sentiment.

Earnings reporting today include Aveanna (AVAH), Bullish (BLSH), Canada Goose (GOOS), Canadian Solar (CSIQ), and Versant (VSNT) in the pre-market, with a full slate of afternoon reports including AMAT and FIG.

Earnings & Corporate News

The earnings season is delivering a powerful dose of optimism, with several key players beating expectations and raising guidance. Cisco Systems (CSCO) is the standout, surging 15.2% in pre-market trading to $117.40 after beating EPS by $0.03 and revenue expectations, while guiding Q4 EPS and revenues well above consensus. The company cited broad-based, record-high demand and raised expectations for AI infrastructure from hyperscalers, validating the sector’s growth trajectory. Similarly, Biogen (BIIB) is up 6.0% to $216.70 following the announcement of positive Phase 2 CELIA study results, which showed a reduction in tau pathology and cognitive benefit in early Alzheimer’s patients. This is a significant catalyst for the healthcare sector, which has been under pressure due to valuation concerns.

In the semiconductor space, NVIDIA (NVDA) is trading higher at $230.10, up 1.9%, after the U.S. government approved H200 chip sales to ten Chinese companies. This regulatory green light removes a major overhang and reinforces NVIDIA’s dominance in the AI chip market. Other notable movers include Dillard’s (DDS), which beat by $0.57 and reported Q1 comps of +3%, and YETI Holdings (YETI), which beat by $0.08 and guided FY26 EPS above consensus. Conversely, Doximity (DOCS) is gapping down 22.5% after missing on revenue and guiding Q1 and FY27 revenues below consensus, highlighting the divergence in tech performance. The market is clearly rewarding companies with strong guidance and AI exposure while punishing those with slowing growth.

WaveFinder Signal Summary

The WaveFinder scan environment is moderately rich with 15 continuation signals, indicating that the market is providing actionable setups despite the macro noise. The top signals are heavily concentrated in the medical and software sectors, aligning with the day’s narrative of earnings-driven momentum. The breadth data shows a contraction, with only 49.93% of stocks trading above their 40-day SMA, down from 53.46% yesterday, suggesting that while the indices are hitting new highs, the rally is becoming more narrow and reliant on mega-cap leaders. The 20-day SMA coverage has also dropped significantly to 65% from 92%, reinforcing the need for selectivity.

Key setups to watch include Biogen (BIIB), which is showing a strong continuation pattern with a 2.6% gain and high relative volume, and Cisco (CSCO), which is breaking out on massive volume following its earnings beat. The scan also highlights ARGX and MIRM as potential continuation plays in the medical sector. The lack of Delayed 9M signals suggests that the market is currently focused on immediate catalysts rather than long-term trend reversals. Traders should focus on the top-tier continuation signals and be wary of the narrowing breadth, which could lead to increased volatility if the mega-caps falter.

Today’s Watchlist

• CSCO — Earnings beat-and-raise, +15% gap, AI infrastructure demand driver; watch for follow-through above $117.
• BIIB — Phase 2 Alzheimer’s study success, +6% gap, strong 2LYNCH setup; key level $216.
• NVDA — Regulatory approval for H200 sales to China, +1.9% pre-market, leadership in AI chips; watch $230.
• AVAH — Raised FY26 sales guidance, pre-market gapper, strong revenue beat; watch $6.77.
• TSEM — Record Q2 guide and SiPho commitments, strong momentum; watch $455 revenue target.
• DOCS — Missed earnings, -22% gap, downgrade risk; avoid until stabilization.

Action Codes of the Day

2LYNCH — The market is in a bullish regime with 15 continuation signals, and CSCO/BIIB are showing classic breakout patterns with massive volume and positive catalysts.
BTFD — Despite the hotter PPI data, the market’s ability to rebound to record highs indicates that dips are being bought aggressively, particularly in mega-cap tech.