Situation Awareness: Cautious, leaning constructive. The tape is being driven this morning by soft July producer inflation — headline PPI printed flat month-over-month versus the 0.1% consensus, and core PPI rose just 0.2% against a 0.3% estimate — reinforcing yesterday’s in-line CPI and keeping September rate-hike odds capped. Futures are modestly higher (S&P +5, Nasdaq +10 vs fair value) with sliding oil (WTI -2.1% to $81.49) providing a quiet tailwind. Index price and moving-average data are unavailable this morning, so lean on breadth rather than specific SPY/QQQ/IWM levels. Trade mode: selective and constructive — ride confirmed AI/semiconductor strength but respect the mixed mega-cap participation. The dominant force is disinflation feeding rate relief, with a $25B 30-yr auction at 1:00 ET as the day’s supply wildcard. Regime context — 60.66% of stocks trade above their 40-day SMA, and the 4% Bull/Bear gauge shows 308 bulls vs. 163 bears. The 5-day trend turned up, with the % above 20-SMA jumping to 126% from 115% and the 40-SMA gauge nudging to 60.66% from 60.12%, signaling broadening participation.
SIP: JMIA LQDA STRO
- What’s working: the Continuation/2LYNCH scan is rich with 26 signals — healthy breadth. Reversal scan is thin at 5. No Delayed 9M and no MAGNA53 prints, so momentum-continuation is the cleaner playbook than fresh episodic pivots.
- Market closed — no live sector/theme data. Sector Volatility (ATR) table is empty; lean on breadth internals, which show broadening leadership beyond mega-cap tech.
- Key event: July PPI came in soft across the board, and weekly jobless claims ticked up to 209K — the disinflation-plus-cooling-labor combination keeps the Fed sidelined narrative alive.
- Market read: yesterday was a narrow, contained advance — S&P +0.3%, Nasdaq +0.5%, DJIA flat — led by semis (SOX +2.5%) and AI names, offset by soft mega-cap discretionary/comm services. Constructive but not broad; today needs follow-through.
- DEP watchlist: no Delayed 9M signals today — nothing to feature; default to Continuation leaders.
- SIPS: FOUR (+7.0%), LGN (+5.7%), IRTC (+2.9%) from the Continuation scan.
Today’s Market Narrative
The market walks into Thursday’s open with the inflation hurdle largely cleared and a slight bid under futures. After yesterday’s in-line July CPI kept a lid on Fed-tightening fears, this morning’s July PPI delivered another dovish nudge: total PPI was flat month-over-month versus the 0.1% consensus, and core PPI rose just 0.2% against a 0.3% estimate. Both June figures were revised up, but the July prints themselves undershot expectations — the market-friendly read. S&P futures sit +5 and Nasdaq futures +10 versus fair value, a measured extension of yesterday’s grind higher.
Yesterday’s session was the definition of a contained advance. The S&P 500 rose 0.3% and the Nasdaq Composite 0.5% while the Dow finished flat, with the whole tape confined to narrow ranges once CPI landed as expected. The story underneath was rotation, not a broad lift: information technology led (+1.1%) as the AI momentum trade reignited, powered by monster post-earnings moves in CoreWeave (+19.3% to $107.73), Super Micro (+18.8% to $37.55), and Lumentum (+13.6% to $932.47). The PHLX Semiconductor Index jumped 2.5%. Real estate matched tech at +1.1% on easing yields.
The offsetting weakness matters for today’s positioning. Consumer discretionary fell 1.4% as Amazon (-1.8%) and Tesla (-1.6%) sagged, homebuilders dropped despite lower yields (home-construction ETF -2.3%), and communication services shed 0.9% with Meta down 3.4% and Charter off 4.7%. That split — semis and AI ripping while several Magnificent Seven names bleed — is the key tension. Breadth internals argue the broadening is real: the equal-weight and small-cap complex has outrun the mega-caps all year, with the Russell 2000 up 22.7% YTD versus the S&P’s 13.2%.
Overseas, the risk tone is firm. South Korea’s Kospi surged another 3.6% — now up more than 20% off its July low in just ten sessions — on its semiconductor components, and Japan’s Nikkei added 1.2% helped by benign domestic PPI. Europe is mostly higher on the back of falling oil. The Anthropic headline — investors eyeing a $2 trillion IPO valuation — keeps the AI-capex story front and center.
Macro & Policy
The policy picture is stabilizing in the market’s favor. Following yesterday’s CPI, the CME FedWatch tool put the probability of the FOMC holding rates unchanged in September at roughly 60%, up from about 52% the prior day — the odds of a 25bp hike slipped toward 40%. This morning’s soft PPI only reinforces that lean. Year-over-year core CPI eased to 2.5% from 2.6%, still above the 2% target but trending the right way. The Big Picture thesis remains the anchor: record index highs are being met by record earnings, and the forward P/E has actually compressed to 20.1x from 22.2x at the start of the year, so valuations are lower even as prices climb.
Treasuries are playing a waiting game and firming modestly. The 2-yr yield sits at 4.18% (-2bp), the 5-yr at 4.35%, the 10-yr at 4.67% (-1bp), and the 30-yr at 5.24%. Yields drifted lower overnight in sympathy with oil, though Briefing flags the IEA demand-cut catalyst as dubious given it predated yesterday’s session. The real swing factor today is the $25 billion 30-yr bond auction at 1:00 ET — supply into an already heavy fiscal backdrop, with July’s Treasury deficit the largest since October 2021. A soft tail there could nudge the long end and pressure rate-sensitive equities.
Geopolitically, the U.S.-Iran standoff over the Strait of Hormuz simmers without fresh escalation. The administration is signaling reliance on sanctions and a naval blockade rather than direct action, and oil is fading on demand worries — WTI down 2.1% to $81.49, gold off 0.5% to $4,444, copper -0.6%. The dollar is quiet: EUR/USD 1.1536, USD/JPY 159.29 with BOJ hike chatter for September/October building. Currency and commodity moves are secondary to the rates story today.
Economic Calendar Today
- 08:30 ET (released): July PPI — Actual: flat m/m | Consensus: +0.1% | Prior: -0.1% (revised). Soft, market-friendly, supports Fed-on-hold.
- 08:30 ET (released): July Core PPI — Actual: +0.2% m/m | Consensus: +0.3% | Prior: +0.4% (revised). Cooler than feared.
- 08:30 ET (released): Initial Jobless Claims — Actual: 209K (+9K) | Consensus: 205K | Prior: 200K. Slight softening in labor.
- 08:30 ET (released): Continuing Claims — Actual: 1.777M | Prior: 1.799M. Continuing claims fell, still a firm labor floor.
- 13:00 ET: $25B 30-yr Treasury bond auction — the day’s key supply catalyst; watch the tail and long-end reaction.
With the morning data now in the rear-view and no top-tier releases left, the auction and single-stock earnings reactions will dictate the afternoon. Expect volatility to stay contained absent an auction surprise.
Earnings & Corporate News
The most instructive tell this morning is beats being sold. Cisco (CSCO $116.50, -6.0%) beat EPS by $0.05, topped revenue, and guided both Q1 and FY27 above consensus — yet the stock is lower, a “good news isn’t good enough” reaction after a strong run. Coherent (COHR $332.41, -6.5%) similarly beat on EPS and revenue but is being sold. That pattern — high-bar reactions in networking/optical names — argues for discipline chasing extended movers today.
Contrast that with the AI-infrastructure winners still carrying momentum. Lumentum’s fiscal Q4 was a standout: record 50.4% non-GAAP gross margin (up 1,260bp yr/yr) and Q1 guidance of $1.225-1.275B revenue and $4.05-4.35 EPS that blew past estimates, with 800G shipments at record levels and the 1.6T ramp beginning. That structural optical-demand story, plus CoreWeave and Super Micro’s post-earnings surges, is the through-line the market keeps rewarding.
Elsewhere, Brinker (EAT) hit an all-time high, +13%, as Chili’s same-restaurant sales accelerated to +5.6% and FY27 guidance topped estimates — a rare consumer-discretionary bright spot with July traffic accelerating. Among the Stocks in Play, Jumia (JMIA $6.42) is the lone positive-sentiment mover on a better-than-expected Q2 with sales up nearly 40% yr/yr, while Liquidia (LQDA) sold off despite strong results and Sutro (STRO) fell on a Q2 miss — mixed biotech reactions warrant caution.
WaveFinder Signal Summary
The scan environment is healthy on the continuation side: 26 Continuation/2LYNCH signals is solid breadth, consistent with the improving internals. There are no Delayed 9M prints and no MAGNA53 episodic pivots today, so the edge is in riding established trends rather than chasing fresh gap-and-go setups. The Reversal scan is thin at just 5 names (BABA, KHC, CSX, HPQ, NUVB), which fits a tape that’s grinding up rather than snapping back.
Breadth is quietly expanding — 60.66% of stocks above their 40-SMA versus 60.12% the prior session, and the % above 20-SMA leapt to 126% from 115%. The 4% gauge is decisively bullish at 308 bulls to 163 bears (up from 214/158). Best continuation setups worth watching: FOUR (+7.0%, Finance), LGN (+5.7%, Building), and IRTC (+2.9%, Medical, RVOL 1.5). Note the elevated risk stamps on many — FOUR at 101% and MNTN at 131% — so size accordingly.
Today’s Watchlist
- LITE — Blowout margins and 1.6T optical ramp; AI-infrastructure leader with follow-through potential after +13.6%.
- CSCO — Beat-and-raise sold off to $116.50; watch whether it stabilizes or the “sell the good news” tone spreads.
- FOUR — 2LYNCH continuation +7.0% in Finance; high-risk (101%) breakout, needs volume confirmation above the open.
- IRTC — Medical continuation, +2.9% on RVOL 1.5; cleaner risk profile (88.8%) among the leaders.
- JMIA — Only positive-sentiment SIP; Q2 EPS beat, sales +39.8%, gap +8.4% — watch for hold above the open.
- EAT — All-time high on real Chili’s turnaround and accelerating July traffic; consumer-discretionary standout.
Action Codes of the Day
- 2LYNCH — Continuation breadth is rich at 26 signals with breadth expanding (60.66% above 40-SMA, 308 bulls); ride confirmed trend leaders like FOUR and LGN on strength.
- CRT — Controlled Risk Taking fits the cautious 60.66% regime and the “beats getting sold” pattern (CSCO -6%, COHR -6.5%); take calculated risks and respect the mixed mega-cap tape.