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Yesterday's session featured a CPI report for June that didn't sit well with the Treasury market. Fortunately, the news that NVIDIA (NVDA) and Advanced Micro Devices (AMD) should soon be selling their AI chips again in China offered a bullish-minded distraction.
The latter point notwithstanding, the broader market succumbed to selling interest as the 10-yr note yield pushed 4.50% and as the 30-yr bond yield topped 5.00%. In brief, Tuesday was a good day for the chip stocks, but it was not a good day for the broader market.
There is a chance that script gets flipped today or at least rewritten to include more stocks thanks to a PPI report for June that did not inflame the same inflation concerns following the CPI report and a positive response to the better-than-expected earnings results posted by Goldman Sachs (GS), Bank of America (BAC), and Johnson & Johnson (JNJ).
Currently, the S&P 500 futures are up 12 points and are trading 0.2% above fair value, the Nasdaq 100 futures are up 12 points and are trading 0.1% above fair value, and the Dow Jones Industrial Average futures are up 133 points and are trading 0.3% above fair value. The 2-yr note yield is down three basis points to 3.93%, the 10-yr note yield is down three basis points to 4.46%, and the 30-yr bond yield is down three basis points to 4.99%.
The primary catalyst for the positive disposition is the PPI report. The index for final demand was unchanged month-over-month in June (Briefing.com consensus: 0.2%) following an upwardly revised 0.3% increase (from 0.1%) in May. The index for final demand, less foods and energy, was also unchanged month-over-month (Briefing.com consensus: 0.2%) following an upwardly revised 0.4% increase (from 0.1%) in May.
The index for final demand was up 2.3% year-over-year, versus 2.7% in May, while the index for final demand, less foods and energy, was up 2.6% year-over-year, versus 3.2% in May.
The key takeaway for the market is the disinflation seen on a month-over-month and year-over-year basis. That is clearly moving in the Fed's preferred direction, and the unchanged readings for June should foster good thoughts about what the PCE Price Index for June will show when it is released.
There isn't going to be a rate cut at the July FOMC meeting, yet this report, importantly, keeps a September rate cut on the table.
In other developments, chip equipment maker ASML (ASML) posted better-than-expected Q2 results but caused a stir when it said that it cannot confirm if it will deliver growth in 2026 due to increasing uncertainty driven by macroeconomic and geopolitical developments. ASML clarified, however, that AI customers' fundamentals remain strong when looking at 2026. ASML is down 8.4% in pre-market trading.
President Trump indicated that pharmaceutical tariffs will likely start August 1 at a low rate and that semiconductor tariffs could be announced soon as well, according to Bloomberg. The Wall Street Journal, meanwhile, reports that the president is expected to sign an executive order in the near future that makes private investments available in 401(k) plans.
