Markets Update - 8/13/26
A look at what happened today impacting US equity, Treasury, and selected commodity markets, and what to watch for tomorrow
Quick Summary:
US equity indices opened higher Thursday after a softer-than-expected July PPI report added to Wednesday’s relatively cool CPI report, further reducing concerns about near term Fed rate hikes and helping Treasury yields move lower as discussed in the morning update.
July PPI was unchanged versus expectations for a modest increase, while core PPI rose +0.2%, also below expectations, although core-core (excluding trade margins) accelerated to highest since May lifting estimates for July PCE prices (the Fed’s preferred inflation metric). Coming after Wednesday’s CPI report, the data helped pull September hike odds down to roughly 35% from 55% a week ago.
Weekly jobless claims also remained consistent with a low-layoff labor market. Initial claims were 209,000, with the four-week moving average the least since October 2022 while the four-week average of continuing claims saw the biggest drop from a year earlier since December 2022, reinforcing that while hiring may be cooling, the labor market is still not showing much layoff stress.
The friendlier rates backdrop supported stocks, with Technology and Communication Services helping lead the market, with semiconductors and software names powering the Tech sector and Meta and Netflix helping Communication Services. Oil was another tailwind, with WTI falling more than 2% to around $81, seeing Energy finish modestly lower.
At day’s end, the S&P 500 gained +0.7%, crossing 7,800 intraday for the first time and notching fresh record intraday and closing highs. The Nasdaq Composite led with a +0.8% gain, the the Russell 2000 was +0.2% while the Dow Jones Industrial Average eked out a +0.1% advance.
Attention now turns to Friday’s retail sales report, with the Fed still on watch for inflation pressure from a robust consumer.
Some market commentary:
The Fed:
“There’s nothing in the CPI report that demands a September rate hike,” Baird Strategas chief economist Donald Rissmiller wrote in a note to clients on Wednesday. “To be fair, [though], there is more data to come before that meeting, in addition to the Fed’s Jackson Hole discussions at the end of the month,” Strategas’ Rissmiller wrote. “So, while the September [Fed] decision is likely another hold, in our opinion, there should continue to be serious discussions about raising the fed funds rate (eventually)—and the hawks could continue to advocate multiple tightening moves depending on their forward-looking expectations.”
“Still, the odds favor a rate increase in either October or December, after monetary policy officials take time to gauge the temperature on both sides of the central bank’s mandate,” said José Torres, senior economist at Interactive Brokers.
“[The PPI report] is good news for consumers and the Federal Reserve, which is walking an extremely tight line between trying to tame inflation, while monitoring a softening labor market,” said Glen Smith at GDS Wealth Management. “Thursday’s PPI alone doesn’t change the calculus of the Federal Reserve, as the key to taming the inflation picture right now is a resolution in the Middle East or the establishment of pipelines to rely less on the Strait of Hormuz and the Fed has no influence on that,” the chief investment officer said. “For now, the Fed is likely to keep rates steady through year-end,” he continued.
Thursday’s tame inflation print, paired with last week’s softer-than-expected jobs report, will give Fed Chair Kevin Warsh more breathing room, and may just be enough to keep rates on hold, according to Arun Sundaram at CFRA.
“But the Fed’s decision is far from settled,” he said. “Investors still have several potential plot twists to digest.”
“The Fed still has an inflation problem, but the recent softness likely strengthens the case for doves on the committee who want to wait things out,” said Sonu Varghese at Carson Group.
“The inflation picture at the moment isn’t enough to derail what really remains an earnings-driven market,” said Bill Merz, head of capital markets research at U.S. Bank Asset Management. “It remains to be seen how the Fed under new Chair [Kevin] Warsh is going to interpret these numbers and what they do about it, if anything, and so that remains a little bit of an uncertainty that markets are digesting,” he continued. “But for the time being, some incremental moderation in CPI and PPI numbers, that’s constructive.”
In today’s Markets Update:
A deeper look at Thursday’s stock and sector breakdown, including continued strength from Tech along with Communication Services and Real Estate leadership, and limited downside across most sectors.
A look at selected corporate headlines from Bloomberg and CNBC.
Updated technical charts across the SPX, Nasdaq, Russell 2000, and equal-weighted SPX.
A review of market breadth and participation, including large individual winners and losers, Nasdaq 52-week highs versus lows, speculative Nasdaq trading activity, and the very low volume on the SPX.
A look at the rates and Fed backdrop, including Treasury yields, the post-PPI move in Fed hike expectations, and the 30-year Treasury auction.
A look at volatility and market structure, including VIX, VVIX, and 1-day VIX.
A review of cross-asset trends, including WTI crude, crude inventories, the dollar, gold, copper, natural gas, and bitcoin.
Citi’s new SPX target, BTIG’s Jonathan Krinsky on momentum, Citi on short-covering risk, Atlanta Fed on sticky CPI, WSJ on Nvidia’s AI-infrastructure financing model, and Daily Chartbook/Deutsche Bank and Goldman on financial conditions.
A wrap-up on the CPI/PPI clearing events, the AI trade, improving breadth, yields, and the setup into retail sales.
A look ahead to Friday’s calendar, including US economic data, Fed speakers, Treasury auctions, SPX earnings, and ex-US highlights.
