The S&P 500 Index ($SPX) (SPY) on Wednesday rose +0.26%, the Dow Jones Industrial Average ($DOWI) (DIA) fell -0.04%, and the Nasdaq 100 Index ($IUXX) (QQQ) rose +0.74%. September E-mini S&P futures (ESU26) rose +0.31%, and September E-mini Nasdaq futures (NQU26) rose +0.71%.
Stocks closed higher on Wednesday due to strength in AI and chip stocks after CoreWeave and Super Micro reported better-than-expected earnings. Stocks also received a lift from Wednesday’s favorable CPI report, which supported T-note prices and reduced the odds of a rate hike at the next FOMC meeting to 40% from 51% on Tuesday.
Wednesday’s July US CPI report was in line with market expectations. On a year-on-year basis, the July CPI eased to +3.4% y/y from June’s +3.5%, and the core CPI eased to +2.5% from June’s +2.6%. On a month-on-month basis, the July CPI rose +0.1% m/m, and the core CPI rose +0.2% m/m.
Wednesday’s July core CPI report of +2.5% y/y matched the 5.5-year low posted earlier this year but remained above the Fed’s 2% inflation target. The nominal CPI remains elevated at +3.4%, well above the 5.5-year low of +2.3% posted last year.
Sep WTI crude oil prices (CLU26) were relatively stable on Wednesday as the markets waited for any sign of progress towards a US-Iran deal to open the Strait of Hormuz. A Pakistan Foreign Ministry spokesperson said the current US-Iran talks continue and that a memorandum of understanding could be extended. A US Navy helicopter fired two missiles at a cargo vessel on Tuesday that the US said was trying to call at an Iranian port, in violation of the US blockade on Iran’s ports.
President Trump told reporters late Tuesday that the US has “total control over the Hormuz Strait” and that “we own it.” He added, “At some point, maybe they’ll do something, and then they get blown away.”
The outlook for strong Q2 earnings is a bullish factor for stocks. The S&P 500 is tracking for earnings growth of almost 32% in Q2, well above projections of +23%, and nearly four times the average earnings growth rate outside of the Covid period since Q4 of 2013, according to Bloomberg Intelligence. AI spending is expected to account for most of earnings, with AI infrastructure stocks set to contribute nearly 60% of the S&P 500's earnings-per-share growth in Q2. So far, earnings results have been positive, with 85% of the 446 S&P 500 companies that have reported Q2 earnings beating estimates, according to Bloomberg data.
The markets are discounting a 40% chance of a +25 bp rate hike at the next FOMC meeting on September 15-16, down from 51% on Tuesday.
Overseas stock markets closed mixed on Wednesday. The Euro Stoxx 50 fell -0.26%. China's Shanghai Composite closed up +0.32%. Japan's Nikkei-225 Stock Average today closed up +0.83%.
Interest Rates
September 10-year T-notes (ZNU6) rose +1.5 ticks. The 10-year T-note yield was little changed at 4.688%, rebounding higher from an early decline of more than -2 bp. T-note prices received an early boost from the favorable CPI report, with the core CPI matching a 5.5-year low. Also, the 10-year breakeven inflation expectations rate fell slightly by -0.1 bp to 2.264%.
However, T-note prices gave up most of the early pop on the CPI report as the Treasury’s auction of $42 billion of 10-year T-notes produced an auction yield that was the highest since the 2007 financial crisis. Investors have recently demanded higher Treasury yields, partially due to Fed Chair Warsh's reduced guidance and uncertainty about the Fed's inflation-fighting resolve.
The Treasury will sell $35 billion of 30-year T-bonds on Thursday.
European government bond yields rose slightly. The 10-year German bund yield rose +0.2 bp to 3.160%. The 10-year UK gilt yield rose +0.6 bp to 4.970%.
Markets are discounting an 89% chance of a +25 bp ECB rate hike at its next policy meeting on September 10.
US Stock Movers
CoreWeave (CRWV), a key AI data center provider, rallied more than +19% on Wednesday after providing guidance for $3.45-3.60 billion in revenue for Q3, which was at the higher end of market expectations, and full-year revenue guidance of $12.4-13.2 billion, up from its previous guidance of $12-13 billion. The company also reported positive news on orders and its backlog.
Super Micro Computer (SMCI) rallied more than +18% on better-than-expected revenue guidance for Q3, which was a positive indicator for AI data center servers.
The favorable news from CoreWeave (CRWV) and Super Micro Computer (SMCI) boosted chip stocks. Micron Technology (MU), Lam Research (LRCX), GlobalFoundries (GFS), and Applied Materials (AMAT) all closed up by more than +4%. The iShares Semiconductor ETF (SOXX) rallied +2.3%.
The Magnificent Seven struggled on Wednesday, with six of the seven stocks closing lower, led by a decline of more than -3% in Meta (META). Microsoft (MSFT) closed down by more than -2%. The lone winner, Nvidia (NVDA), rallied +3% thanks to the chip rally.
H&R Block (HRB) rallied +16% after positive fiscal Q4 results and stronger-than-expected full-year guidance.
Earnings Reports (8/12/2026)
Amcor PLC (AMCR), Cisco Systems Inc (CSCO), Coherent Corp (COHR), Performance Food Group Co (PFGC), Trimble Inc (TRMB).
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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