NASDAQ 100 Rises❗️ +1.15% on PPI Slowdown and Oil Pullback
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The NASDAQ 100 rose by 1.15%, outperforming the S&P 500's 0.65% gain.
The slowdown in the July PPI, which pushed the US 10-year Treasury yield down to 4.64%, and a 2.4% drop in WTI crude oil also supported the stock market rally.
On the other hand, President Hammack maintained his view that an immediate rate hike is necessary, and Cisco fell 8.40% despite strong earnings.
Now, let's dive into the detailed market commentary!
July PPI
Market pricing for a September rate hike retreats due to cooling inflation
✅ PPI was 0.0% month-over-month, market forecast was +0.2%
✅ PPI was +4.7% year-over-year, previous was +5.5%
✅ Initial jobless claims were 209,000, forecast was 202,000
With energy down 3.1% and food down 0.9%, the PPI remained flat month-over-month.
Initial jobless claims also exceeded expectations, and the market's pricing for a September rate hike retreated to about 35%.
The view that rate hikes need to be rushed has eased from both the price and employment perspectives, making it easier to buy the NASDAQ 100.
Fed Official Remarks
Temperature difference between President Hammack and President Barkin
✅ President Hammack's view is that an immediate rate hike is necessary
✅ President Barkin explained tariffs and high oil prices as temporary price factors
✅ Possibility of additional measures for persistent price pressures
While welcoming the low PPI, President Hammack maintained his argument for a rate hike, questioning whether it is enough to return to the 2% target.
President Barkin indicated room for temporary price factors to fade, while stating that additional measures might be necessary if pressures from supply chains and AI investment continue.
Since interest rates continued to fall after the PPI, stocks maintained their gains even though President Hammack showed a hawkish stance on rate hikes.
Interest Rate Declines and Stocks
Buying in real estate and housing with US 10-year Treasury at 4.64%
✅ US 10-year Treasury yield fell 4.8bp to 4.64%
✅ AvalonBay Communities was +2.3%
✅ D.R. Horton was +2.8%
Following the PPI slowdown, US Treasuries were bought, and yields from the 2-year to the 30-year fell.
The decline in bond yields made real estate stocks that offer dividends more attractive, and expectations for lower mortgage rates also supported housing stocks.
It was a day where buying spread not only to tech stocks but also to sectors sensitive to interest rates.
Cisco Earnings
Strict scrutiny on profit margins despite strong earnings
✅ Q4 revenue was $17.3 billion, +18% year-over-year
✅ Adjusted earnings per share was $1.22
✅ Fiscal 2027 revenue outlook is $72.2 billion to $73.4 billion
✅ Cisco stock was -8.40%
Cisco grew AI infrastructure orders to $9.3 billion in fiscal 2026, and both revenue and profit exceeded market expectations.
Even so, because the adjusted gross margin fell from 68.4% in the same period last year to 66.3%, there was strict scrutiny on whether order expansion would lead to profit growth.
Even while the NASDAQ 100 is rising, AI-related stocks are being selected based not only on revenue but also on profit margins.
Crude Oil and Geopolitics
Crude oil pulls back on profit-taking
✅ WTI crude oil fell 2.4% to $81.25
✅ Brent crude oil fell 2.2% to $87.07
Crude oil pulled back after rising over 10% in five days, as profit-taking and the significant increase in U.S. crude inventories reported the previous day weighed on the market.
Although the decline was tempered by a Houthi attack on a Saudi refinery, the pullback in energy prices eased concerns about inflation.
This worked in the same direction as the PPI slowdown, supporting a decline in U.S. Treasury yields and a rise in stock prices.
Summary
PPI and oil prices lower interest rates, pushing up the NASDAQ 100
✅ Market pricing for a September rate hike retreated to about 35% due to the PPI slowdown
✅ Buying in tech, real estate, and housing as the U.S. 10-year Treasury yield hits 4.64%
✅ The Fed's cautious stance and Cisco's profit margins remain points of concern
The slowdown in PPI and the pullback in oil prices led to lower interest rates, allowing the NASDAQ 100 to outperform major indices.
On the other hand, Fed officials maintain their vigilance on inflation, and Cisco fell despite strong earnings, so the market is not one where we can be one-sidedly optimistic based on low PPI alone.
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