Wholesale prices were flat in July, lifting September Fed-hold odds to 63%. The S&P closed at a record 7,798.99 as AI names rallied. Cisco fell 8.4% despite a beat, while Brent dropped to $87.07 even as Iran and the U.S. fought over control of Hormuz.
Inflation gave stocks another pass.
The S&P 500 rose 0.65% to a record 7,798.99 Thursday. The Nasdaq gained 0.81% to 26,803.03, while the Dow added 0.13% to 53,839.99. Seven of 11 S&P sectors finished higher.
July PPI was flat against a 0.2% gain expected. Core PPI rose 0.2%, below the 0.3% forecast. That followed Wednesday's CPI at 3.4% and gave the Fed more room to wait. Markets now put the chance of no September hike near 63%.
AI took the relief and ran with it.
Sandisk (SNDK) surged 13.7%, Micron (MU) gained 4.2%, Meta (META) rose 2.8%, and Microsoft (MSFT) added nearly 1%.
Cisco (CSCO) went the other way. Shares fell 8.4% despite strong earnings and guidance. Tapestry (TPR) dropped more than 16% after muted sales guidance.
The Signal
Soft inflation kept the rally alive. Earnings decided who got to participate.
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Oil fell. Hormuz did not reopen.
Brent dropped about 2% to $87.07 as softer inflation and weaker demand helped break its six-day rally.
But the political dispute over the strait moved no closer to a solution.
Trump says the U.S. has "total control" of Hormuz. Iran says the opposite. Iranian officials said no ship can pass without Tehran's permission and that the waterway will remain blocked until its conditions are met.
The traffic data gives Iran's claim weight. Hormuz's five-day average fell to about 13 vessels Tuesday, near a three-month low and roughly 90% below the prewar level of around 130 ships a day.
That disruption matters beyond oil.
The U.K. grew 0.4% in the second quarter after 0.6% growth in the first, while business investment rose 1.7%. Britain may remain the fastest-growing G7 economy, but its dependence on imported energy leaves it exposed. Treasury stress tests reportedly show growth falling to just 0.3% next year if Hormuz disruption lasts.
Energy Signal
Brent fell because inflation and inventories improved. Hormuz traffic says the geopolitical problem did not.
Two inflation reports have now made the same argument.
CPI rose 0.1% in July. PPI did not rise at all. Core PPI gained 0.2%, less than expected. Markets now see a 63% chance the Fed holds rates at 3.50% to 3.75% in September.
That matters after July payrolls fell by 23,000. The Fed entered August with a weak labor print and an inflation problem. It now has two softer price reports against that labor weakness.
Oil remains the complication. Brent near $87 is still high enough to keep energy pressure alive, especially if Hormuz stays blocked.
Friday now carries less macro weight than the first four days of the week. The immediate inflation shock did not arrive.
Macro Signal
CPI gave the Fed room. PPI gave it more. Oil is the variable that can still take some of it back.
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Cisco proved that an AI beat can still fail the market's test.
Cisco reported $17.3 billion in quarterly revenue, up 18% and above the $16.8 billion expected. It guided current-quarter revenue to $18 billion to $18.2 billion, also well above the $16.8 billion consensus.
Hyperscaler AI orders hit $4 billion in the quarter and $9.3 billion for the year. Cisco expects hyperscaler revenue to nearly double to $7.5 billion in fiscal 2027.
Shares fell 8.4% anyway.
The stock entered earnings up more than 60% this year. Investors wanted cleaner margin expansion and faster acceleration, not just another beat. Cisco's heavier hardware mix raised questions about how profitable the AI growth will be.
Microsoft is solving a different AI problem. It has closed at least 15 China offices and joint ventures over five years as geopolitical risk rises. China represented only 1.5% of its 2024 revenue. Yet Microsoft is keeping a bridge open through Azure, helping Chinese firms such as ByteDance and Shein run overseas operations and access Western AI infrastructure.
Capital Signal
AI demand is not enough anymore. Cisco showed the market wants profitable demand. Microsoft shows it also wants demand that can survive geopolitics.
Bitcoin got two soft inflation prints and did almost nothing with them.
BTC stayed below $64,000 Thursday. Glassnode puts the median realized price near $63,000 and the short-term holder cost basis around $68,700. Bitcoin has spent almost three months trapped between those levels.
The stranger number is volume. Spot activity has fallen to its lowest level since Glassnode's data began in 2019. U.S. spot ETFs lost another $61 million Wednesday. Sellers are tiring, but buyers are not arriving with enough size to force a breakout.
That leaves $60,000 as major support and $65,000 to $66,000 as the first real upside test.
Prediction markets are moving in the opposite direction. Kalshi is reportedly discussing a $750 million raise from investors including Sequoia Capital and Wellington Management at a valuation near $40 billion, up from $22 billion in its last major round.
That valuation arrives while states continue challenging whether some event contracts are financial derivatives or illegal gambling. Kalshi is raising like market infrastructure while regulators are still deciding what kind of market it is.
The Verdict
Bitcoin has the macro setup but not the demand. Kalshi has the demand but not the settled rulebook. Capital is moving faster than either market's structure.
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Thursday separated price relief from structural relief.
PPI was flat. Core PPI rose just 0.2%. The S&P closed at a record 7,798.99, and September Fed-hold odds reached 63%.
But Cisco fell 8.4% after beating estimates because AI growth came with margin questions. Bitcoin stayed below $64,000 because softer inflation came without fresh demand. Brent fell to $87.07, but Hormuz traffic remained roughly 90% below normal.
That is the thread running through the day.
The easy numbers improved. The harder questions did not.
Inflation cooled. Stocks reached a record. Now the market has to prove the rally can survive without another macro gift.
