Written by: Trend Research

The U.S. July PPI shows that inflation is cooling, combined with falling oil prices, market expectations for interest rate hikes have further narrowed, and risk appetite for U.S. stocks has rebounded. All three major indexes closed higher, with the S&P 500 rising 0.65% to 7798.99 points, hitting a record high; the Nasdaq rose 0.81% to 26803.03 points; the Dow rose 0.13% to 53885.10 points. The VIX reported 14.94, up 5.05%. Most large tech stocks rose, with Tesla leading the seven giants, up more than 3.5%. The storage sector surged across the board, with SanDisk up more than 13%. The Nasdaq Golden Dragon China Index fell 1.84%, JD.com dropped more than 7%, and Chinese concept stocks underperformed the market. Bitcoin was reported at $64,500, and Ethereum at $1,900. The benefits of cooling inflation have been fully digested by the market, and funds are looking for the next direction after the S&P hits a new high.

PPI unexpectedly cools down, internal divisions appear in the Federal Reserve

The U.S. July PPI year-on-year growth narrowed to 4.7%, with falling energy costs being the main drag. After inflation cooled more than expected, the market no longer fully bets on the Federal Reserve raising interest rates this year. The yield on the two-year U.S. Treasury, sensitive to interest rates, fell by 4.82 basis points, while the yield on the ten-year U.S. Treasury fell by 4.57 basis points.

However, internal divisions within the Federal Reserve are widening. Barkin supports holding steady, while Harker insists on raising rates. The Federal Reserve, under the leadership of Waller, is undergoing a recalibration of its policy framework, and the public disagreements among officials have increased uncertainty for the September meeting.

The auction of 30-year U.S. Treasury bonds recorded a bidding rate at its highest level since 2001, with signals of weak demand appearing alongside declining short-term rates, making the shape changes in the yield curve worth noting.

The storage sector surges across the board, SanDisk sets high long-term growth goals

Storage chip stocks were the standout sector on Thursday. SanDisk rose over 13%, Western Digital and SK Hynix rose over 7%, and Seagate Technology rose nearly 5%.

SanDisk announced its long-term high growth goals at its investor day, expecting revenue to achieve mid-to-high double-digit growth from fiscal year 2028 to 2030, with a profit margin target as high as 80%. Following the announcement, SanDisk's stock briefly surged nearly 20%. In the context of continually rising valuations for AI hardware, SanDisk responded to market concerns about whether growth can be sustained with clear long-term financial targets, and funds chose to vote with real money.

The collective strength of the storage sector is also supported by the industry's fundamentals. Demand for HBM driven by AI continues to be strong, and while there is divergence in the prosperity of general storage chips, the long-term guidance from leading companies temporarily outweighed short-term concerns.

AI application software stocks collectively surge, Workday once skyrockets by 30%

Influenced by acquisition rumors, Workday surged by 30% on Thursday, driving the overall rise in software stocks. Reports say that Silver Lake intends to acquire Workday, and the technology software industry ETF-iShares rose over 3%.

The rise in software stocks sharply contrasts with the recent “earnings exceeded expectations but stocks fell” trend in AI hardware stocks. Funds are rotating into the software sector, which has relatively low valuations and potential merger catalysts, as the S&P hits an all-time high. If the acquisition rumor about Workday comes true, it may trigger a new wave of consolidation expectations in the software industry.

Anthropic also made a big move before its IPO, planning to acquire chip optimization company Decart AI for $6 billion. Investors are betting its valuation could double, potentially leading to the largest IPO in history at a $2 trillion valuation. The financing heat of the primary AI market continues to rise, and whether secondary market pricing can keep up is a variable to watch.

Tesla rises over 3.5%, leading the seven giants, while Chinese concept stocks lag behind

The Wind U.S. Technology Seven Giants Index rose 0.74% on Thursday. Tesla led the way, soaring over 3.7%, Google A rose about 0.7%, Nvidia rose about 0.3%, while Microsoft, Amazon, Apple, and Meta all saw slight gains.

Chinese concept stocks, however, continue to lag. The Nasdaq Golden Dragon China Index fell 1.84%, JD Group dropped over 7%, and Pinduoduo fell over 5%. JD.com's Q2 revenue fell nearly 3% year-on-year but still exceeded expectations, and operating profit turned around year-on-year, indicating during a conference call that the profit turning point has appeared, delivery losses narrowed by more than 50%, and retail business in Q3 is expected to return to positive growth. Despite the improvement in fundamentals, stock prices declined, and global funds remain cautious about Chinese concept stocks.

Crude oil falls over 2%, gold retreats

Crude oil fell over 2% on Thursday. Iran rebutted Trump’s remarks, claiming they have complete control over Hormuz. The price of oil had increased consecutively, and Thursday's pullback was more about profit-taking than a substantial easing of geopolitical risk.

Spot gold fell 1.34%, and spot silver dropped 1.43%. After the PPI data was released, New Copper briefly recovered its losses, but then retreated slightly by 0.35% from its daily high. Cooling inflation and narrowing expectations for interest rate hikes should be a benefit for gold, but instead, gold prices fell, as the market is reassessing the relative attractiveness of various assets after the S&P hit a new high.

Today’s focus: Consumer confidence and speeches from Federal Reserve officials

There are two main focal points in the market on Friday.

One is the preliminary value of the University of Michigan Consumer Confidence Index. The PPI has already confirmed that inflation is cooling; if consumer confidence data also shows weakening economic expectations, the market's bets on a September rate hike may further decline, causing U.S. Treasury yields to continue to fall. If consumer confidence surprises on the strong side, it may trigger a revaluation of “the economy is not overheating, but inflation is not coming down.”

The second is the subsequent statements from Federal Reserve officials. The divergence between Barkin and Harker has become public; if more officials join the camp of holding steady, the probability of a rate hike in September will continue to decrease; if hawkish voices come to dominate again, Thursday's optimistic sentiment may be partially corrected.

The S&P 500 is already at an all-time high, and cooling inflation gives the market a reason to continue upwards, but after a new high, new catalysts are needed. The data and speeches on Friday will determine whether to continue breaking through or to face fluctuations.