Markets Slightly Up Early on Mixed CPI Report

Published as of: August 12, 2025, 9:10 a.m. ET

(Tuesday market open) U.S. July inflation mainly met expectations and kept hopes alive for a September rate cut, but an increase in one important category might mean additional churn for the market. The monthly Consumer Price Index (CPI) rose 0.2%, as expected, while core CPI excluding food and energy also rose an as expected 0.3%. Annual core CPI, however, climbed 3.1%, up from June's 2.9% and analysts' 3% consensus.  "CPI was in line with expectations but the trend is heading in the wrong direction," said Kathy Jones, chief fixed income strategist at Schwab.

CPI—which Jones says "may not prevent a rate cut" in September because policy is restrictive—suggests that progress toward the Fed's 2% inflation goal has stalled. But stocks inched up after the data. In other news, President Trump on Monday announced a 90-day extension of the deadline for the U.S. and China to formulate and agree on tariffs. The two countries evidently made progress during negotiations last month. The announcement removed one pressure point, but stocks didn't show much response as the decision was widely expected.

Stocks stayed on hold most of Monday ahead of CPI but selling accelerated in the last hour. Softness was widespread, with just one sector, staples, finishing higher, and health care unchanged. This lean toward defensive sectors showed up on a few days last week and might raise eyebrows if it continues, especially considering the market is in a seasonally weak period. And as info tech fell 0.7% Monday after last week's rally, no other sector came along to pick up the pieces.

1. CPI deeper dive: Drilling into CPI, the 2.7% annual increase was the same as in June, perhaps kept down by falling energy prices. But the 3.1% core increase was the highest since February. Shelter costs were the main driver of inflation in July. Items like home furnishings and apparel, which rose sharply in June perhaps reflecting tariff-related price increases, were up again in July but by a lower percentage. Household furnishing prices rose 0.7% and apparel rose 0.3%. On a less positive note, the "supercore services" CPI that removes housing along with goods, food, and energy, rose 0.48%, the biggest gain since January. "The largest contributor to the data was shelter costs, which continue to moderate, but core goods excluding new and used cars actually decelerated from June's pace, suggesting tariffs may not be having as large as impact as some expected," said Alex Coffey, senior trading and derivatives strategist at Schwab.
    
2. Pay to play for semiconductors eyed for margin impact: Shares of Nvidia (NVDA) and Advanced Micro Devices (AMD) both showed little reaction Monday after reports that the two chip makers will receive export licenses to sell Nvidia's H20 and AMD's MI308 chips in China in return for the U.S. government receiving 15% of revenues from those sales. This is an unconventional arrangement, to say the least, and aside from anything else could have investors focusing on the potential profit margin impact. While Nvidia's profit margin overall is very high at near 70%, any hit could be costly. Beyond these two companies, the policy also raises concerns that the Trump administration could target other large firms for a piece of their revenues. The question is, what could that portend for profit margins going forward, especially if the targeted companies compete in lower-margin sectors? And would companies that reject such ideas face punishment from the administration? Remember, sales of these Nvidia and AMD chips weren't allowed by the administration before the new arrangement got made. There could be sticks as well as carrots for corporations if this trend continues.
    
3. Gold, oil track geopolitical events ahead: Friday's expected meeting between President Trump and Russian leader Putin is an event out of the market's control, though any resulting cooldown in Ukraine would likely get a warm welcome from investors. While it's unclear how much progress can be made, investors may want to keep their eyes on the oil and gold markets this week for possible hints. U.S. crude oil recently fell to two-month lows below $64 a barrel, perhaps baking in hopes for progress on the Ukraine front, while gold hit new intraday all-time highs last week before backtracking sharply Monday. Not all the moves in gold and oil futures prices reflect the talks ahead, naturally, but more weakness in either this week could hint of hopes in the talks breaking ground. "The gold market can sometimes be a proxy for geopolitical risk," Schwab's Coffey said.

• Circle Internet Group (CRCL) jumped nearly 7% in pre-market trading after reporting that revenue jumped 53% in its latest quarter and cited strong early momentum on its payments network.
   
• Palo Alo Networks (PANW) added 1.5% after getting an upgrade from Piper Sandler to Overweight from Neutral saying bookings growth should reaccelerate.
   
• Chipotle (CMG) climbed 1% after getting an upgrade to Overweight from Neutral from Piper Sandler, which cited an improved risk/reward for shares.
   
• Apple (AAPL) fell 0.4% in the early going. Tesla (TSLA) CEO Elon Musk threatened "immediate" legal action against Apple, accusing Apple of unfairly favoring OpenAI on its iPhone, Bloomberg reported.
   
• BigBear.ai (BBAI) fell more than 30% before the open after quarterly revenue for the AI software firm missed consensus estimates and it cut its 2025 revenue outlook.
   
• On Holding (ONON) climbed 13% ahead of the open after the shoemaker beat analysts' earnings estimates.
   
• Tesla (TSLA) climbed nearly 3% yesterday, possibly in part due to President Trump extending the tariff deadline for China another three months.
   
• CoreWeave (CRWV) climbed nearly 8% yesterday as investors braced for today's earnings report after the close. The stock is up 32% since the start of the month.
   
• Intel (INTC) jumped 2.4% today after its CEO said he had a "candid" and "constructive" discussion with President Trump yesterday. Trump called the meeting "interesting."
   
• Chances of a Fed rate cut next month were around 90% soon after the CPI data, up from 86% a day ago, according to the CME FedWatch Tool.

Gold futures (/GC—candlesticks) had a rough go yesterday, falling 2.5% as President Trump extended the deadline 90 more days for China and the U.S. to come to terms on tariffs and said no tariffs would apply to gold. Worries about trade and U.S. fiscal policy had lifted gold more than 27% this year, but the sell-off took spot futures down near their 20-day moving average (blue line). Crude oil rose slightly Monday but has been in a sharp descent since early this month on hopes for an end to conflict in the Ukraine. If gold or crude rise between now and Friday's meeting of Trump and Putin, it could signal that market participants are losing hope in a resolution.

August 13: Expected earnings from Cisco (CSCO).
August 14: July PPI and expected earnings from Deere (DE), JD.com (JD), Tapestry (TPR), and Applied Materials (AMAT).
August 15: July retail sales, July industrial production, and preliminary August University of Michigan Consumer Sentiment.
August 18: Expected earnings from Palo Alto Networks (PANW).
August 19: July housing starts and building permits and expected earnings from Home Depot (HD) and Medtronic (MDT).