Good Morning Investors,
Yesterday’s wholesale surprise validated a core principle of mature bull markets. Policy noise can shake intraday sentiment without breaking structural momentum. PPI’s 0.9% monthly jump raised eyebrows, but the broader story remains controlled disinflation inside a resilient growth backdrop. This morning’s retail sales will tell us whether Thursday’s print signals genuine inflation pressure or a one-off from supply chains and tariffs.
Opening Bell: Divergence that signals strength
Futures are split in a constructive way. Dow ($DIA ( ▲ 0.02% )) +0.6 percent with records in sight, S&P 500 ($SPY ( ▼ 0.27% )) modestly higher, Nasdaq ($QQQ ( ▼ 0.59% )) fractionally lower. That rotation favors breadth over narrow momentum and is consistent with a soft-landing path. The 8:30 a.m. ET slate brings retail sales (consensus +0.5 percent), import and export prices, plus Michigan sentiment at 10:00. A firm consumer read would keep the PPI scare contained to a single session.
Strategic Framework: Policy recalibration, not reversal
PPI rose 3.3 percent year over year, the fastest since February. Markets did what they should. They trimmed the probability of a 50 bp move, nudged pause odds toward 10 percent, yet kept September easing as the base case. Employment remains steady with low layoffs, inflation is episodically hot rather than systemically re-accelerating, and financial conditions are not restrictive enough to derail earnings. Powell at Jackson Hole next Friday likely emphasizes gradual normalization over reactive policy swings.
Abroad, Europe grinds higher on earnings, China just logged its best week in nine months despite soft data, and Japan’s Nikkei sits at a record on a weaker yen and improving indicators. Global risk remains supported even as regional dynamics differ.
Technology and National Security: Capital follows strategy
Intel ($INTC ( ▼ 6.99% )) is higher premarket on reports of government stake discussions. Strategic onshoring and technological sovereignty now inform valuation for critical compute and foundry capacity. On the flip side, Applied Materials ($AMAT ( ▼ 0.78% )) guided Q4 revenue to 6.7 billion dollars, below Street, citing China digestion and policy timing. We view this as a sequencing issue inside a multi-year AI capex cycle, not a thesis break. Positioning preference remains for domestic capacity, clear government partnerships, and diversified AI exposure.
Corporate Developments: Signals, not just headlines
UnitedHealth jumped after Berkshire disclosed a 5.0 million share stake. That is a quality signal for managed care as investors add defense in a noisy policy week.
Intel rallied on potential federal equity support. Direct backing would be a meaningful accelerant for the foundry pivot.
Applied Materials guided below consensus, highlighting export controls and leading-edge timing risk even as Q3 revenue and EPS beat.
Meta faces calls for a congressional probe of chatbot policy. Governance remains an overhang for large platforms.
Deere tightened the outlook as tariffs and weak crop prices shift buyers toward rentals.
Devon Energy signed a 10-year supply deal with Centrica that is equivalent to five LNG cargoes per year from 2028.
Boeing saw an 81 million dollar trade-secret award reinstated on appeal in the Zunum case.
Lyft founders exited the board as the planned transition completed.
Kenvue drew Sachem Head as a new activist holder.
T1 Energy and Corning agreed to build a fully domestic solar chain aligned with new eligibility rules for clean-energy credits.
Hedge fund positioning corroborates the leadership picture. Several large managers increased Big Tech exposure in Q2, leaning into the AI earnings flywheel that continues to outgrow consensus.
Capital Markets: Animal spirits with discipline
August is usually quiet. Not this year. Deal count and proceeds have already doubled a typical August. Bullish raised over 1 billion dollars and opened 143 percent above offer before settling, while Circle, Chime, and CoreWeave kept the tape active. The pipeline into year-end looks healthy. Equity underwriting fees improved at major banks last quarter, and that trend should extend if volatility stays orderly.
Portfolio Positioning: Tactical tweaks, strategic consistency
Added healthcare selectively where pessimism created valuation gaps to operating reality. Berkshire’s UnitedHealth ($UNH ( ▼ 1.45% )) position is a helpful headline after making this change a few days back.
Trimmed mega-cap momentum after a powerful April to August run, added to enterprise software with visible AI monetization.
Leaned into small and mid caps that benefit most from easing as investors front-run September.
Alphabet ($GOOG ( ▼ 1.14% )) remains a core long. It is building AI’s backbone. Near-term cash flow strain is the price of durable share capture in cloud and applied AI.
Today’s Calendar
08:30 NY Fed Manufacturing (Aug): cons 0.0, prior 5.5
08:30 Import Prices m/m (Jul): cons 0.0 percent, prior 0.1 percent
08:30 Export Prices m/m (Jul): cons 0.1 percent, prior 0.5 percent
08:30 Retail Sales m/m (Jul): cons 0.5 percent, prior 0.6 percent
08:30 Retail Sales ex-autos m/m (Jul): cons 0.3 percent, prior 0.5 percent
08:30 Retail Control m/m (Jul): cons 0.4 percent, prior 0.5 percent
09:15 Industrial Production m/m (Jul): cons 0.0 percent, prior 0.3 percent
09:15 Capacity Utilization SA (Jul): cons 77.5 percent, prior 77.6 percent
09:15 Manufacturing Output m/m (Jul): cons −0.1 percent, prior 0.1 percent
10:00 Business Inventories m/m (Jun): cons 0.2 percent, prior 0.0 percent
10:00 Univ. of Michigan Sentiment prelim (Aug): cons 62.0, prior 61.7
10:00 U. Mich Conditions prelim (Aug): cons 67.9, prior 68.0
10:00 U. Mich Expectations prelim (Aug): cons 56.5, prior 57.7
10:00 U. Mich 1-yr inflation expectations (Aug): prior 4.5 percent
10:00 U. Mich 5-yr inflation expectations (Aug): prior 3.4 percent
Analysts’ Notes
Acadia Healthcare: Raymond James downgrades to Outperform from Strong Buy; price target to 26 from 40, citing free cash flow concerns and likely model changes with aggressive bed expansion.
CF Industries: BofA Global Research downgrades to Underperform from Neutral; price target to 82 from 93, on valuation and potential ammonia oversupply pressuring earnings and margins.
eBay: Argus Research downgrades to Hold from Buy, pointing to stretched near-term valuation and tariff uncertainty.
Ibotta: BofA Global Research downgrades to Underperform from Neutral; price target to 24 from 57, on a weaker outlook and increased uncertainty around the growth timeline.
State Street: Truist Securities raises price target to 125 from 116; notes higher revenues from stronger management and servicing fees as equity markets lift client asset levels.
Risk Management and Outlook
The key risk event is Powell at Jackson Hole. Expect data dependence over pre-commitment. We are also watching Trump–Putin talks for sanction signals that could alter commodity and European risk premia. Energy and defense exposures provide natural hedges.
Final Thought
Yesterday did not break the market. It tested it. What we saw was rotation, not liquidation, and measured volatility inside a healthy price-discovery process. Our roadmap is unchanged. Overweight technology infrastructure, energy security, healthcare quality, and financials levered to normalized policy. Trim where gains are extended, add where cash flows are durable, and use policy headlines to improve entry points. The convergence of AI monetization, policy normalization, and expanding earnings breadth still argues for higher highs into the cut.
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Dan Sheehan
This newsletter is for informational purposes only and should not be considered as investment advice. Please consult with your financial advisor about your specific situation.