Market Recap: AI Stocks Lead Gains as Cisco Retreats Following Earnings
Throughout this week, AI-related stocks have been standout performers in the US equity market, fueled by investor optimism toward AI infrastructure, chips, and data center demand. However, Cisco Systems’ shares slipped significantly after its earnings release, despite briefly hitting an all-time high during intraday trading. The stock ultimately closed down more than 6%, highlighting lingering profit-taking pressures in select tech names.
Thursday’s US market open showed broad strength, supported by softer inflation figures and declining Treasury yields. Market participants are closely monitoring today’s US Producer Price Index (PPI) and oil price movements, alongside ongoing geopolitical uncertainties affecting sentiment.
Nasdaq Boosted by Robust Gains in Key AI Stocks
The S&P 500 closed at 7,748.50, up 0.26%, while the Nasdaq Composite advanced 0.54% to 26,588.49. The Dow Jones Industrial Average edged down 0.04%.
Notable AI-related stock advances included:
- CoreWeave, rising approximately 19%
- Super Micro, up around 19%
- Nebius, surging roughly 34%
- Nvidia climbing 3%
- Micron Technology gaining 4.9%
These moves underscore strong market confidence in AI-driven demand and associated hardware investments, driving significant sector momentum.
Easing Inflation Reduces Pressure on Rate Hikes
July’s US Consumer Price Index (CPI) rose a modest 0.1% month-over-month, bringing annual inflation down to 3.4% from June’s 3.5%. This moderation has lowered the probability of a Federal Reserve rate hike in September to around 40%, down from 54% just a week ago.
Lower anticipated interest rates tend to benefit growth stocks, particularly in the technology sector, as reduced borrowing costs enhance the present value of future profits. Investors await the PPI data today, as it reflects price trends at the wholesale level and can signal downstream inflation shifts.
Treasury Yields and Gold Prices Adjust
The 10-year US Treasury yield declined slightly to 4.68%. As a key global interest rate benchmark, this yields movement influences both equity and fixed income markets. A downward trend in yields generally supports growth stocks.
The US dollar index stood near 99.96, with the USD/JPY exchange rate close to 159.33.
Following a strong rally, gold prices have retraced somewhat, with spot gold near $1,384 per ounce and December futures around $1,441. Since August, gold has increased over 8%, driven primarily by reduced expectations for Fed tightening.
Oil Prices Dip Amid Supply Concerns and Geopolitical Risks
Brent crude traded near $87.95 per barrel, and WTI around $82.19. Short-term price pressure stems from weakening global demand forecasts and rising US inventories. However, tensions between the US and Iran around the Strait of Hormuz maintain a risk that disruptions to oil supply could swiftly trigger price spikes and market volatility.
Rising oil prices could fuel higher transportation and production costs, potentially reviving inflation concerns and impacting Federal Reserve policy outlooks, with knock-on effects for equities.
Agricultural Commodity Volatility Amid Black Sea Conflict
The ongoing conflict in the Black Sea region is disrupting wheat exports. Ukrainian strikes on Russian grain export infrastructure, including the port of Novorossiysk, have tightened supply and driven up grain prices. This increase may eventually raise costs for bread, pasta, cereals, animal feed, and meat and dairy products, directly affecting consumer prices.
Cisco’s Solid Earnings Insufficient to Halt Share Decline
Despite reporting robust growth and securing $400 million in AI infrastructure orders, Cisco’s shares dropped over 4% in after-hours trading. The decline reflects heightened expectations following the stock's run-up exceeding 60% earlier in the year, and results that, while positive, fell short of investor forecasts.
This episode highlights the critical role of expectations in driving stock price movements beyond just reported earnings.
Cerebras Faces Share Selling After Revenue Miss
Chipmaker Cerebras’s shares fell about 16% post-market following quarterly revenue that missed analyst estimates. Although full-year revenue guidance was raised, disappointed investors reacted to weaker-than-expected profit margins. The episode illustrates how high-valuation stocks can face steep declines on even modest earnings disappointments.
Key Focus: Producer Prices and Market Sensitivity
Current market conditions, shaped by easing inflation, slightly lower Treasury yields, and strong AI investment, remain supportive of equities, especially technology. Yet with the S&P 500 nearing historical highs, upside momentum faces challenges.
Today’s PPI release is crucial for gauging inflation trends at the wholesale level. Meanwhile, oil price developments and geopolitical risks will continue to influence inflation expectations and market sentiment. Investors should also monitor whether Cisco’s post-earnings weakness precipitates broader semiconductor sector adjustments, as upcoming earnings reports will offer further clarity on whether recent market fluctuations mark a temporary correction or signal a deeper trend.