Stocks Swivel At Midday As Hot PPI Meets AI Market Resilience

Thursday, August 14, 2025 – Mid-Session Report
Wall Street entered the lunch hour still wrestling with an inflation surprise that would normally rattle risk appetite, yet the headline indices hover only fractions below their all-time peaks. The dynamic underscores a market whose tone is being set less by macro data and more by the outsized gravitational pull of artificial-intelligence spending and a handful of mega-cap enablers.

Market Overview#

Intraday Indices Table & Commentary#

The S&P 500 inched into positive territory after a brief stumble out of the gate, reflecting the push-and-pull between elevated inflation data and relentless demand for AI-linked names. The NASDAQ Composite added just over a quarter-percent at its morning high as traders rotated back toward software and semiconductor bellwethers; by midday it is still green, albeit modestly. Dow constituents with heavier cyclical exposure pulled the DJIA lower by roughly one-quarter of a percent. Meanwhile, the CBOE Russell 2000 Volatility Index surged more than five percentage points, hinting at greater stress in smaller-cap corners of the market.

Liquidity has been fair for an August session: S&P 500 volume is tracking near 1.4 billion shares versus a fifty-day average a shade above three billion, confirming that few players are willing to commit aggressively until clearer guidance from the Federal Reserve emerges.

Macro Analysis#

Economic Releases & Policy Updates#

At 08:30 ET, the Bureau of Labor Statistics reported that the Producer Price Index rose 0.9 percent month-over-month and 3.3 percent year-over-year in July, far above the respective consensus estimates of 0.4 percent and 2.5 percent. According to BLS tables, more than half the monthly increase stemmed from higher margins in equipment wholesaling, a read-through to tariff-related cost pressures that have built steadily since early spring. St. Louis Fed President Alberto Musalem told CNBC that tariff pass-through "should fade after two or three quarters," yet conceded the risk of persistence remains "reasonable."

Futures markets immediately reduced the probability of a September rate cut to under 35 percent from nearly 50 percent yesterday (CME FedWatch). Treasury yields spiked ten basis points in the two-year and five basis points in the ten-year before retracing about half of those moves by late morning. The curve remains deeply inverted at –44 basis points, an ongoing signal of growth anxiety.

Global and Geopolitical Developments#

Overnight headlines out of Anchorage confirmed that high-level talks between U.S. and Russian delegations on Ukraine are progressing. Bloomberg cited unnamed officials noting an outline of limited energy-corridor concessions on the table. Market reaction has been muted so far, though options pricing in European defense contractors eased. U.S. defense prime LHX is bucking the trend with a two-third-percent gain as traders fade worst-case peace scenarios.

On the trade front, White House adviser Peter Navarro said a Section 232 national-security review will target pharmaceutical imports, adding another potential lane of tariff risk. While healthcare stocks have largely shrugged off the comment, supply-chain analysts warn of upward pressure on drug-component costs by year-end.

Sector Analysis#

Sector Performance Table#

Source: Monexa AI real-time sector tracker, 12:30 ET

The day’s leadership is notable: Communication-services names such as NFLX and GOOGL are pacing gains on renewed streaming optimism and a high-profile Google–Oracle AI partnership. Defensive groups—Consumer Staples and Utilities—are also bid, a classic inflation hedge. Technology’s modest uptick masks sharp divergences: large-cap platform firms trade higher while second-tier hardware suppliers lag.

Industrials and Energy are under heaviest pressure. Deere’s earnings miss and cautious guidance shaved nearly seven percent off DE, undermining the farm-machinery complex. Solar equipment names ENPH and FSLR dropped sharply after overnight commentary from brokers flagging order deferrals in Europe.

Company-Specific Insights#

Midday Earnings and Key Movers#

The morning’s marquee disappointment belongs to optical-components maker COHR. Shares cratered more than 20 percent after fiscal Q4 results delivered a narrow revenue beat but guided Q1 sales to a midpoint of $1.53 billion, below the Street’s $1.55 billion. Management cited a "lumpy" transition toward 800-gigabit and 1.6-terabit modules and softer industrial-laser demand. The plunge highlights how richly-valued AI supply-chain names can suffer brutal repricing on even incremental hiccups.

Elsewhere, MSFT reclaimed Tuesday’s post-earnings downdraft, up about 0.6 percent as Citi reiterated a $613 price target and pointed to Azure’s sustained 33 percent growth clip. NVDA is fractionally positive after Piper Sandler boosted its twelve-month objective to $225, stressing upside in China revenue despite export-license noise.

Retail luxury was rocked by a double-digit collapse in TPR following its warning on European demand. However, e-commerce juggernaut AMZN rose more than 3 percent intraday as channel checks from Morgan Stanley flagged stronger Prime Day follow-through.

On the banking side, WFC gained 1.3 percent, reaping the benefits of a steeper yield curve, while fintech peers PYPL and COIN slumped on risk-off flows into crypto-adjacent assets.

Extended Analysis#

Intraday Shifts and Momentum#

The session’s core narrative is the market’s willingness to fade macro negatives in favor of secular AI demand. Data compiled by RenMac this morning show information-processing equipment and software now account for more than one percentage point of GDP growth, eclipsing the historic contribution of consumer spending—the first such inversion in the post-war era.

This shift manifests on tape in two ways. First, the five largest AI platform companies—NVDA, MSFT, GOOGL, AMZN and PLTR—collectively add around forty basis points to the S&P 500 today, more than offsetting the entire drag from Industrials and Energy. Second, volatility metrics such as the VIX remain historically subdued; today’s mid-teens print would have been unthinkable in prior periods of three-percent producer inflation.

Market internals reveal however that breadth is deteriorating. Only 45 percent of S&P components trade above their 20-day moving average, down from 61 percent a week ago. The AI halo is masking stress in lower-beta cyclical names, a situation reminiscent of late-cycle leadership patterns in 2018 and 2021.

From a positioning standpoint, Goldman Sachs prime brokerage notes that systematic-trend funds lifted gross exposure by two percentage points since Monday, completely concentrated in Nasdaq futures. Yet cash equity desks report net selling in small-cap value ETFs. The divergence suggests that any reversal in the AI complex could spark a mechanical de-risk that cascades through passive vehicles.

Credit spreads are inching wider but remain contained. The CDX IG index trades at 63 basis points, versus 60 yesterday. Investment-grade issuance calendars remain wide open; Walmart tapped the market this morning with a three-part deal priced twenty basis points inside initial talk, a tangible vote of confidence in consumer-defensive earnings quality.

Conclusion#

Midday Recap and Afternoon Outlook#

By early afternoon the tape is defined by paradox: hotter-than-expected PPI should, on paper, have been a textbook catalyst for profit-taking. Yet with AI capital expenditure topping $350 billion annualized—now larger than telecom’s late-1990s binge—investors continue to grant technology bellwethers a valuation pass. Whether that stance survives hawkish Fed rhetoric in coming days will dictate short-term index direction.

Traders head into the back half awaiting the 2 p.m. ET release of the Fed’s July meeting minutes. Any sign of discomfort about still-elevated services inflation could nudge rate-cut hopes even lower, which in turn could test equity multiples. Watching how the Nasdaq reacts relative to the Dow during that release will be telling: persistent divergence would confirm the market’s narrow leadership and raise the probability of a volatility spike.

Earnings flow is light after the close, but tomorrow’s print from AMAT provides another read on semiconductor demand breadth beyond Nvidia’s universe. Macro traders will track tomorrow’s University of Michigan consumer-sentiment survey for evidence that hot wholesale prices are bleeding into inflation expectations.

Key Takeaways and Implications for Investors
The midday picture underscores three investable conclusions. First, inflation is not dead: producer prices are accelerating and may stay sticky into year-end, arguing for selective exposure to companies with genuine pricing power. Second, AI demand remains a powerful antidote to macro fear, but leadership is narrowing and fragility is rising under the surface. Portfolio safeguards—cash buffers, low-duration bonds, and defensive equity sleeves—deserve fresh attention. Third, company-specific execution risk is being punished severely; the rout in COHR is a reminder that narratives alone cannot sustain rich multiples. For investors over-weight the AI supply chain, continuous validation of order pipelines and margin integrity is essential.
As the afternoon unfolds, watch the ten-year yield’s ability to stay below 4.40 percent and the VIX’s reaction to Fed minutes. Stability in both would keep the soft-landing story intact; renewed spikes would force a broader market reassessment ahead of September’s policy meeting.