Daily Close: Tech leads as inflation cools

The next major macro catalyst is the July Producer Price Index on Thursday, August 13 at 8:30 a.m. ET. Markets will also continue digesting earnings from technology and AI-infrastructure companies after several strong reports helped lift growth stocks Wednesday.\n\nWhat this means: CPI reduced some immediate inflation anxiety, but PPI can either confirm that relief or put upward pressure back on yields. The cleaner bullish setup would be contained producer inflation paired with continued breadth.

July consumer inflation slowed to 3.4% year over year from 3.5% in June, while core inflation was about 2.5% year over year. The report was close enough to expectations to ease some immediate rate pressure, although inflation remains above the Federal Reserve's 2% objective and energy remains a source of uncertainty. Oil prices slipped during Wednesday's session after recent volatility tied to Middle East supply concerns.\n\nWhat this means: the CPI report was supportive for risk assets because it did not add a new inflation shock. It does not settle the September policy debate, so Treasury yields and Thursday's PPI remain important confirmation signals.

Technology was the clearest source of upside, with AI-linked names helping push the Nasdaq ahead of the broader market. At the same time, the Russell 2000 outperformed the S&P 500, showing that the session was not solely dependent on mega-cap technology.\n\nWhat this means: simultaneous strength in growth and small caps is healthier than a narrow index rally. The next question is whether that participation survives another inflation data point and whether cyclicals can continue to contribute.

The Nasdaq's outperformance showed that large-cap growth responded well to a less-threatening inflation backdrop. Nvidia and other AI-linked stocks were among the notable contributors as investors returned to the growth trade after recent pressure from oil and yields.\n\nThe important signal now is follow-through. If Treasury yields remain contained and technology holds Wednesday's gains, the market can rebuild momentum toward recent highs. If yields reverse sharply higher after PPI, growth leadership could fade quickly.

Base case: PPI is close enough to expectations that yields remain contained, allowing the S&P 500 and Nasdaq to consolidate Wednesday's gains while market breadth stays constructive.\n\nUpside-risk case: producer inflation comes in softer, yields fall, and technology plus small caps advance together. That would strengthen the case for a retest of recent highs.\n\nDownside-risk case: PPI surprises to the upside, yields jump, and Wednesday's growth-stock rebound reverses. That would put inflation sensitivity back at the center of the tape.\n\nThe key takeaway from Wednesday is that CPI removed an immediate obstacle without eliminating inflation risk. The market now needs confirmation from rates, PPI and follow-through in breadth.