MPC Markets Morning Call — 14th August 2026: S&P 500 Hits Record as Inflation Cools, Cisco Disappoints
The S&P 500 closed at an all-time high on Thursday after soft producer price data cemented expectations the Fed will hold rates steady in September. But not every story was bullish — Cisco slumped 8% despite strong AI-linked demand, oil snapped a six-day rally, and the US government sold 30-year bonds at the highest rate in a quarter of a century.
Back-to-back benign inflation prints — CPI on Wednesday, PPI on Thursday — have dramatically shifted the rate outlook, with markets now pricing only a 34% chance of a September Fed hike, down from above 50% just days ago. The S&P 500 surged 0.7% to a record close of 7,799, breaching 7,800 intraday for the first time. The tech-heavy Nasdaq added 0.8%, lifted by memory chip names Sandisk (+13.7%) and Micron (+4.2%), while Netflix jumped 5.4% after Bill Ackman unveiled a major new position. Cisco was the session’s biggest casualty, dropping 8.4% as its AI revenue guidance of $7.5 billion fell short of sky-high expectations built on a 60%+ YTD rally. Oil finally lost steam, with Brent dropping 2.2% to $87 as an unexpected 17.4 million barrel US crude build and demand forecast cuts from both the IEA and OPEC offset Hormuz disruption fears. After the bell, Applied Materials beat and raised, signalling continued strength in AI chip equipment demand. ASX futures are pointing down 37 points.
The S&P 500 rose 0.7% to a record close of 7,799, crossing 7,800 intraday for the first time, as soft PPI data pushed September rate-hike odds down to 34%.
July PPI was flat month-on-month and rose 4.7% year-on-year, both softer than expected, reinforcing the CPI cooldown and giving Fed Chair Warsh more breathing room.
Cisco slumped 8.4% despite strong AI demand — its $7.5 billion AI revenue forecast disappointed investors who had driven the stock up 60%+ YTD.
Oil snapped a six-day winning streak with Brent falling 2.2% to $87, as a surprise 17.4 million barrel US crude build and IEA/OPEC demand cuts outweighed Hormuz concerns.
The US sold 30-year bonds at 5.216%, the highest rate since 2001, underscoring the growing cost of financing America’s deficit even as shorter-end yields fell.
ASX 200 futures are down 37 points (0.4%) to 9,091 — QBE Insurance and Abacus Storage King report today, with new loan commitments data due at 11:30am AEST.
Wall Street Hits New Highs on Cooling Inflation
Wall Street ended at a record on Thursday as rate-sensitive technology stocks got a major lift from a second consecutive day of benign inflation data. The S&P 500 climbed 0.7% to close at 7,799, after earlier crossing the 7,800 level for the first time and posting an all-time intraday high of 7,817. The Nasdaq advanced 0.8% while the Dow added a more modest 0.1%, held back by Cisco’s slide.
The July producer price index came in flat on a month-over-month basis, with the annual rate decelerating to 4.7% from 5.5% in June — both readings softer than consensus. Core PPI added just 0.2% monthly and 4.2% annually. Following Wednesday’s in-line CPI, the data prompted traders to pare September rate-hike odds to roughly 34%, with a hold now priced at nearly 66% probability on the CME FedWatch tool.
“Interest rate hike expectations have receded following the deceleration of inflation in both the CPI yesterday and the PPI today,” said Michael O’Rourke, chief market strategist at Jones Trading. “We are seeing the early signs of the broadening rally returning. The S&P 500 Equal Weight, S&P 400, and Russell 2000 are viewed as the key beneficiaries of a less hawkish Federal Reserve.”
Richmond Fed President Tom Barkin laid out an argument to hold rates steady, noting signs that inflation is declining. His Cleveland counterpart Beth Hammack took the opposite view, questioning whether the inflation slowdown will continue and reiterating her call to raise rates now. Markets are siding with the doves — a rate hike isn’t fully priced until December.
Cisco Stumbles Despite AI Boom; Applied Materials Shines After Hours
Cisco Systems was the session’s biggest drag, falling 8.4% despite reporting strong quarterly results driven by runaway AI infrastructure demand. CEO Chuck Robbins told the Wall Street Journal the company had not experienced this level of demand across its entire portfolio in three decades, with billions in orders from megacap tech firms. But with the stock already up more than 60% year-to-date heading into the print, investors were looking for more — and Cisco’s projection of $7.5 billion in AI-linked revenue for the fiscal year fell short of lofty expectations.
After the bell, Applied Materials delivered the goods, beating third-quarter estimates with adjusted EPS of $3.50 (vs. $3.40 expected) and revenue of $9.12 billion (vs. $8.99 billion). The chip equipment maker raised its fourth-quarter outlook to $9.75–$10.75 billion in revenue and $3.82–$4.22 in EPS, both comfortably above consensus, citing “unprecedented demand” driven by AI adoption.
“Big Short” investor Steve Eisman warned that the AI boom depends heavily on the success of just two companies — OpenAI and Anthropic — which he said account for roughly 70% of AI-related revenue at Microsoft, Amazon, Google, and Oracle. He flagged Chinese open-weight AI models as the “Achilles’ heel” of the trade, warning a price war could emerge. Meanwhile, Michael Burry has placed bearish bets against Nvidia and the broader semiconductor sector.
Oil Snaps Rally as Crude Builds and Demand Forecasts Slide
Brent crude snapped a six-day winning streak, settling 2.2% lower at $87.00 a barrel, while WTI shed 2.5% to $81.18. The selloff was triggered by a surprise 17.4-million-barrel jump in US commercial crude inventories to 424.4 million barrels — the highest since early June — against expectations for a draw. Both the IEA and OPEC cut their demand forecasts: the IEA now expects world oil demand to decline by 1.6 million barrels per day in 2026, while OPEC trimmed its growth estimate to 600,000 bpd from 800,000 bpd.
The geopolitical backdrop remains tense but failed to support prices on the day. The US and Iran continue to independently assert control over the Strait of Hormuz, with Iran’s Armed Forces declaring that “no commercial vessel or oil tanker will be able to transit safely without Iran’s authorization.” Traffic through the strait has trickled to its lowest levels since mid-May, while Houthi attacks in the Bab el-Mandeb Strait have added another layer of supply disruption concern.
Bond Auction Sounds a Deficit Warning; Dollar Slips
Treasury yields fell on the soft PPI data, with the 10-year down 5.6 basis points to 4.636% and the 2-year off 5.4 basis points to 4.145%. But the day’s headline in fixed income was the US government’s sale of $25 billion in 30-year bonds at 5.216% — the highest rate since 2001. The auction underscored investors’ growing demand for compensation to finance the nation’s expanding deficit, a headache for the White House ahead of November’s midterms.
The US dollar index slipped 0.1% to 99.94, snapping a three-day win streak as Fed tightening bets faded. Gold fell 1.4% to $4,348 an ounce. Elsewhere, Netflix surged 5.4% after Bill Ackman unveiled a new holding as part of Pershing Square’s biggest portfolio overhaul in years, while Tapestry plunged 16% on a muted revenue outlook. In China, memory chipmaker CXMT overtook Tencent as the most valuable Chinese company with a $524 billion market cap — a stark illustration of the market’s shift from “clicks to chips.”
Britain’s GDP returned to growth in June, with the economy expanding 0.4% quarter-on-quarter in Q2 following 0.6% in Q1. That puts the UK on course for the strongest first-half growth in the G7. However, Deutsche Bank warns the pace is unlikely to be sustained, with elevated energy costs, pump prices, and budget uncertainty set to weigh on the second half.
The Day Ahead: ASX Opens Lower; Data-Heavy Friday
ASX 200 futures are pointing to a softer open, down 37 points or 0.4% to 9,091, despite Wall Street’s record session. QBE Insurance and Abacus Storage King are among the companies reporting today. NAB’s economists are watching the 11:30am AEST release of new loan commitments data, which they expect to show a second consecutive fall in new lending, reflecting the broadening housing slowdown.
Globally, it is a data-heavy Friday with Taiwan Q2 GDP (revised), Germany July producer prices, the flash estimate of euro zone Q2 GDP, US July retail sales, and the preliminary August University of Michigan consumer sentiment and inflation expectations readings all on the calendar. After Applied Materials’ strong after-hours beat, semiconductor and AI infrastructure names will be closely watched at the open.
