WS #14010

Markets are rallying toward record highs on a second consecutive cool inflation print (July PPI +4.7% y/y vs +4.9% expected, down from +5.5% in June), which has cut September Fed rate hike odds to ~35% from ~50% two days ago. This is the dominant macro driver, lifting the S&P 500 above 7,800 for the first time and pushing the Nasdaq up ~1%. The rally is broad but led by chip and AI infrastructure names, with SanDisk soaring 15% on a bullish analyst day and memory stocks continuing their week-long surge. However, this positive tape is being partially offset by a sharp selloff in Cisco (down ~10%) after its AI revenue outlook disappointed, and Cerebras (down 14%) on a revenue miss, injecting some caution into the AI trade. Oil prices are easing (Brent ~$87-88, WTI ~$82-83) despite continued Hormuz tensions, as traders weigh the conflicting US-Iran claims of control over the strait. Iran's military has categorically rejected Trump's claim of US 'total control,' stating no vessel can transit without Tehran's permission, keeping the geopolitical risk premium intact but not escalating further. The AI infrastructure buildout thesis remains robust, with LITE and COHR reporting record results and strong forward guidance, and Nvidia's $500B third-party financing plan with Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs, and KKR validating the capex supercycle. Anthropic's IPO narrative continues to build, with investors expecting a $2T+ valuation, though the company is not discussing financials in early meetings. Counter-signals: the cool PPI is offsetting oil-driven inflation fears, and the US sending the USS George Washington to replace the exhausted USS Abraham Lincoln is a de-escalatory logistical move, though it does not resolve the underlying Hormuz standoff.