U.S. Stock Market Trends (August 13): CPI Meets Expectations as Nasdaq Leads Gains; Coherent Beats Expectations but Turns Lower After Hours

Written by: Chaoxiang Research

July CPI data fully met expectations, expectations for a Fed rate hike were pushed lower, and the three major U.S. stock indexes closed mixed. The S&P 500 rose 0.26% to 7,748.5, approaching its record high; the Nasdaq rose 0.54% to 26,588.49; and the Dow Jones edged down 0.04% to 53,770.27. The VIX stood at 14.94, essentially unchanged. CPI growth narrowed to 3.4% year over year, while core CPI growth slowed to 2.5% year over year. Market bets on a September rate hike remained around 45%. However, the real focus was not on the indexes but on the AI sector. Optical communications, AI cloud services, and memory chips all surged, with Coherent jumping sharply, Nebius soaring 34%, and SK hynix rising more than 9%. However, the earnings released after the close told a different story: Coherent initially fell 8% after reporting results above expectations, Cerebras dropped more than 17% after hardware revenue unexpectedly declined, and Cisco, whose total AI orders reached $4 billion, initially rose 8% before falling more than 6% after hours. The AI sector is undergoing a brutal “earnings validation” process.

CPI Meets Expectations, September Rate Hike Probability Remains at 45%

U.S. July CPI rose 3.4% year over year and 0.1% month over month, while core CPI rose 2.5% year over year and 0.2% month over month. All four figures matched market expectations. CPI remained moderate for the second consecutive month. Inflationary pressure did not worsen further, but there was no significant improvement either.

After the data was released, traders maintained their bets on a 45% probability of a Fed rate hike in September. The U.S. Dollar Index fell initially before rising, gaining 0.22% intraday. The yen fell to 159.48, approaching the key psychological threshold of 160. The 10-year Treasury yield reached its highest level since the 2007 financial crisis. The 10-year Treasury yield fell 1.57 basis points to 4.6729%, while the 2-year Treasury yield rose 0.53 basis points to 4.2267%.

The Philadelphia Semiconductor Index rose 0.53%, outperforming the major indexes.

AI Stocks Surge Across the Board as Funds Pour In After CPI

After the CPI data was released, funds flowed heavily into the AI sector. AI cloud services and memory stocks posted the largest gains.

AI cloud services led the market. Nebius’s second-quarter revenue increased 454% year over year, while AI cloud sales grew 514%, sending its stock soaring 34%. CoreWeave rose more than 19%. The gains at these two companies show that demand for AI computing-power rentals continues to grow explosively, and their earnings figures alone are sufficient to support their valuations.

Optical communications remained strong. Lumentum rose more than 13%, while Coherent surged. The optical communications sector had already accumulated substantial gains over the past several weeks. Funds continued adding to their positions after the CPI release, indicating confidence in the durability of demand for optical communications.

Memory chips also strengthened. SK hynix rose more than 9%, while Seagate rose more than 7%. South Korean media reported that Samsung and SK hynix are preparing “epic” dividend and buyback programs that could total more than $140 billion. If implemented, the plans would directly boost valuations across the memory sector.

AI chipmaker Cerebras surged intraday, but those gains were completely erased after the company released its earnings report after the close.

The Brutal Reality of Earnings Season: Beating Expectations Is No Longer Enough

After-hours earnings reports from Coherent, Cerebras, and Cisco caused the optical communications and AI chip sectors, which had surged during the day, to collectively reverse course.

Coherent beat expectations yet still fell more than 8% after hours. Coherent reported fourth-quarter revenue of $2.05 billion, up 34% year over year and above the market expectation of $1.99 billion; adjusted earnings per share came to $1.74, up 74% year over year and above the expected $1.62. Both results and guidance beat expectations across the board, but the stock initially fell more than 8% after hours. The market’s expectations for optical communications have shifted from “growth” to “continued growth above expectations.”

Cerebras’s hardware revenue unexpectedly declined, sending the stock plunging more than 17% after hours. Cerebras reported second-quarter revenue below expectations, with hardware sales unexpectedly declining and sending the stock down more than 18% at one point after hours. Cerebras’s intraday gain of more than 11% was completely erased after hours. Not every AI chip player can get a share of the pie, and the volatility of hardware demand is being repriced by the market.

Cisco’s AI orders surged, but the stock initially rose 8% after hours before falling more than 6%. Cisco reported record fourth-quarter revenue of $17.3 billion, with total AI orders reaching $4 billion. After the earnings release, Cisco, which had closed up nearly 2.9%, initially rose nearly 8% after hours before reversing to a loss of more than 6%. The AI trade is crowded and valuations are elevated, with Cisco’s price-to-earnings ratio near 30 times, compared with 22 times for the S&P 500. Investors are demanding increasingly more proof that orders are sustainable.

Gold Extends Its Rally, Bitcoin Rebounds Amid Volatility

Gold rose for a third consecutive trading day. Spot gold rose more than 1% to $4,412.40 per ounce, remaining above $4,400. Spot silver retreated from its intraday high, up 1.02% at $65.322 per ounce. With inflation remaining moderate and rate hike expectations cooling, gold continues to attract funds as a hedging instrument.

Bitcoin rebounded from around $63,200 and climbed back above $64,250. Ethereum opened at $1,894. Digital assets experienced a wave of leveraged-position liquidations before the CPI data was released, with total long and short positions declining by approximately $174 million before rebounding after the data was announced.

WTI crude oil closed up 1.3% at $83.20, while Brent crude closed up 1.36% at $88.91. U.S.-Iran negotiations remain deadlocked, and oil prices continued to rise.

What to Watch Today: Earnings Digestion and Retail Data

The market’s core task on Thursday will be digesting the massive volume of earnings reports released after the close.

Whether Coherent and Cerebras can stabilize during Thursday’s regular trading session after their after-hours declines will determine sentiment in the optical communications and AI chip sectors. Coherent’s results themselves were not poor; the market is criticizing the “insufficient magnitude of the beat.” Cerebras, by contrast, is facing a substantive problem with hardware demand. The two situations are fundamentally different.

Cisco’s performance also merits attention. The surge in AI orders is a fact, but the reversal from gains to losses after hours indicates that the market’s tolerance for high valuations is declining. If Cisco continues to weaken during Thursday’s regular session, it could weigh on the entire enterprise networking equipment sector.

Retail sales data will also be a key macroeconomic variable on Thursday. If consumer data is strong, confidence in a “soft landing” will strengthen; if it weakens, concerns about a cooling labor market will resurface.