CPI Sparks Midday Tech Rally as Rate-Cut Bets Rise

Introduction#

Tuesday’s session (12 August 2025) has flipped the playbook from last week’s defensive drift. From the opening bell, equity traders responded to July’s milder-than-feared Consumer Price Index (CPI) print by rotating into growth and cyclical pockets that benefit most from cheaper money. At midday the major indices are all lodged near session highs, volatility gauges are retreating, and the breadth of gainers within the S&P 500 has widened decisively compared with Monday’s close.

Market Overview#

Intraday Indices Table & Commentary#

According to intraday composite data from Monexa AI, the NASDAQ Composite has notched a fresh all-time high at 21,650.57, powered by outsized moves in the semiconductor complex. The CBOE Volatility Index (^VIX) has broken below 15 for the first time since May, signaling a notable unwinding of short-term hedges.

In dollar terms roughly US$1.45 trillion of market cap has been added since the open, reversing Monday’s $890 billion drawdown. Turnover is equally telling: composite NYSE/NASDAQ volume is tracking 16% above the 30-day average, a sign that today’s rally is underpinned by real participation rather than algorithmic churn.

Macro Analysis#

Economic Releases & Policy Updates#

At 8:30 a.m. ET the Bureau of Labor Statistics reported that headline CPI rose just 0.2% month over month, in line with economists surveyed by Reuters. More crucial for policy watchers, core CPI climbed 0.3% m/m and 3.1% y/y, the slowest annualized pace since January. Minutes after the release, Fed funds futures priced the probability of a 25-basis-point cut at the 17 September FOMC meeting at 62%, up from 44% yesterday (CME FedWatch data).

Bloomberg Television highlighted fresh commentary from Kansas City Fed President Jeffrey Schmid, who called the print “encouraging” but added that policy remains “modestly restrictive.” While two other regional presidents voiced caution, the market’s take-away is clear: the bar for a first cut keeps falling.

Global/Geopolitical Developments#

Overnight headlines from Beijing’s Commerce Ministry confirmed that tariff exemptions on U.S. semiconductor equipment will be extended through year-end, easing supply-chain angst and providing an additional tail-wind to chip equipment names such as ON and MCHP. Meanwhile oil prices are holding below US$83 despite renewed drone activity near Black Sea terminals, muting any inflationary spill-over into energy equities.

Sector Analysis#

Sector Performance Table#

A surface read shows Communication Services atop the leaderboard, yet the more pivotal story is the micro-surge in semiconductors within Technology and the sudden pivot back into travel-linked names inside Industrials and Consumer Cyclical.

• In chips, NXPI +7.28%, ON +7.26%, and MCHP +6.85% are pacing gains as traders seize on hopes that looser financial conditions can sustain capex demand.
• Airlines are the day’s dark-horse winners: UAL +9.41% and DAL +8.19% are posting their best intraday moves since early April on TSA checkpoint data showing a 14% year-on-year increase in weekend traveller throughput.
• Utilities are green but bifurcated. Merchant generators like VST +3.79% track higher power-price expectations, whereas rate-sensitive regulated plays such as NEE –1.59% lag as lower bond yields erode the group’s traditional defensive appeal.

Company-Specific Insights#

Midday Earnings or Key Movers#

The earnings tape delivered a binary set of outcomes, underscoring why forward guidance now trumps backward-looking beats.

GDOT +30.26% vaulted after the banking-as-a-service specialist topped Q2 revenue estimates by nearly US$40 million and lifted FY25 EPS guidance to US$1.28–1.42. Management cited “balance-sheet optimization” and “expense discipline,” signalling that incremental margin leverage is back on the table even before any rate relief materialises.

SE +20.51% likewise lit a fire under the Southeast-Asian tech space. Revenue expanded 38% year on year to US$5.3 billion, smashing the US$4.55 billion consensus tracked by Bloomberg. Momentum in Shopee’s gross merchandise value (+28.2%) suggests e-commerce penetration remains structurally elevated post-pandemic, while digital finance bookings grew 70%, countering investor worries that credit risk would curtail growth.

Not all beats are equal. CE –10.81% slipped after flagging Q3 EPS of US$1.10–1.40, at least 20% below Wall Street’s prior mean. The company blamed “order books building at a slower pace,” an admission that industrial restocking has not yet reached chemical intermediates. Similarly CAH –6.97% is being punished for missing the top-line despite raising FY26 EPS guidance; distributors rarely get the benefit of the doubt when revenue momentum stalls.

Meanwhile TKO +1.93% extended Monday’s 7% pop after it inked a seven-year, US$7.7 billion rights deal with Paramount Skydance. Roth Capital lifted its target to US$210, arguing the pact provides “line-of-sight visibility on cash flow.” The stock is also on watch for S&P 500 inclusion once liquidity thresholds reset in September.

A more cautionary tale is ACVA –17.68%. Needham’s surprise price-target cut to US$16 ahead of Thursday night’s earnings triggered forced de-risking by momentum funds, reminding traders that single-stock volatility remains extreme even on quiet macro days.

Analyst Actions & Other Catalysts#

CMG +2.61% got a lift from Piper Sandler’s shift to Overweight. The firm trimmed its 12-month price objective to US$50 (from US$53 on a post-split basis) yet contends that the 31% year-to-date drawdown “prices in margin compression that may not fully materialize.”

Alphabet’s GOOG +1.37% is digesting an eye-catching but speculative US$34.5 billion bid from AI start-up Perplexity for its Chrome browser. While sources quoted by The Wall Street Journal suggest regulatory divestiture is improbable, the chatter is adding a modest risk premium to Alphabet’s sum-of-parts calculus.

Extended Analysis#

Intraday Shifts & Momentum#

Today’s tape is the first in nearly a month where rising real yields are not crowding out high-duration assets. Ten-year breakeven inflation expectations dropped 6 basis points post-CPI, while the nominal ten-year Treasury yield is flat at 4.14%, producing a mild bull-steepening that equities historically applaud. That shift is felt most acutely in semis and software-as-a-service, two sub-groups where cash-flow visibility and terminal multiples carry oversized weights in valuation models.

Yet the rotation is hardly indiscriminate. The advance-decline line in Financial Services is negative, and exchanges such as CME –2.97% and Cboe –2.12% are under pressure because a lower-vol regime typically shrinks trading spreads. In other words, today’s macro relief has not altered the micro-economics of certain business models.

Looking beneath the surface, short-covering accounts for roughly 28% of Technology’s intraday notional bid, according to Goldman prime brokerage flow data cited by CNBC just before 11:00 a.m. ET. That suggests a non-trivial chunk of the rally could prove fleeting unless fundamental buyers add incremental capital during the final two hours.

Why Guidance Is the Market’s New North Star#

The divergent fates of GDOT and CE encapsulate current sentiment. With the macro path still contingent on data releases, investors are using company guidance as a sanity check on whether the earnings cycle has definitively “bottomed.” Firms able to point to sustained pricing power or operating leverage are being rewarded disproportionately, whereas any whiff of demand softness is promptly punished regardless of backward-looking beats.

That framework explains why CRCL +6.61% is attracting incremental bids even after a post-IPO run-up of more than 800%. Circle’s 53% revenue growth to US$658 million and management’s assertion that USDC circulation is up 90% year on year provides the narrative continuity the market currently craves.

Conclusion#

Midday Recap & Afternoon Outlook#

By lunchtime Wall Street has embraced July’s CPI relief as a green-light to re-engage with risk. Tech and travel-related Industrials command leadership, small-cap volatility gauges (^RVX) have plunged toward 22, and credit spreads are tightening in sympathy. Traders will now watch two fulcrum points into the close: whether the S&P 500 can secure a settlement above the prior intraday high of 6,438, and whether the semiconductor cohort can hold at least half of its intraday gains once European markets close at 11:30 a.m. ET.

The calendar is sparse until Thursday’s Producer Price Index and the University of Michigan’s sentiment survey on Friday, implying that earnings reactions will dominate tape action over the next 48 hours. Expect heightened single-stock volatility around aftermarket prints from names like ONON and SLRC, alongside any fresh Fed speak that could re-shape September cut odds.

Key Takeaways#

Throughout the morning session three intertwined forces have shaped price discovery: (1) softer inflation data that lifts the veil on policy easing, (2) powerful sector rotation into semiconductors and airlines, and (3) a guidance-centric lens that amplifies earnings surprises in both directions. That mix points to a market willing to pay for growth again—but only if management teams validate the macro narrative with hard numbers.