Yields climb as investors shrug off inflation fears ahead of Trump-Putin summit

• PPI surprises to upside – but investors push it aside.
• Bonds retreat, sending yields up.
• Oil and gold await today’s summit.
• Lots of Eco data.
• Try the Classic Philly Cheese Steak.

PPI Comes in HOT, HOT, HOT.

Final Demand m/m and Ex-Food & Energy m/m both surged +0.9% — up from 0% last month and well above the +0.2% estimate. Final Demand y/y jumped to +3.3% (from 2.3%), smashing the +2.5% forecast. Ex-Food & Energy y/y rose to +3.7%, from +2.6% last month, beating the 3% estimate.

What does this mean? Producer prices have jumped and if they stick, consumer prices will likely follow next month. That all but kills any talk of a 50-bps cut and even puts a 25-bps cut in jeopardy. The higher PPI tells us that companies are absorbing the tariff costs rather than passing them to consumers — but at what price? Margin compression and the risk of earnings pressure in the 3rd and 4th quarters. For now, the market’s limited pullback suggests investors aren’t overly concerned… yet. Yet it is the key word here — because companies can’t absorb those costs forever.

You’d think stocks would have sold off, but they didn’t. We saw early weakness, but no “blood in the streets”. The market seems to be assuming the Fed will treat this PPI spike as a one-off and still lean toward cuts beginning in September, especially if the labor market continues to ‘weaken’.

Bottom line: the path to lower rates is never a straight line. This isn’t the number we wanted to see — but it’s no reason to panic. Stay disciplined. Stick to your plan.

By the end of the day - The Dow lost 11 pts, the S&P gained 2, the Nasdaq lost 2.5 pts, the Russell gave up 29 pts, the Transports lost 132 pts, the Equal Weight S&P gave up 49 pts, while the Mag 7 ADDED 125 pts.

The late-day rally was fueled by strength in BIG Tech (just look at Mag 7) and solid gains in Financials and Healthcare — both finishing at +0.5%, exactly the sectors I’ve been highlighting for weeks. The rest of the market didn’t share the enthusiasm: all nine other sectors closed lower. Basic Materials led the laggards, down 1%, followed by Industrials and Consumer Staples (-0.9%), Real Estate (-0.7%), Utilities (-0.7%), Tech (-0.25%), Consumer Discretionary (-0.1%), while Communications managed to finish flat.

Now bonds took a bit of a hit on the back of that news – the TLT and TLH both lost a little ground – falling 0.7% and 0.6% respectively. The hotter PPI raised concerns about persistent inflation and lowered expectations of aggressive rate cuts (think 50 bps), but bonds did stabilize as the PPI components driving the increase were less relevant to the Fed’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) index. The 2 yr rose 7 bps to end the day at 3.73%, the 10 yr rose 5 bps to end the day yielding 4.28%.....this morning bonds are churning in place as any idea of no cut fades away.

Oil bounced off of its recent low at 62.28 – a level I thought would find temporary support…It rose $1.20 yesterday to end the day at $63.95 – this morning it is down 50 cts at $63.45….all as the world awaits the meeting between Trump and Putin in Anchorage, Alaska.

Gold is also in wait and see mode…. trading between the trendlines…$3370/$3415…. A deal with Russia will see traders’ cash in and take some profits off the table…. should Vlad disappoint – then watch gold push higher.

The focus today will be squarely on the Trump–Putin summit, scheduled for 3:00 pm EST / 11:00 am AKDT in Anchorage. All eyes are on what comes next. A deal with Putin would likely send stocks higher, while Aerospace and Defense could see a short-term dip in reduced perceived demand — but I think any weakness there would be temporary.

Remember, Trump has warned of tougher secondary sanctions on Russia if no deal is reached — potentially targeting India and China if they continue buying Russian oil and fueling the war. There’s been plenty of chatter about land grabs and territorial concessions, but don’t expect final decisions today. The immediate goal is simply to stop the fighting.

Before any headlines out of Anchorage, we’ve already had a batch of economic data — and after yesterday’s hot PPI, investors, traders, and algos were paying close attention. Advance Retail Sales m/m came in at +0.6% (unchanged from last month), Ex-Autos & Gas at +0.3% (down from +0.6%), Industrial Production flat, Manufacturing Production flat, Capacity Utilization steady at 77.6, and the University of Michigan Sentiment Survey at 62.0.

Now to the real pre-market action: U.S. futures are mixed — Dow futures are up sharply, +280 pts, thanks almost entirely to UnitedHealth (UNH). Word is that some of the BIG BOYS are dipping their toes. Buffett’s Berkshire Hathaway, David Tepper’s Appaloosa Management, and Michael Burry’s Scion Capital have all taken big positions in the beaten-down Dow component. Buffett reportedly bought $1.6 billion worth, Tepper took a $764 million stake, and Burry flipped from short to long.

This morning’s 12% jump in UNH is doing all the heavy lifting in the Dow. The S&P is up 4 (again, mostly UNH), the Nasdaq is down 40, and the Russell is flat at +1. Strip UNH out, and all the indexes would be in negative territory. So, before you panic about missing out — just breathe.

Let’s be honest — the market is frothy. Valuations are rich. Record highs sound great, but trees don’t grow to the sky. Nothing rises forever, and assuming stocks will keep climbing endlessly is dangerous. Don’t let FOMO make your decisions. This is where discipline and plan matter most.

European markets are all higher again…..Italy taking the lead up 1.1%, France +0.7%, Spain +0.5%, Euro Stoxx + 0.35%, Germany + 0.3% and the UK up only 0.1%.

The S&P closed at 6468 – up 1 pt. Now, while the excitement continues – it is beginning to feel like a blow off – FOMO top… (Fear of Missing Out). All that means is proceed with caution…Remember – you are invested, so you are participating….Just be careful how you allocate new money into the markets….Look at those underperforming sectors (healthcare) to add to you outperforming sectors…to help you balance out your portfolio.

The VIX remain well into the complacent zone…. which should be a warning flat.

The Nasdaq remains ‘overbot’ while the others remain within the normal trading zone….yes, hinting at overbot, but not officially overbot….Remember – all you need is just one catalyst for the market to pull back – and while I thought it would have been yesterday’s PPI – it wasn’t…..or maybe it will be…The story isn’t over yet….

I remain in the camp that we are toppy – which only means I am more cautious on where I allocate. Doing nothing is a decision – remember – you don’t have to do something all the time…. Let your portfolio do the work…. We still have the end of August and the whole month of September to work through.

Now I’m from Boston, but I love Classic Philly Cheese Steak.

The Philly cheese steak was born in Philadelphia in the 1930s, credited to Pat Olivieri, a hot dog vendor. One day, Pat decided to grill some thinly sliced beef with onions for his lunch. A passing cab driver caught a whiff and asked for the same — and loved it. Soon, Pat’s simple steak sandwich drew crowds, and his hot dog stand evolved into Pat’s King of Steaks. Cheese wasn’t part of the original, but by the 1940s, Cheez Whiz, provolone, or American cheese became standard additions. Over time, it became a Philadelphia icon — thin-sliced beef, grilled onions, melted cheese, and a soft roll — beloved far beyond the city’s borders.

This is one of my favorites.

Start with your Taleggio cream sauce…. Cut up the cheese and melt it slowly in a double boiler…. with heavy cream… Then, blend it till smooth. Now set aside.

I use Rib Eye – slightly frozen – easier to cut. Slice it into thin strips and set aside.

Slice up your onions and peppers and mushrooms. – Sauté all of these in a sauté pan until soft and delicious. Season with s&p. Set aside. Do not wipe out the sauté pan…we are going to use it for the steak.

Now – using the same sauté pan – turn up the heat and add the sliced steak. Season with s&p. Once browned – top with the onions, peppers and mushroom – then add in your slices of cheese – I use provolone, but you can use whatever you like.

Take you submarine roll, layer it with the taleggio cream sauce and then place the steak, onions, peppers and mushrooms and cheese in the roll… Slice in half and serve. That’s all you need.