To The Moon

14 August 2026

Softer producer inflation, falling oil prices and fading rate-hike expectations lifted technology stocks and pushed the S&P 500 to another record close, although a weak 30-year Treasury auction showed that long-term fiscal and interest-rate risks have not disappeared.

S&P 500 rose 0.65% to 7,798.99

Dow Jones rose 0.13% to 53,839.99

Nasdaq rose 0.81% to 26,803.03

US 2-year Treasury yield fell approximately 6 basis points to 4.14%

US 10-year Treasury yield fell approximately 5 basis points to 4.64%

Market data: Reuters⁠

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News

1) US July PPI came in below expectations, while lower oil prices further reduced pressure for a September rate hike

* The US Producer Price Index was unchanged month-on-month in July, below expectations for a 0.2% increase. June’s reading was revised to a 0.1% decline.

* Headline PPI inflation slowed from 5.5% in June to 4.7% year-on-year, suggesting that overall pricing pressure at the producer level is beginning to ease.

* Core PPI, excluding food and energy, increased 0.2% month-on-month, below expectations of 0.3%, and rose 4.2% year-on-year.

* Goods prices fell 0.7%, led by a 3.1% decline in energy costs and a 5.7% drop in wholesale gasoline prices.

* Services prices still rose 0.2%, driven partly by a 6.5% increase in portfolio-management fees. PPI excluding food, energy and trade services rose 0.4%, showing that some underlying inflation remains sticky.

* The market-implied probability of the Federal Reserve holding rates unchanged in September rose to approximately 67.6%. The probability of a hike fell to 32.4%, from 40.6% the previous day and 55% a week earlier.

* Oil prices fell around 2%, further easing concerns about renewed energy inflation and supporting rate-sensitive technology and real-estate stocks.

Market impact: Cooling inflation and lower rate-hike expectations should help contain Treasury yields and support technology valuations. However, underlying inflation remains above the Fed’s target, meaning markets can price in a pause, but not yet a rate-cut cycle.

Positive counterpoint: If energy prices remain lower and gradually feed through to consumer inflation, inflation may already have passed its peak for the year, giving the Fed more room to remain on hold. Reuters⁠ | US Bureau of Labor Statistics⁠

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2) The 30-year Treasury auction recorded its highest yield since 2001 as Fed officials remained divided

* The US Treasury sold US$25 billion of 30-year bonds at a high yield of 5.216%, the highest level since 2001.

* The yield was approximately 0.4 basis point above the 5.212% when-issued yield, indicating that investors demanded a small concession to absorb the supply.

* The bid-to-cover ratio declined from 2.444 in July to 2.392, below the recent average of approximately 2.429, signalling softer overall demand.

* Indirect bidders, including foreign central banks and major asset managers, took 66.9% of the offering, down sharply from 77.7% in July.

* The weaker demand reflected continuing concerns about the US fiscal deficit, government debt approaching US$40 trillion and persistent long-term inflation risks.

* Richmond Fed President Thomas Barkin said whether another rate hike is necessary remains an “open question”, suggesting that he prefers to wait for more data.

* Cleveland Fed President Beth Hammack continued to support an immediate rate increase, arguing that monetary policy is not sufficiently restrictive and that inflation could remain above the 2% target.

Market impact: Short-term yields fell following the softer PPI report, but weak demand for 30-year debt suggests that the yield curve may continue to steepen, maintaining pressure on expensive equities, property and corporate borrowing costs.

Positive counterpoint: Although the auction was soft, it was not disorderly. The sharp decline in short-term yields also shows that investors still expect the Fed to keep rates unchanged in the near term. WSJ⁠ | Financial Times⁠

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3) Agentic AI is reviving CPU demand, with the future CPU-to-GPU ratio potentially approaching 1:1

* Traditional AI data centres focus heavily on GPUs, while CPUs generally start systems, manage workloads and distribute tasks to GPUs. The current CPU-to-GPU ratio is estimated at around 1:4.

* Agentic AI does more than answer questions. It must plan tasks, call software tools, access databases, execute code and coordinate multiple agents, requiring significantly more general-purpose computing power.

* GPUs will continue to handle model training and highly parallel inference, while CPUs increasingly act as the AI system’s control centre for orchestration, tool use and data processing.

* Bank of America believes agentic AI could move the CPU-to-GPU ratio from around 1:4 toward 1:1, meaning that every additional GPU cluster may require substantially more CPU capacity.

* The bank raised its 2030 server CPU market forecast from US$170 billion to more than US$210 billion, nearly five times the estimated 2025 market size.

* AMD is regarded as a major CPU beneficiary, while Intel could benefit from a recovery in server demand. Arm-based processors could gain share through their lower power consumption.

* Nvidia could remain the largest overall AI-hardware beneficiary because agentic AI does not replace GPUs—it broadens AI spending to include CPUs, memory, networking and the entire data-centre stack.

Market impact: The AI investment theme could broaden beyond GPUs into CPUs, DRAM, storage, networking and servers. However, whether the ratio ultimately reaches 1:1 will depend on the commercial adoption of AI agents and the architecture chosen by data-centre operators.

Positive counterpoint: AI infrastructure demand may not be peaking. Instead, it could be entering a broader second phase that creates new growth opportunities for AMD, Intel and the wider server supply chain. Agentic AI and CPU analysis⁠

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4) Four major tests for the bull market before the US midterm elections

* The 19 August FOMC minutes will reveal the extent of disagreement among Fed officials. A majority favouring patience could further stabilise interest-rate expectations.

* July core PCE, the Fed’s preferred inflation gauge, will be released on 26 August. Current estimates point to an increase of approximately 0.2% month-on-month and 3.3%–3.4% year-on-year.

* The revised US GDP reading is also due that day. The most supportive combination for equities would be resilient economic growth alongside cooling inflation.

* Nvidia is also expected to report earnings on 26 August. Investors will focus on Blackwell and Rubin demand, cloud customers’ capital expenditure and whether AI investment continues translating into revenue.

* The August employment and CPI reports will be the final major data releases before the 15–16 September FOMC meeting and could determine whether the Fed pauses or resumes tightening.

* The third-quarter earnings season beginning in October will test whether AI capital spending by Microsoft, Amazon, Alphabet, Meta and other technology companies continues generating cloud revenue and profit growth.

* Ahead of the 3 November midterm elections, markets will also monitor oil prices, the Strait of Hormuz, tariffs and fiscal policy. Another energy-price surge or breakout in long-term Treasury yields could trigger a valuation correction.

Market impact: With the S&P 500 already at a record high, further gains will require three conditions: cooling inflation, an economy that avoids recession and continued delivery of AI-related earnings.

Positive counterpoint: Corporate earnings and AI capital expenditure remain strong. If core PCE does not accelerate and the Fed stays on hold, the bull market still has room to continue into the midterm elections. BEA PCE schedule⁠ | Federal Reserve calendar⁠

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Daily

* US July retail sales: Consensus expects approximately 0.1% month-on-month growth, versus 0.2% previously. Investors will assess whether high interest rates and elevated prices are beginning to weaken consumer spending.

* University of Michigan consumer sentiment: The preliminary August reading is expected at approximately 54.5, versus 54.4 previously. One-year and long-term inflation expectations will also be closely watched.

* US June business inventories: Expected to rise approximately 0.2% month-on-month, versus 0.3% previously.

* Earnings: No major US technology company is scheduled to report today. Markets will continue digesting Applied Materials’ overnight results. Revenue, earnings and guidance exceeded expectations, but the shares still fell approximately 4%–5% after hours, highlighting the exceptionally high expectations already priced into AI semiconductor-equipment stocks. US economic calendar⁠ | Applied Materials results⁠$NVIDIA(NVDA)$  $Advanced Micro Devices(AMD)$  $Broadcom(AVGO)$  $Meta Platforms, Inc.(META)$