U.S. stocks finished mostly higher Wednesday, August 12, as a cooler inflation reading eased fears of an immediate Federal Reserve rate increase and another wave of strong AI-infrastructure results pulled technology shares higher.
The S&P 500 gained 20.38 points, or 0.26%, to 7,748.58, finishing just below its record. The Nasdaq Composite rose 145.70 points, or 0.55%, to 26,588.49, while the Dow Jones Industrial Average slipped 30.28 points, or 0.06%, to 53,761.57. Small-cap stocks also outperformed during the session, with the Russell 2000 trading roughly 0.5% higher near record territory.
The 10-year Treasury yield fell to about 4.68% from 4.70% Tuesday, while Brent crude settled slightly lower at $88.58 a barrel after another volatile session shaped by Middle East supply concerns and weaker global oil-demand forecasts.
Among the day’s biggest stock movers, Super Micro Computer jumped about 19.6%, CoreWeave gained roughly 19.4%, and Nvidia rose 3.1%. Nebius surged more than 20%, while Lumentum gained roughly 15%. On the downside, housing-related stocks struggled, with D.R. Horton down 3.1%, PulteGroup off 2.3% and Builders FirstSource losing 3.9% as elevated mortgage rates continued weighing on the sector.
Economy: Inflation Finally Gives Businesses Some Breathing Room
The most important economic number of the day was considerably less dramatic than markets feared.
The Consumer Price Index rose just 0.1% in July, after falling 0.4% in June. Compared with a year earlier, consumer prices were up 3.4%, down from 3.5% in June. Core inflation, excluding food and energy, increased 0.2% for the month and 2.5% from a year earlier, down from 2.6%.
Shelter costs rose just 0.1% and accounted for roughly two-thirds of the monthly increase. Gasoline declined for a second consecutive month, while hotel prices and prescription-drug costs also fell. Medical care and airline fares moved higher.
For businesses, the important part was what did not happen. The energy shock from the Iran conflict has not yet produced the broad inflation surge many economists feared. That reduces the immediate pressure on the Federal Reserve to raise borrowing costs again.
Markets moved quickly. Traders shifted to roughly a 62% probability that the Fed will leave rates unchanged in September, compared with essentially even odds between a hike and a hold before the inflation report.
Consumers are not necessarily feeling richer, however. Real average hourly earnings were still down about 0.2% from a year earlier, meaning purchasing power remains squeezed even as the inflation rate moderates.
Washington: July Deficit Hits $432 Billion
One of Wednesday’s largest business stories received far less attention than CPI.
The federal government ran a $432 billion budget deficit in July, the largest July deficit on record and the biggest monthly shortfall since the pandemic-era spending surge of March 2021.
Some of that was timing. Because August began on a weekend, about $99 billion of benefit payments that normally would have appeared in August were paid in July. Even after adjusting for those calendar effects, however, the July deficit was approximately $333 billion, 18% larger than a year earlier.
The bigger number is the fiscal-year total.
During the first 10 months of fiscal 2026, the federal deficit reached $1.799 trillion, already exceeding the entire $1.775 trillion deficit recorded in fiscal 2025, with two months still remaining in the fiscal year.
There was also an unusual tariff twist. Net customs receipts were actually negative $8.55 billion in July after the government issued $33.38 billion in tariff refunds.
For investors and business owners, federal deficits eventually meet the bond market. Persistent heavy Treasury borrowing can keep pressure on longer-term interest rates even when inflation cools, affecting mortgages, corporate borrowing, commercial real estate financing and government interest expense.
Restaurants & Consumers: Wendy’s May Be Going Private
Wendy’s shares jumped about 12% after Reuters reported that Nelson Peltz’s Trian Fund Management is assembling a group of investors for a possible takeover of the fast-food chain.
The potential consortium could include BlueFive Capital and Flynn Group, one of Wendy’s franchisees, with a bid potentially arriving within weeks. Wendy’s currently has a market value of roughly $1.44 billion.
The timing says as much about the restaurant industry as it does about Wendy’s.
The chain has lost market share within the quick-service hamburger category for 17 consecutive months, with customer visits and frequency under pressure. Wendy’s recently withdrew its 2026 financial forecast after comparable sales declined.
Restaurants have spent much of the past two years relying on value meals and promotions to lure inflation-weary customers. The Wendy’s situation suggests investors increasingly believe some struggling public restaurant companies may be worth more under private ownership, where turnarounds can be attempted without the pressure of quarterly earnings expectations.
Wall Street: Goldman Pays $2.25 Billion for the ETF Boom
Goldman Sachs agreed to buy Neos Investments for as much as $2.25 billion, another sign that Wall Street sees actively managed ETFs as one of the fastest-growing businesses in money management.
Neos manages about $30 billion across 19 ETFs, many of which use options to generate income or limit downside risk.
The deal follows Goldman’s roughly $2 billion purchase of Innovator Capital earlier this year. Once Neos is added, Goldman expects to oversee about $80 billion in active ETFs.
Why pay billions for ETF managers?
Investment banking and trading revenues can swing dramatically from quarter to quarter. Asset-management fees arrive repeatedly as long as investors leave their money in the funds. Goldman’s asset and wealth management operation generated $4.6 billion of second-quarter revenue, up 20% from a year earlier.
The Neos acquisition therefore reflects a broader transformation on Wall Street: banks that once depended heavily on dealmaking are buying businesses that produce steadier recurring fees.
Energy: Refiners Are Making Billions From the Fuel Shortage
High gasoline prices are hurting consumers, but they are generating extraordinary profits for American refiners.
Marathon Petroleum, Phillips 66 and Valero Energy earned a combined $12.6 billion during the second quarter, their largest combined profit since Russia invaded Ukraine in 2022.
The three companies returned $6.3 billion to shareholders through dividends and stock buybacks, compared with $2.6 billion during the same quarter last year.
The profits are coming from exceptionally high refining margins as disruptions through the Strait of Hormuz, refinery attacks elsewhere and tight fuel inventories make gasoline, diesel and jet fuel more valuable.
The numbers are striking. The diesel refining spread reached a record $93.84 a barrel on August 10, while the gasoline refining spread reached roughly $60 a barrel in July.
Investors have noticed. Marathon shares are up roughly 110% this year, Valero more than 98%, and Phillips 66 about 75%, significantly outperforming the broader energy sector.
For consumers and transportation-dependent businesses, the same economics work in reverse. Refiners’ extraordinary margins are another reminder that even if crude prices stabilize, gasoline and diesel prices do not necessarily fall at the same speed.
AI Infrastructure: The Capacity Shortage Is Getting Bigger
The AI infrastructure boom produced another remarkable data point Wednesday.
Nebius reported second-quarter revenue of $582.3 million, nearly six times the revenue generated by its core AI-cloud operation a year earlier and above Wall Street expectations. Its shares surged more than 20%.
More revealing than the quarterly revenue was the backlog.
Nebius signed four AI-cloud contracts averaging more than $1 billion each, while total contract value nearly quadrupled. Management said it believes it could sell all of its planned 2027 computing capacity at current pricing.
The company now expects more than $9 billion in customer prepayments this year and says it has more than $40 billion in customer commitments. It increased its contracted 2026 power target to five gigawatts.
That reinforces the message coming from CoreWeave, Super Micro and Nvidia: businesses are still competing for access to AI computing capacity faster than infrastructure can be built.
The other side of the story is cost. Nebius spent approximately $5.7 billion on capital expenditures in the quarter, about $1 billion more than analysts expected.
AI demand may no longer be the biggest question. Financing the electricity, chips and data centers required to satisfy that demand increasingly is.
What to Watch Thursday
The next inflation test comes immediately.
The Bureau of Labor Statistics will release the July Producer Price Index at 8:30 a.m. ET Thursday, August 13. Unlike CPI, which measures what consumers pay, PPI measures prices further up the supply chain and can reveal cost pressures that businesses have not yet passed along to customers.
That makes Thursday’s number particularly important after Wednesday’s reassuring CPI. A benign PPI would strengthen the argument that the Iran-driven energy shock remains relatively contained. A strong number would suggest manufacturers and wholesalers are absorbing costs that could eventually reach consumers.
Applied Materials reports after Thursday’s closing bell, with its earnings call scheduled for 4:30 p.m. ET. The semiconductor-equipment giant has become another major indicator of how long the AI capital-spending boom can continue. Analysts are looking for roughly $9 billion in quarterly revenue as chipmakers invest aggressively in advanced manufacturing capacity.
Cisco’s fiscal fourth-quarter results were scheduled for 4:30 p.m. ET Wednesday, just after the regular market close, so those numbers were not yet incorporated into Wednesday’s closing market reaction. Cisco had already raised its expectations for AI-infrastructure orders from hyperscale customers to $9 billion for fiscal 2026, making its results another potential driver for technology stocks Thursday morning.
And oil remains impossible to ignore. Brent finished Wednesday near $88.58 a barrel, but stalled U.S.-Iran negotiations, tanker security and disruptions around the Strait of Hormuz mean one geopolitical headline can still move fuel prices, inflation expectations, Treasury yields and stocks together.
Wednesday’s indexes barely moved by historical standards.
The business developments beneath them were much larger: inflation cooled enough to give the Fed room to wait, Washington’s fiscal deficit crossed another troubling threshold, private capital circled a major restaurant chain, Wall Street continued buying recurring-fee businesses, refiners harvested billions from the energy disruption, and AI companies showed that demand for computing power still exceeds the industry’s ability to build it.
JBizNews Desk | Wall Street
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