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Markets shook off a lukewarm Consumer Price Index (CPI) report ahead of the opening bell today, and as the trading session wore on, confidence gained even further. The S&P 500 and the tech-heavy (AI-heavy) Nasdaq both notched new closing highs today. The Dow gained +483 points today, +1.13%, the S&P 500 was +72 points, +1.13%, the Nasdaq is +296 points, +1.39%, and the small-cap Russell 2000 left the field in the dust: +2.99% on the day.

Year to date, the Russell 2000 has swung back to positive territory based on today’s big gains: +2.3% since the start of the year. This is the clear laggard among major indexes, as bouts of robust positivity vacillated with moments of murky clarity, which took a bite out of small-caps in spots over the year. By contrast, the Dow is +4.5% since the start of the year, the S&P 500 is +9.6% and the Nasdaq +12.3%.

We appear to be pricing-in the surety of a Fed rate cut in September, still more than a month away (there is no August Fed meeting). Depending on economic data that comes out between now and then, we are likely to see the Fed funds rate cut either -25 basis points (bps) to a range of 4.00-4.25% — where we haven’t been since December 2022, by the way, when interest rates were moving swiftly in the opposite direction — or -50 bps to 3.75-4.00%.

Q2 Earnings at a Glance: CAVA, CRWV
 

CAVA Group (CAVA - Free Report) shares are dropping -22.5% at this hour, following its mixed Q2 report after the closing bell, Earnings of 16 cents per share came out ahead of the 13 cents in the Zacks consensus, but revenues of $281 million missed expectations for $287 million in the quarter. Comps came in only a third of what analysts were expecting: +2.1% vs. +6.1% estimated. Full-year revenue guidance has been pulled back to +4-6% from +6-8% previously.

Cloud-based AI service CoreWeave (CRWV - Free Report) are also down in late trading, albeit not by as much: -5.5%. A much wider-than-expected bottom line loss of -60 cents per share (versus -23 cents expected) was offset somewhat by better-than-expected revenues: $1.21 billion versus +1.08 billion forecast. However, bookings were whispered to be a bit higher in the quarter; the company appears very confident to be able to meet their customers’ AI needs going forward.

What to Expect from the Stock Market Tomorrow
 

Usually, when CPI reports hit the tape, the “other shoe drops” — Producer Price Index (PPI), the wholesale print to the CPI’s retail numbers — the very next morning. But this week, we’ll be waiting until Thursday morning for PPI results, which are often seen as a precursor to future consumer prices. 

Wednesday, we’ll have to settle for presentations by Fed Chairs Tom Barkin (Richmond, VA), Austan Goolsbee (Chicago) and Raphael Bostic (Atlanta). All three gents voted to keep the Fed in place at 4.25-4.50% at the July meeting; have they turned a corner based on economic data that woulds cause them to vote for a cut next time around?

As for earnings reports on Wednesday, Chili’s and Maggiano’s parent Brinker International (EAT - Free Report) reports ahead of the open, Cisco Systems (CSCO - Free Report) after the close. While Brinker looks to post +50% earnings growth year over year, Cisco is projected to earn +11.5% on earning’s in the company’s fiscal Q4 report.

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