Stocks Rally as CPI Cools and AI Giants Deliver
Wall Street closed near record highs on Wednesday as a softer-than-expected inflation report and blockbuster earnings from AI infrastructure players fueled a broad risk-on rally. The S&P 500 climbed 0.8% to 5,640, while the Nasdaq Composite jumped 1.2% to 18,250, just shy of its all-time high. The Dow Jones Industrial Average added 210 points, or 0.5%, to 39,870.
Tuesday’s CPI data showed headline inflation at 2.9% year-over-year, below the 3.0% forecast, while core inflation held at 3.2%. The report reinforced bets that the Federal Reserve will begin cutting rates in September, with fed funds futures now pricing in a 92% probability of a 25-basis-point cut.
DoubleLine Sees Fed Cuts as Treasury Yields Slide
DoubleLine Portfolio Manager Bill Campbell argued on Bloomberg’s “The Close” that the Fed has “room to ease” given the disinflation trend and a labor market that is “cooling but not cracking.” He pointed to two-year Treasury yields falling to 4.20%, down 15 basis points on the day, as evidence that fixed-income investors are positioning for policy loosening.
Campbell cautioned that the Fed’s first cut may come with a “hawkish tilt” to avoid reigniting inflation, but he expects the terminal rate to settle near 3.5% by mid-2027. “The market is getting ahead of itself on the pace,” he said, “but the direction is clear.”
Cava and Sweetgreen Recover After Food-Safety Scares
In the restaurant space, Cava Group reported quarterly earnings that beat expectations, with same-store sales up 5.2% year-over-year, despite a temporary demand hit from a Cyclospora outbreak linked to its produce. CEO Brett Schulman said the company has “strengthened supply chain protocols” and is seeing a “rapid recovery” in customer traffic. Cava shares rose 4.8% to $92.10.
Sweetgreen, which faced a similar outbreak, saw its stock rebound 3.5% to $34.20 after CEO Jonathan Neman outlined enhanced food-safety measures, including “enhanced washing procedures” and “supplier diversification.” Neman noted that the company is “winning back” customers with new menu items and digital engagement.
Cisco and Cerebras Earnings Highlight AI Infrastructure Boom
Cisco Systems reported record quarterly revenue of $15.9 billion, up 12% year-over-year, driven by a surge in AI-related orders. CEO Chuck Robbins called demand for AI networking “unprecedented,” with backlog growing to $28 billion. Cisco’s stock jumped 6.3% to $52.40 in after-hours trading.
Cerebras Systems, the AI chipmaker, posted a 45% increase in cloud revenue to $180 million, but its hardware segment fell 20% as customers shift to its cloud service. The company’s CEO, Andrew Feldman, said the “neo-cloud” model is “the future of AI compute,” though he acknowledged “weaker” GPU sales. Cerebras shares slipped 2.1% to $45.80.
Bank of America Commits $250 Billion to Infrastructure
Bank of America announced a $250 billion commitment to infrastructure and sustainable finance over the next decade, with a focus on AI data centers, grid modernization, and renewable energy. Karen Fang, Global Head of Infrastructure, said the bank is “providing capital for the backbone of the digital economy.” The announcement lifted the bank’s stock 0.7% to $41.30.
The move comes as tech giants like Microsoft and Google race to expand data center capacity, with global spending on AI infrastructure projected to reach $300 billion this year, according to industry estimates.
What to Watch: Fed Minutes and AI Earnings Next Week
Investors will scrutinize the Fed’s July meeting minutes next Tuesday for clues on the rate-cut timeline and any dissent among policymakers. Also on deck are earnings from Nvidia and Palantir, which will test whether the AI trade can sustain its momentum.
The key number to watch is Nvidia’s data center revenue, which is expected to grow 80% year-over-year. If the company guides higher, the rally could extend; any shortfall could trigger a sharp pullback in tech stocks.
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