Inflation Data Eases Rate-Hike Fears
Wholesale prices were flat in July, below the small rise economists expected, a sign that inflation pressure may be cooling. The producer price index rose 4.7% from a year ago, down sharply from June's higher annual reading. Lower goods prices offset a rise in services costs. This report follows a mild July CPI reading and a weaker jobs report. Together they give the Federal Reserve more reason to hold rates steady at its September meeting instead of raising them. The next key read is the July PCE inflation report later this month, which markets will watch for clues on the Fed's path.
Workday Jumps on Buyout Talks
Workday (WDAY) shares surged as much as 25% before trading was halted, after a Reuters report said private equity firm Silverlake is in talks to buy the enterprise software company. The move put Workday on track for its biggest one-day gain in more than a decade, leading gains across the S&P 500. Software stocks have been under pressure over fears of AI disruption and slowing growth, so a take-private deal would be a strong vote of confidence in the sector. Investors want confirmation of the talks and any sign of valuation or deal structure.
Chinese Tech: Two Different Reactions
Lenovo (LNVGY) shares jumped double digits after strong first-quarter results, matching gains in Hong Kong where the stock hit a record. Revenue rose 43% and adjusted profit grew 176% year over year. The company expects revenue to reach $100 billion this fiscal year on strong demand for AI hardware. Its infrastructure business nearly doubled its revenue, and operating margin hit an all-time high above 9%.
JD.com (JD) fell over 7% even though second-quarter results beat estimates. Net profit came in just over $1 billion, up 15% year over year and 40% from the prior quarter. Revenue fell almost 3% to $51 billion, its first quarterly revenue drop since the 2014 listing, though it still beat forecasts and was helped by China's major midyear shopping events. Margins and profits improved, but slowing top-line growth points to strong competition and soft consumer demand.
What to Watch Next
Retail sales come out tomorrow morning, a focus given ongoing questions about the consumer. Headline sales are expected to rise a modest 0.1% to 0.3% month over month, roughly in line with last month. Core retail sales, which exclude cars and give a clearer view of spending trends, are projected to rise 0.2%, up from a drop in June. The University of Michigan consumer survey is also due; stronger consumer sentiment usually means more spending, so it pairs closely with the retail sales data to close a busy week for economic news.
