Newsletter · · Ashutosh Agarwal

Cool CPI and a Neocloud Blowout Push Stocks Toward Records - Daily Market Wrap - Wednesday, August 12, 2026

The session of Wednesday, August 12, 2026: a perfectly in-line July inflation report took a September rate hike off the table, and blowout neocloud earnings from Nebius and CoreWeave sent the AI-infrastructure complex vertical, pushing the S&P 500 within a whisker of a record as the VIX collapsed.

Daily Market Wrap

Wednesday, August 12, 2026: Cool CPI and a Neocloud Blowout Push Stocks Toward Records

A perfectly in-line July inflation report took a September rate hike off the table, and blowout "neocloud" earnings sent the entire AI-infrastructure complex vertical. The S&P 500 closed within a whisker of a record; fear, as measured by the VIX, fell out of the market.

Wednesday, August 12, 2026 · US market close

Here's the scoreboard for the day:

  • S&P 500: 7,748.71, +0.27%, a hair below its 52-week high of 7,793.68
  • Nasdaq Composite: 26,588.49, +0.54%
  • Dow Jones Industrial Average: 53,770.27, -0.04% (basically flat)
  • Russell 2000 (small caps): 3,045.48, +0.61%, small caps led, a sign of a "risk-on" mood
  • VIX (the "fear gauge", higher means more expected turbulence): 14.55, down 4.78%, well under its recent average near 17
  • 10-year Treasury yield: ~4.68%, essentially unchanged on the day
  • Best sectors: Real Estate (+1.28%), Consumer Staples (+1.11%), Industrials (+1.02%). Worst: Materials (-1.61%), Consumer Discretionary (-1.33%), Communication Services (-1.10%)

One quick thing to notice under the hood: the average stock in Big Tech actually slipped today. The Nasdaq only rose because a handful of enormous AI names went vertical (more on that below), while money quietly rotated into rate-sensitive and defensive corners like real estate and staples. That's the tell of a day where a soft inflation number, not broad euphoria, did the heavy lifting.

Big Story 1: A "boring" inflation report was exactly what the bulls wanted

What happened. The Bureau of Labor Statistics reported July inflation this morning, and every number landed dead-on expectations:

  • Headline CPI: +0.1% for the month, +3.4% versus a year ago, matching forecasts, and cooling for a second straight month (it was 3.5% in June).
  • Core CPI (which strips out volatile food and energy to show the underlying trend): +0.2% for the month, +2.5% year-over-year, also in line, and the slowest annual pace in five months (down from 2.6%).
  • The relief valve was energy: prices fell another 1.5% in the month as the oil spike from the earlier Iran conflict kept fading. Shelter, the single biggest piece of the basket, rose just 0.1% on the month.

Why it happened, and why "in line" was such a big deal. This is the crucial twist most casual headlines miss: the Fed under new Chair Kevin Warsh is not debating rate cuts right now. It's debating whether to hike. At the July 28-29 meeting the Fed held rates at 3.50%-3.75%, but the vote was a bruising 9-3, with Beth Hammack (Cleveland), Neel Kashkari (Minneapolis) and Lorie Logan (Dallas) all wanting an immediate quarter-point increase to fight sticky inflation.

So a print that came in no hotter than feared did something powerful: it took the urgency out of the hawks' case. Futures markets that had priced roughly a coin-flip (~48-50%) chance of a September hike cut those odds to the mid-30s-to-low-40s percent, with a "hold" now the clear favorite around 62% and a cut still priced at essentially zero (The Motley Fool, Kiplinger). Lower hike odds means less pressure on stocks and bonds, hence the vol crush and the small-cap bid.

What people said.

"The big surprise with a report that had no surprises… is that it reinforces the soft-landing narrative. The market would typically be buoyed by the thought of rate cuts, but in a world where many were expecting rate hikes, anything that delays or squashes the need for rate hikes will be viewed positively." Chris Zaccarelli, CIO, Northlight Asset Management

"There's nothing in today's CPI report that demands a September rate hike." Donald Rissmiller, Chief Economist, Strategas

Bloomberg Economics' Anna Wong and Troy Durie put the nuance well: the report was "modest enough to lower chances of a September rate hike, but not low enough to write it off completely." And Heather Long, chief economist at Navy Federal Credit Union, noted it "gives new Fed Chair Kevin Warsh some cover to wait and see what happens this fall before he has to act." The next big signpost: Warsh speaks at the Fed's Jackson Hole gathering, which kicks off August 27.

Big Story 2: The "neocloud" trade roars back, Nebius +34%, CoreWeave +19%

What happened. Two back-to-back earnings reports from the companies that rent out AI computing power lit a fire under the entire AI-infrastructure complex. "Neoclouds" are the new middlemen of the AI boom: they buy warehouses full of Nvidia chips and rent that compute out by the hour to AI labs and enterprises.

  • Nebius (NBIS): +34.1% to $259.20, the day's headline mover. Second-quarter revenue exploded to $582.3 million from just $105.1 million a year ago, roughly 5.5x growth, beating estimates (~$570M). The loss of $0.68 a share came in far narrower than the ~$1.46 loss Wall Street feared. Nebius said its annualized revenue run-rate is now around $3 billion (up nearly 600% in a year), with a $40 billion-plus contracted backlog and four new mega-deals each worth over $1 billion.
  • CoreWeave (CRWV): +19.3% to $107.73, after reporting Tuesday night. Revenue doubled to $2.58 billion; the net loss of $626 million was smaller than expected. The number that mattered most was the backlog of $104 billion in contracted future revenue as of June 30, plus another $25 billion in commitments signed just since the quarter ended. Management raised full-year revenue guidance to $12.4-13.2 billion and said it is "effectively sold out" for the rest of the year, with new deals carrying margins 5-10% higher because capacity is so tight.

Why it happened. The common thread from both calls: demand for AI compute isn't the constraint, physical capacity is. Both companies are locking customers into multi-year contracts and raising how much they'll spend building data centers (CoreWeave lifted its 2026 capex plan to $35-39 billion). That capex promise is what sent the "picks-and-shovels" suppliers vertical, because their order books are downstream of neocloud spending:

  • Optical/networking gear: Lumentum +13.6% (its own report showed revenue up ~109% year-over-year), Ciena +11.5%, Viavi +12.3%, Nokia +9.5%
  • Power: Bloom Energy +12.3%, data centers need enormous, reliable electricity
  • Servers/hardware: Super Micro +18.8%, Dell +9.9% (Goldman Sachs raised its target to $510), Celestica +9.4%
  • Crypto miners turning into AI landlords: IREN +9.9%, helped along by a $9.1 billion, 20-year deal disclosed today in which AI lab Anthropic will take 191 megawatts of compute capacity at Riot Platforms' Texas campus

What people said. Management framed it as an inflection point:

"CoreWeave reached an important inflection point this quarter as our scale began to translate into expanding operating leverage. Customer demand is accelerating." Michael Intrator, CEO, CoreWeave

On the Bloomberg Intelligence podcast (Aug 12), senior analyst Anurag Rana called the space "arguably the most exciting place to grow for all cloud infrastructure," and cut to the chase on the prints:

"The biggest thing to hear from the call is that there is no shortage of demand right now. It's all about AI compute constraints… It's just a matter of how soon can they get more data centers up and running."

But the skeptics are getting louder, and they're worth hearing. On CNBC's Fast Money (Aug 11), "Big Short" investor Steve Eisman laid out the fault line under the whole trade:

"Something like 70 percent of all AI revenue for Microsoft, Amazon, Google, Oracle is from Anthropic and OpenAI… So the futures of these massive companies, in a sense, are a bet that OpenAI [and] Anthropic is going to succeed."

His worry: if cheaper Chinese AI models spark a price war and dent those two customers, "then we have a problem." His honest caveat, the timing is unknowable: "That story could happen. But it could be a year from now… And it may not happen at all." On The Rundown podcast (Aug 12), host Zaid Admani flagged the balance-sheet risk plainly: CoreWeave carries roughly $35 billion in debt, and "if we ever see a slowdown for AI compute, a company like CoreWeave could be one of the first to take the biggest hit."

For now, the market is siding with the bulls, decisively.

Quick Hits

  • The losers were mostly earnings hangovers. Latin American e-commerce giant MercadoLibre (MELI) -5.8% kept sliding after its recent quarter showed revenue up ~50% but operating margins squeezed by heavy spending on logistics and its fast-growing lending book. AppLovin (APP) -4.7% after Bank of America downgraded it to Neutral (target cut to $400 from $430), arguing its 30% long-term growth goal "lacks sufficient evidence." Axon (AXON) -5.7% as investors soured on a strong quarter that came with withdrawn cash-flow guidance and disclosed insider selling.
  • Cencora (COR) -5.9% after the drug distributor disclosed that some Walgreens volume began moving elsewhere as of July 1, though it kept the core prime-vendor agreement and reaffirmed full-year adjusted EPS of $17.75-$17.95, which analysts called a limited hit.
  • Affirm (AFRM) -4.3% on no company-specific news, looks like profit-taking in high-flying fintech ahead of its earnings on August 27.
  • Restaurants were a bright spot. Brinker International (EAT), owner of Chili's, jumped +11.1%, and Mediterranean chain CAVA reported a strong quarter after the bell, revenue up more than 30% to $368 million and same-store sales up 9%, with guest traffic up 5.3%.
  • Overnight backdrop: Asia was firm, South Korea's Kospi surged about 4% and Japan's Nikkei added ~0.8%, setting a constructive tone before the US CPI print.
  • On the fiscal front: the Treasury reported a $432 billion budget deficit for July, a reminder that the government's borrowing needs remain a slow-burn story for the bond market even on a calm day for yields.
  • M&A: Goldman Sachs is reported to be acquiring fintech firm Neos; terms were not disclosed in early reports.

Bottom line: a benign inflation number defused the near-term rate-hike scare, and a genuine earnings blowout, not just hype, reignited the AI-infrastructure trade. The bull-bear debate now hinges on two things nobody can yet see clearly: whether AI compute demand stays "sold out," and whether the two customers underwriting most of it, OpenAI and Anthropic, keep winning.