📰 Market Outlook – Tuesday, August 12, 2025

What’s Driving Markets Today

1. July CPI Holds Steady, Core Inflation Rises
   The July Consumer Price Index came in as expected at a 2.7% year-over-year increase, matching June. Core CPI, however, rose to 3.1%, driven by notable increases in services like airfares and dental costs. This fueled market optimism around a potential September rate cut, while keeping inflation caution in play.
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2. U.S.–China Trade Truce Extended
   The tariff truce between the U.S. and China was extended by 90 days, postponing steep tariff hikes and easing trade fears. This boosted global sentiment, especially in Asia, where markets rallied on renewed trade confidence.
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3. Japan’s Nikkei Hits Record High
   Japan’s Nikkei 225 surged 2.5% to a new record high, buoyed by renewed U.S.–Japan trade optimism, a weaker yen, and strong tech sector performance—including gains in SoftBank and semiconductors.
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4. Morgan Stanley Flags Lingering Market Risks
   Despite equity gains and optimism rooted in AI and earnings strength, Morgan Stanley cautions that risks remain—from cooling labor data and concentrated gains in mega-cap tech to potential stagflation from persistent trade tensions.
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5. Sector Movers: Mixed Signals
   Stocks like Teradyne are showing technical strength (+15.6%) amid volatility, while General Dynamics and others exhibit neutral-to-cautious setups—highlighting uneven performance across sectors.

What to Watch Next

• Producer Price Index (PPI): Signals from wholesale inflation ahead of the Fed meeting will be closely watched.

• Fed Communication & Rate Cut Outlook: Powell’s upcoming remarks and the renewed trade lull could shift forward guidance.

• Tech & AI Earnings Flow: Watch for more results and guidance, particularly from mega-cap names driving momentum.

Markets are digesting steady inflation and easing trade tensions, supporting global equities and boosting rate-cut optimism—though structural risks could test fragile sentiment ahead.