Market Recap - Tuesday, August 12, 2025
Stocks Rally on Cooling Inflation, Rate Cut Hopes Rise - Small caps shine as CPI data keeps Fed on dovish path
Stocks surged today after a key inflation report came in largely as expected, boosting confidence that the Fed is on track to cut interest rates soon. The S&P 500 gained 1.14% and closed above the 6,400 mark for the first time, setting a new record high. The Nasdaq jumped 1.39%, while small-cap stocks saw a massive move, with the Russell 2000 up nearly 3%, its best day since May. The Dow also climbed 1.10%.
Big tech led the rally, with Meta standing out, and chipmakers, homebuilders, airlines, and cruise lines also saw strong gains. Even retail investor favorites and heavily shorted names joined in the rebound. On the other hand, defensive sectors like utilities, insurance brokers, healthcare distributors, and tobacco lagged behind.
The July CPI report — the day’s main event — showed core inflation rising 0.3% month-over-month, in line with expectations. Though services inflation came in hotter than some hoped, tariff-impacted goods showed more mixed results. Still, the data was “good enough” for markets to boost the odds of a September rate cut to 92%. Bond yields fell modestly, and the dollar weakened slightly.
Elsewhere, Trump signed a 90-day extension of the US-China tariff truce, as expected. While geopolitical headlines (like the upcoming Trump-Putin summit) remain in the background, markets mostly ignored them. M&A activity picked up with a potential $5B Hanesbrands deal and a surprise offer for Google’s Chrome division. Meanwhile, reports surfaced that Nvidia may face new roadblocks in China despite recent export license wins.
Notable Gainers:
Hanesbrands (HBI) +28%: Gildan reportedly near a $5B deal to acquire the company.
Mercury Systems (MRCY) +27%: Strong earnings and optimism about future guidance.
Sea Limited (SE) +19.1%: Strong Q2 results, particularly in e-commerce.
On Holding (ONON) +9%: Beat earnings and raised full-year guidance.
Intel (INTC) +5.6%: Trump had positive remarks about the CEO after a White House meeting.
Texas Instruments (TXN) +5%: Price hikes and upbeat tone lifted the stock.
Notable Decliners:
Fluence Energy (FLNC) -19.4%: Missed revenue and maintained weak full-year guidance.
BigBear.ai (BBAI) -15.8%: Q2 miss and lowered outlook, citing uncertainty in Army programs.
Celanese (CE) -13.1%: Beat Q2 numbers but flagged weak demand and lower Q3 expectations.
Cardinal Health (CAH) -7.2%: Weak pharma segment performance and a new $1.9B acquisition.
Here’s Our Take:
Today’s rally was driven by a “just right” inflation print that gave investors more confidence in the Fed’s easing path. While services inflation remains sticky, there’s growing belief that tariffs aren’t yet fueling a new wave of price spikes — at least not in the July data. With rate cut odds rising and buyback windows reopening, risk appetite is back. Still, we’re watching closely for Thursday’s PPI and Friday’s retail sales to see if this momentum holds. For now, markets seem content betting on a softer Fed, stronger consumer, and cooling inflation — a sweet spot for equities.
P.S. Know someone who'd appreciate smarter stock insights and clearer investing strategies? Forward this email or share this link: subscribe.triplegains.com