August 12th, 2025
Stocks Rally on Inflation Data, Easing Concerns Over Tariff-Driven Price Surges
Stocks climbed on Tuesday as investors welcomed a softer-than-expected inflation report, boosting hopes that the Federal Reserve will cut interest rates at its upcoming September meeting.
The Dow Jones Industrial Average surged 448 points, or 1%, while the S&P 500 rose 1% and the Nasdaq Composite gained 1.2%, with both indexes hitting new intraday highs during the session.
Major large-cap indexes climbed about 0.5% in early trading, while the small-cap Russell 2000 also advanced. This optimism followed overnight gains in global markets, with European indexes posting modest increases and Japan’s NIKKEI soaring 2%.
Economic Takeaways:
- Shorter-dated U.S. government bonds rallied, with the 2-year Treasury yield dropping 2 basis points (0.02%) amid growing expectations of near-term Federal Reserve rate cuts.
- The U.S. dollar softened slightly against a basket of major currencies in this risk-on environment.
- The Consumer Price Index (CPI) rose 0.2% month-over-month in July, keeping the annual headline inflation rate steady at 2.8%. Core CPI, which excludes volatile food and energy prices, increased 0.3% month-over-month, pushing the year-over-year rate to 3.1%. Overall, the report suggests tariffs have so far caused only a moderate uptick in inflation this year. However, unless companies absorb these costs through reduced margins, inflationary pressures from tariffs may intensify in the months ahead.
- Following the latest CPI data, the probability of a Federal Reserve rate cut next month rose to about 90%, up from 86% the previous day, according to the CME FedWatch Tool.
White House Hails CPI Report as Inflation Holds Steady, Core Prices Tick Higher
The Trump administration responded Tuesday to new inflation data showing headline consumer prices were unchanged in July, with declines in gas and grocery costs offsetting higher prices for certain imports. The Consumer Price Index rose 2.7% from a year earlier, matching June’s pace, while core inflation — excluding food and energy — climbed to 3.1% from 2.9%.
Press secretary Karoline Leavitt called the report “proof” that President Trump’s economic policies are working, crediting tariffs with generating billions in revenue while small business optimism and real wages rise. Gas prices fell 2.2% from June and nearly 10% from last year, and grocery prices edged down 0.1%, giving consumers short-term relief. Still, economists warn tariffs are raising costs for goods like shoes, furniture, and coffee — increases that could lead to more “shrinkflation” ahead.
The Federal Reserve now faces a balancing act: easing rates to support slowing job growth or holding firm to avoid fueling persistent core inflation. Trump, in a Truth Social post, renewed criticism of Fed Chair Jerome Powell, urging immediate rate cuts.
Perplexity AI Launches Groundbreaking $34.5 Billion Bid to Acquire Google’s Chrome Browser
In a move that could upend both the browser market and the AI search race, Perplexity AI has made an unsolicited $34.5 billion all-cash offer to acquire Alphabet’s Chrome browser. The bold bid is more than double the three-year-old startup’s own $14 billion valuation, signaling CEO Aravind Srinivas’s ambition to secure billions of users and a powerful distribution channel in the escalating competition over AI-powered search.
Chrome is one of the most widely used pieces of software in the world, with more than three billion active users. Its role as a gateway to search queries and user data makes it a key battleground for Big Tech’s AI ambitions. For Google, Chrome is deeply intertwined with its push to defend market share through AI features like “Overviews,” which integrate AI-generated summaries directly into search results. For Perplexity, which already offers its own AI browser called Comet, acquiring Chrome would provide an instant leap in scale, enabling it to compete head-on with rivals such as OpenAI, which is building a similar AI-driven browsing experience.
The offer arrives at a moment of heightened legal pressure on Google. The U.S. Justice Department has sought a forced sale of Chrome as a remedy in its landmark search antitrust case, after a federal court ruled last year that Google held an unlawful monopoly. Google is appealing the decision and has made clear it does not intend to sell Chrome. Antitrust experts say the appeals process could drag on for years, with any forced divestiture likely to face skepticism in higher courts, including the Supreme Court.
Perplexity’s bid also faces questions about funding. The startup has raised about $1 billion from backers including Nvidia and SoftBank, but said on Tuesday that multiple investment funds have pledged to finance the deal in full.
On the Move
- Satellite communications company AST SpaceMobile surged 11% after announcing plans to launch between 45 and 60 satellites by 2026, with at least five orbital launches expected by the end of Q1 next year.
- Mercury Systems jumped over 24% following a fiscal fourth-quarter report that exceeded analyst expectations. Mercury posted adjusted earnings of 47 cents per share on revenue of $273.1 million, surpassing FactSet estimates of 22 cents per share on $244 million in revenue.
- Hillenbrand rose 15% after delivering better-than-expected fiscal third-quarter results. The company reported earnings of 51 cents per share on $598.9 million in revenue, beating analyst forecasts of 50 cents per share on $572.4 million. Hillenbrand also raised the low end of its full-year earnings guidance.
- Sonos jumped more than 12% after a regulatory filing disclosed that CEO Thomas Conrad purchased 92,300 shares last Friday.
- Circle Internet Group (CRCL) soared nearly 7% in pre-market trading following a robust 53% jump in quarterly revenue, driven by early momentum in its payments network.
- Palo Alto Networks (PANW) gained 1.5% after Piper Sandler upgraded the stock from Neutral to Overweight, citing expectations for a reacceleration in bookings growth.
- Chipotle (CMG) also rose 1%, boosted by a Piper Sandler upgrade to Overweight, highlighting an improved risk/reward profile for the shares.
- Apple (AAPL) slipped 0.4% in early trading amid reports that Tesla CEO Elon Musk has threatened “immediate” legal action against Apple, accusing the tech giant of unfairly favoring OpenAI on iPhones, according to Bloomberg.
- ai (BBAI) plummeted over 30% pre-market after missing revenue expectations for the quarter and lowering its 2025 revenue forecast.
- On Holding (ONON) surged 13% ahead of the open following better-than-expected earnings results.
- Tesla (TSLA) climbed nearly 3% yesterday, possibly buoyed by President Trump’s decision to extend the tariff deadline on Chinese imports by another three months.
- CoreWeave (CRWV) jumped nearly 8% yesterday ahead of its earnings report after the close, with the stock up 32% since the beginning of the month.
- Intel (INTC) rose 2.4% today after CEO Pat Gelsinger described his recent meeting with President Trump as “candid” and “constructive.” Trump called the discussion “interesting.”
What’s Ahead
Markets are closely watching gold and oil as geopolitical events take center stage this week. Friday’s anticipated meeting between President Trump and Russian President Vladimir Putin remains largely unpredictable and outside market control. However, any signs of progress toward easing the conflict in Ukraine would likely be welcomed by investors.
While the potential for breakthroughs remains uncertain, traders should keep an eye on oil and gold for subtle clues. Recently, U.S. crude oil dropped to two-month lows, dipping below $64 a barrel—possibly pricing in investor hopes for a diplomatic thaw. Meanwhile, gold surged to new intraday all-time highs last week before pulling back sharply on Monday.
On Thursday, the Producer Price Index (PPI) is expected to show an uptick, reflecting early tariff impacts as higher import costs work their way through to consumers.
Cisco will also be reporting its earnings tomorrow.
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