Wall Street: When prices refuse to lower

Statistics are never just just statistics. Here, they are part of a long quarrel between the federal reserve, the markets and the real economy. It has been 53 consecutive months, more than four years, that inflation exceeds the target of the 2% set by the Fed. However, the labor market, long stretched until excess, begins to show its first cracks. This cocktail (use that is cut but price that clings) is typically the kind of dilemma which can only plead for a drop in rates as for a status quo.

For the moment, investors are betting on the first option. The CME Fedwatch tool shows that the markets fully integrate a drop of 25 base points from September, with new cuts in October and December. A confident bet … maybe too much.

This morning in New York, Wall Street’s patience ended, and the news was not reassuring: the production price index (PPI) in July jumped 0.9% over a month (more than four times the consensual forecast) and 3.3% over a year, far beyond the expected 2.5%. It is not a rounding error, it is a warning stroke that disturbed the precarious calm that reigned in the term markets at the start of the week.

For the Fed, the message stings: inflationary pressures are not only alive, they thrive. And not only in the consumer’s basket: these are big price, the upstream costs that irrigate the whole economy before even reflecting in your receipt or your Amazon order. The involvement is uncomfortable: the respite observed this week in the IPC may well have been a mirage. The Fed, which the markets pushed slowly towards a drop in September, is faced with data that would justify maintaining the rates.

And these price increases have a recognizable imprint: customs duties. Under the leadership of Donald Trump, the United States has strengthened its tariff diet, expanding the list of products struck by import taxes. Officially, it is a patriotic rampart against foreign exploitation. Others will say that it is a tax on the national production chain. Imports become more expensive: companies that rely on foreign inputs see their costs go up and these costs have repercussions throughout the chain. Result: a PPI that swells like a bread dough in an oven.

Do not expect a Mea-Culpa from the White House. True to his habits, the American president could sweep these figures as “fake news” emanating from ill -intentioned bureaucrats or point the finger at a manager to oust. Customs prices will probably be presented as having nothing to do with the rise in prices and perhaps even as a moderation factor. In the electoral year, economic causality knows how to be very flexible.

With a PPI that gets carried away, the Fed’s September decision becomes much more uncertain. The markets, unanimous until this morning to bet on a drop in rate, could well review their copy. The central bank, already uncomfortable at the idea of releaseing its monetary policy in the face of tenacious inflation, has just received the statistical equivalent of a cold shower.

The reaction was immediate: after the announcement, the term contracts fell, the Dow Jones falling at -0.41%, the S&P 500 to -0.44%and the Nasdaq 100 to -0.56%.

The quotes of the day:

• Dollar Index: 98,002
• Or: 3 354 USD
• Crude oil (BRENT): 65,90 USD (WTI) 62,19
• UNITED STATES 10 ans: 4,25%
• BITCOIN: 118 834 USD

In business news:

• Eli Lilly increased up to 170% the price of his weight loss medication Mounjaro in the United Kingdom, the highest dose now cost £ 330 per month.

• Tesla sales in Norway increased 24% in annual shift despite the political reactions hostile to Elon Musk, thus contradicting the downward trend observed in other European markets.

• Eli Lilly has signed an agreement of a maximum value of $ 1.3 billion with Superluminal Medicines to co-develop obesity drugs, which gives it access to its platform for the discovery of cardiometabolic drugs.

• Tapestry’s shares fell 12% after announcing a drop in its annual profits due to new American customs duties of 160 Musd, despite the good sales of the Coach brand.

• NVIDIA and the National Science Foundation of the United States undertook to pay 152 MUSD to help AI2 to develop open AI models intended for scientific research.
• Deere & Co has revised down its forecasts for annual profits, its profits and its turnover in the third quarter having decreased due to the weakness of American volumes and customs duties, despite results above the expectations of analysts.
• Equinix has signed several advanced contracts in the field of nuclear energy to feed its data centers, including fission energy controls and micro -rector.
• Oracle and Google Cloud have joined forces to integrate the gemini AI models in the cloud services and Oracle’s commercial applications.
• Costco has decided not to sell the abortive pill mifepristone in its pharmacies, invoking a lack of request and the pressure of confessional groups.

• JD.com’s benefit has halved in the second quarter due to significant expenses on the competitive meal delivery market in China, despite a 22% increase in turnover.

• Foxconn published solid results for the second quarter, thanks to the high demand for IA servers, which has exceeded for the first time the turnover of intelligent electronics.
• Google, a subsidiary of alphabet, announced an investment of 9 billion in AI and the cloud infrastructure in Oklahoma, especially in a new campus dedicated to data centers and educational programs.
• Meta Platforms is the subject of an investigation after internal documents revealed that its IA robots were authorized to produce harmful content, including inappropriate interactions with minors.

• Thl Partners acquires majority participation in the Headlands Research clinical trial company from KKR for around 600 Musd.

• Applicated Industrial announced an increase of 5.5 % of its turnover in the fourth quarter, exceeding estimates, and provides for a growth of 4 to 7 % of its turnover for the year 2026.

• AMCOR’s net turnover increased by 43% in the fourth quarter compared to the previous year, thanks to the acquisition of Berry Global, and the company provides for growth of 12 to 17% of its profit per share in 2026.

• Reliance Industries has made exceptional fuel oil purchases from HPCL, which suggests abandonment of Russian imports in the face of American customs duties.
• Cisco Systems provides higher turnover than expected for the first quarter, thanks to the high demand for artificial intelligence infrastructure.

Analysts recommendations:

• Allison Holdings Transmission, Inc .: Morgan Stanley maintains its “neutral” recommendation and reduces its price of price from 100 to 96 USD.
• CH Robinson Worldwide, Inc .: Loop Capital Markets maintains its “neutral” recommendation and notes its price of courses from 96 to 124 USD.
• Celinese Corporation: RBC Capital maintains its recommendation “sectoral performance” and reduces its price of courses from 63 USD to 45 USD.
• Cisco Systems, Inc .: Goldman Sachs maintains its neutral recommendation and raises its price target from 67 USD to 71 USD.
• Coherent Corp.: Barclays maintains its recommendation “overlap” and raises its price of courses from 90 USD to 110 USD.
• Coreweave, Inc .: Citi maintains its purchasing recommendation and notes its price target from 160 USD to 164 USD.
• GRAPHIC PACKAGING HOLDING COMPANY: SEAFORT GLOBAL maintains its purchase recommendation and reduces its USD 30 course target to 28 USD.
• Lumenum Holdings Inc .: GF Securities Co. Ltd. Maintains its purchasing recommendation and notes its price target from 81 USD to 129 USD.
• Newell Brands Inc .: Citi maintains its neutral recommendation and raises its price as a price from USD to 5.50 USD.
• Paylocity Holding Corporation: Cantor Fitzgerald initiates a recommendation “overlap” with a price of courses of 215 USD.
• Rambus Inc .: Arete Research maintains her neutral recommendation and raises her price as a course from USD to 77 USD.
• Rockwell Automation, Inc .: Barclays maintains its recommendation “overwhelming” and notes its price as a course from 357 USD to 370 USD.