The S&P 500 closed at a record 7,798.99 on Thursday, clearing 7,800 intraday for the first time, after two straight inflation reports came in cool enough to push a September rate hike out of the picture.
One Wall Street analyst highlighted that the data did more than remove a threat. It widened the range of good outcomes.
“The right tail for equities has increased,” 22V Research’s analyst Dennis DeBusschere wrote in a note to clients Friday.
In plain terms: the odds of the upside scenario just went up.
Inflation Is Running At Fed’s Target, 22V Says
Headline consumer prices rose 0.1% in July and 3.4% from a year earlier, the Bureau of Labor Statistics reported Wednesday, down from 3.5% in June.
Core CPI ran at 2.5%. Producer prices were flat for the month, with the annual rate cooling to 4.7% from 5.5%.
Those numbers still sit above the Federal Reserve’s 2% target.
But DeBusschere’s team tracks a cleaner cut of the Fed’s preferred gauge: core PCE stripped of financial services prices, which are due for revision in September and which most economists are now removing.
By that measure, July prices rose an estimated 0.10%. Annualized over three months, that works out to 2.06% — effectively at target. Excluding housing, the same measure runs at 1.77%, below it.
Where 22V Is Putting Money
Benign labor and inflation data mean financial conditions can stay easy for months, DeBusschere argued, and possibly far longer.
Paired with strong earnings, that supports risk assets.
The firm favors both AI goods and AI services, and remains constructive on non-AI cyclicals — specifically retail, banks and transports.
It is long cyclicals in aggregate and short defensives and low-earnings-volatility names.
The AI Margin Evidence
The note also flags something quieter from second-quarter reporting.
Forward margin estimates for companies with specified AI use cases have continued to outrun those without, both in level and in rate of change — evidence that AI is actually reaching the profit line.
That advantage is widest in technology and communication services, and also shows up in financials, utilities, discretionary and industrials. It does not yet show up in REITs, energy, staples, materials or health care.
How far it broadens from here is the watchpoint for the coming months.
What’s Next
Retail sales and the preliminary University of Michigan sentiment reading land Friday, with Walmart Inc. (WMT) and Target Corp. (TGT) reporting next week and NVIDIA Corp. (NVDA) on Aug. 26. The Federal Open Market Committee meets Sept. 16.
Two things could narrow that right tail again: the 10-year Treasury yield near 4.69%, and oil, which firmed Friday as the U.S. threatened an open-ended naval blockade of Iran.
SPDR S&P 500 ETF Trust (SPY) closed Thursday up 0.70% at $777.88. Invesco QQQ Trust (QQQ) gained 1.16% to $732.07.
