Cooler PPI Drives S&P 500 to Fresh Record as Oil Slides on Hormuz Relief

U.S. equity markets extended their rally to fresh all-time highs on August 13 as a softer-than-expected Producer Price Index print reinforced the view that the Federal Reserve will stand pat in September. The S&P 500 closed at 7,798.99, up 0.65% on the day, while the Nasdaq added 0.81% to settle at 26,803.03. Both indices now trade well clear of their 20-day and 50-day moving averages — the S&P 500's SMA20 sits at 7,582 and SMA50 at 7,515 — though with an RSI of 66.5 for the benchmark index, momentum is approaching territory where overbought signals warrant attention. The 10-year Treasury yield fell +0.65% to close at 4.64%, as bond markets priced in a more benign inflation trajectory, and the US Dollar Index dipped a marginal -0.05% to 99.96, just below its 20-day and 50-day moving averages near 100, reflecting a muted but directionally weaker greenback.

The July PPI report was the session's defining data point. Final demand producer prices were unchanged month-over-month, missing the +0.2% consensus and building on June's -0.1% reading, while the annual rate fell sharply to 4.7% from 5.5% — a materially faster deceleration than markets had anticipated. The drop was driven by a 0.7% decline in goods prices, with falling energy costs doing much of the work, while services PPI edged up just 0.2%. Core PPI ex-food, energy, and trade rose 0.4% MoM, a slight wrinkle that analysts cautioned against ignoring, but the headline miss was sufficient to cement the prevailing Fed-hold narrative heading into September. Initial jobless claims for the week ending August 8 came in at 209,000 — 7,000 above the 202,000 forecast and up from a revised 200,000 the prior week — adding incremental evidence of a softening labor market following July's -23,000 nonfarm payrolls print, though continuing claims actually fell 22,000 to 1.777 million, tempering recession concerns.

Crude oil was the session's sharpest mover in a directionally opposite sense, with WTI falling -2.43% to $81.25 per barrel. The decline reflected two converging forces: partial relief from elevated Strait of Hormuz risk premium following comments from Treasury Secretary Scott Bessent suggesting a deal to reopen the waterway was near, and the weight of an OPEC+ output increase of 188,000 barrels per day agreed earlier in the week. Critically, however, the geopolitical backdrop remains materially unresolved — no comprehensive deal has been signed, the IEA on August 12 issued its most severe supply downgrade of 2026, and Houthi attacks on Saudi-linked vessels in the Red Sea continue. WTI's RSI of 50.8 reflects genuine two-way uncertainty, with the contract sitting just above its 20-day moving average of $82 and its 50-day at $79 providing proximate support. Any breakdown in Bessent's diplomatic optimism could rapidly reverse Thursday's risk-premium unwind. Gold fell -1.03% to $4,363.60, a pullback consistent with easing inflation fears and a modest risk-on shift, though the metal remains substantially above its 50-day SMA of $4,157 and well below its 200-day at $4,498, suggesting the structural bid remains intact even as near-term momentum fades.

Across international markets, the UK's Q2 GDP print of +0.4% QoQ and +1.2% YoY came in line with forecasts, but the June monthly figure of +0.3% — against a -0.1% consensus — was a genuine upside surprise attributed to World Cup-related consumption and summer heatwave effects. GBP/USD traded around $1.3486–1.3495, and the stronger activity data complicated the Bank of England's rate-cut calculus, as better-than-expected momentum into Q3 may give the MPC reason for additional caution. In Japan, July PPI eased to +7.2% YoY against a 7.4% forecast, with a monthly gain of just 0.1% versus a 0.6% consensus — a softer print that nonetheless sits against a backdrop of Japanese government support for a Bank of Japan rate increase as early as September or October, a combination that leaves yen and JGB markets in a holding pattern. Sector rotation on the day favored rate-sensitive growth over energy, with the PPI-driven yield decline benefiting technology and consumer discretionary while energy stocks retreated in sympathy with crude.

Looking ahead, the calendar turns to the July CPI release and Federal Reserve communications as the next key inputs for rate path expectations. If CPI mirrors PPI's downside surprise, market-implied Fed hold probabilities — already elevated following the weak payrolls report and Thursday's data — will firm further, potentially pushing the 10-year yield back toward the 4.50% area. The Hormuz situation remains the single largest tail risk: Treasury Secretary Bessent's optimistic framing carries diplomatic weight but faces a structural constraint — many U.S. sanctions on Iran, including measures under the Iran Sanctions Act, are congressionally mandated and cannot be lifted by executive order alone, meaning any credible deal timeline must account for a legislative process that could extend well into 2027. Traders pricing Bessent's comments as a near-term resolution may be underweighting that implementation friction, leaving crude and broader inflation expectations vulnerable to a sharp repricing if talks stall.