Interest Rate Expectations & Market Impact - The market has largely priced out the possibility of a 50 basis point rate cut in September, with the conversation shifting to either a 25 basis point cut or no cut at all [1][2][3] - Expectations for multiple rate cuts in 2024 are diminishing, with some suggesting only one or two cuts by the end of the year [2][15] - The potential for a "hawkish cut" is being considered, where the Federal Reserve cuts rates but maintains a hawkish stance [3] - The market's optimism, particularly in sectors like biotech, small caps, and homebuilders, is being re-evaluated in light of the hotter-than-expected PPI data [2] Sector Performance & Investment Strategies - Small-cap stocks have been significantly influenced by the prospect of rate cuts, and their performance may be hindered if rate cut expectations are scaled back [6][7][8] - Homebuilder stocks, which had been performing well, may see their "sizzle" diminish due to the changing rate cut narrative [4][5] - Wells Fargo Investment Institute has downgraded small caps to unfavorable, citing concerns about slowing economic growth and high borrowing costs [12] - An equal-weight strategy (RSP) is being considered as an alternative to mega-cap and small-cap investments, offering diversification without the risks associated with small caps [17] Economic Outlook & Fed Policy - The Producer Price Index (PPI) data has introduced uncertainty into the "no inflation" narrative and the likelihood of significant rate cuts [1][6][14] - The Federal Reserve is likely aiming for a consistent rate-cutting approach, avoiding the "stop-start" pattern of the 1970s and 1980s [15] - There's a risk that the Chairman of the Federal Reserve might temper expectations for a guaranteed 25 basis point rate cut at Jackson Hole [19] - Structurally higher interest rates are anticipated compared to the past decade, which will impact sectors like homebuilders [16]

Market Overview - The market showed resilience despite uncertainties regarding trade policy, tariffs, and the Federal Reserve chair [6] - S&P 500 closed up about 01% [6] - Nasdaq was down about 04% due to weakness in big cap tech names [7] - Dow Jones Industrial Average added 04% [7] - Russell 2000 outperformed, with small caps gaining tailwind [7] Earnings and Performance Highlights - Homebuilders outperformed, with the S&P composite 1500 homebuilding index up about 10% [2] - D R Horton's stock was up about 16% after third-quarter earnings beat expectations [18] - PulteGroup's stock was up 12% after reporting better-than-expected earnings [19] - Texas Instruments' second-quarter EPS was $141, beating the consensus estimate of $135, but the stock was down about 7% in after-hours trading [10][12] - Intuitive Surgical's second-quarter revenue came in at $244 billion, and adjusted EPS beat estimates at $22 billion, with shares initially moving higher but later declining [20][29] - Capital One's second-quarter adjusted EPS was $548, far exceeding the consensus estimate of $388, with net revenue at $1249 billion [22][23] - Enphase Energy's second-quarter adjusted EPS beat estimates by $006, and revenue came in better than forecast at $3632 million, with the stock up about 8% in after-hours trading [26] Company Specifics - Texas Instruments invested $39 billion in R&D and CIGNA and invested $49 billion in CapEx and returned $67 billion to owners over the past 12 months [14] - Intuitive Surgical's Da Vinci surgical system installed base grew to 10488 systems as of June 2025, a 14% increase compared to June 30th, 2020 [30] - Capital One's loans held for investment were approximately $4393 billion [23]