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Good Afternoon. Happy Bastille Day. On this date in 1789, hungry Parisians stormed the Bastille after wheat and bread prices doubled inside a year — a reminder that inflation used to end in a lot more than headlines.
This morning's June CPI took a much cooler turn: prices fell 0.4% on the month, the biggest monthly drop since April 2020, with the annual rate dropping to 3.5% from May's 4.2%.
Bank earnings blew past estimates almost across the board. Tech clawed back yesterday's losses. Somewhere in France, they're pouring one out for cheaper baguettes.
—Rosie, Wyatt, Evan & Conor
💰 Markets
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🔍 Today’s Vibe
🔥 What’s Hot: 🔥
Capital-markets banks: Goldman, JPM, and Morgan Stanley — the desks with the biggest trading and Investment Banking footprints — outran the traditional lenders by a mile today. Trading revenue is doing more work than net-interest income for the first time in three years.
🥶 What’s Not: 🥶
Consumer staples: Regular rotation-out-of-defensives look — when CPI cools and growth wins, staples get sold.
🔢 Big number: -0.4% — June's month-over-month headline CPI drop, the deepest one-month decline in the index since April 2020.
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🇺🇸 Stateside
Inflation actually cooled
The news: June CPI fell 0.4% month-over-month against a -0.1% consensus, dragging the annual rate down to 3.5% from May's 4.2% — well below the 3.8% economists were braced for. Core CPI was unchanged on the month versus +0.2% expected, cooling the annual pace to 2.6% from 2.9%. Gasoline led the way lower with a 5.7% drop in energy. Shelter's still sticky at 0.3% m/m.
Why it matters: This is the softest CPI reading of the year and the widest downside miss since the disinflation stretch of late 2024. It rewrites the near-term Fed conversation — traders yanked September hike odds back down and started dabbling with December cut pricing again. The catch: shelter isn't cooperating, and June's oil relief has already reversed with Brent back at a one-month high.
Big picture: A softer number gives Warsh cover to pause without pivoting; a hotter number would've made his hawkish stance untouchable. Two-year yields fell about 8 basis points, five-years slipped seven, and Fed-funds futures moved rate-cut probabilities for December from 28% back to roughly 44% — a real re-pricing rather than a passing head-fake.
Banks blow past estimates
The news: Five of five major banks beat Q2 EPS estimates in a synchronized 7am release. Goldman Sachs stole the show with $20.98 EPS versus a $14.51 consensus (a 45% beat) — a 23.5% ROE and record trading revenue as SpaceX's IPO and M&A volumes surged. JPMorgan posted a record $7.70 EPS on a $6 billion equity-trading haul; Jamie Dimon's release warned "several risks are shifting." Bank of America squeezed out a beat and Morgan Stanley joined the party at +3.01%. Stocks: GS +8.29%, JPM +2.01%, MS +3.01%, BAC +1.76%.
Why it matters: This is the eighth consecutive quarter of positive bank surprises, with trading and investment-banking desks doing the heavy lifting. It signals capital markets are firing on all cylinders even as Main Street lending stays choppy.
What's next: Bank of America and Morgan Stanley release full detail Wednesday morning; regional banks follow later this week and will show whether the strength runs beyond Wall Street's biggest names.
Wells and Citi beat, get sold anyway
The news: Wells Fargo dropped 2.79% to $85.22 despite crushing estimates at $2.00 EPS versus $1.72, on a 17% jump in net income to $6.41 billion and 12% loan growth. Citigroup sold off 4.68% to $134.12 even after topping the Street. Both offered outlooks that read as "steady as she goes" rather than the upgrade traders wanted.
Why it matters: Sell-the-news is doing real work when banks trading at fresh highs deliver in-line-plus-a-hair guidance. The market has priced strong 2H, so anything short of an outright Net Interest Margin upgrade or a bigger buyback becomes a fade. Wells sticking with its ~$50 billion full-year Net Interest Income (NII) forecast — after posting 5% NII growth — is a good example of that new bar.
Bottom line: Blowing away the estimate isn't enough when the whisper number is already there. Options flow leaned put-heavy in Wells and Citi into the close — meaning today's reaction may not be over by Wednesday's open.
Source: RTÉ / MarketScreener — WFC snapshot
Chips climb out of the hole
The news: After Monday's rout, the AI trade came sprinting back. SMH +2.73%, NVDA +4.23% to $212, AMD +3.07% to $551, AVGO +2.15% to $392, TSLA +0.53%. SK Hynix's US ADR was the standout, surging +21.91% to $185.73 on a positive independent-research note projecting HBM4 memory prices could double next year. Regular MSFT and AAPL were among the day's laggards as investors rotated back into cyclical growth.
Why it matters: Two things gave semis air today — the CPI drop pulled discount rates back down, boosting long-duration growth names, and the memory side of the AI trade got a fresh datapoint suggesting HBM pricing hasn't peaked. That directly rebuts Monday's "AI capex is rolling over" narrative.
Big picture: Big Tech earnings start July 23 with Alphabet and Tesla. Today's rebound sets a stronger stage for guidance to matter more than macro.
Source: TradingKey / Seoul Economic Daily
Warsh takes the Hill
The news: New Fed Chair Kevin Warsh delivered his first Humphrey-Hawkins testimony to the House Financial Services Committee at 10am, walking a fine line between acknowledging the cool CPI report and reiterating that the FOMC remains data-dependent and vigilant on inflation expectations. He specifically flagged oil prices and shelter as reasons not to declare victory.
Why it matters: Today's CPI would've been Warsh's easiest possible day if oil hadn't just jumped back to a one-month high. The messaging challenge is real — the market wants to hear soft "peak rates" language; Warsh has to preserve optionality if crude runs.
What's next: Warsh sits with the Senate Banking Committee Wednesday. Traders will parse every reference to "financial conditions" for hints at the September meeting stance.
Source: ICRYPEX Briefing / XTB Economic Calendar
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🌎 Around The World
Hormuz stays hot
The news: Brent climbed above $80 for the first time in a month and WTI held near $76 after US-Iran strikes in and around the Strait of Hormuz resumed overnight. Trump reportedly floated a transit toll for tankers moving through the strait — a rhetorical grenade that spiked shipping insurance rates and sent tanker charter rates up sharply. USO added 1.98% to $120.12; XOM held gains at $145.
Why it matters: Every day the Hormuz story stays a live risk, the oil-price base for the next CPI cycle rises. Today's headline CPI relief came from June's gasoline slide — a period that ended before the current flare-up. If Brent holds above $80 through July, August's energy component alone could add 0.2–0.3 percentage points back to headline CPI.
Bottom line: June was the ceasefire month. July is not. Traders should also expect refined-product spreads to blow out even if crude stays anchored — Gulf refinery utilization is the second-order shock nobody's priced yet.
Source: The National / Pips Perspective
India CPI cooks the RBI
The news: India's June CPI surged to 4.4% year-over-year, up from May's 3.9% and above the 4.1% consensus. It was the first reading above the RBI's inflation threshold in 18 months. The spike came from higher food and services costs, particularly restaurant prices linked to commercial LPG rate hikes. Core CPI hit 4.2%, the highest in the current series, though "core-core" (ex food, fuel, precious metals) stayed subdued at 2.51%.
Why it matters: India's economy has been the world's fastest-growing large one and a magnet for EM capital. A CPI overshoot puts the RBI in a bind — hike now and risk growth; hold and lose credibility. Elara Capital and other shops still expect the RBI to hold this month while sharpening its language.
Big picture: Emerging-market central banks that were slowly easing this spring are facing renewed hawkish pressure on the back of energy and India's food shock.
Source: Mathrubhumi
Kospi claws back some pride
The news: Seoul's Kospi bounced roughly 3.4% overnight after Monday's -8.95% rout, with SK Hynix's Seoul-listed shares surging 11% and Samsung Electronics recovering 5%. The rally came off a supportive SemiAnalysis note on memory demand and reports that HBM4 pricing could double in 2027 as hyperscalers move to next-gen architectures. Foreign buyers came back after selling 1.9 trillion won on Monday.
Why it matters: Yesterday's crash was a positioning unwind, not a fundamentals event. Today's snapback confirms as much and puts the focus squarely back on SK Hynix's July 22 Q2 report. If HBM4 prices are truly doubling, memory margins could stay elevated well into 2027.
What's next: SK Hynix Q2 lands July 22. Consensus is 65 trillion won operating profit; some analysts still see downside risk to the low 60s.
Source: FinancialNews / Investing.com
🥸 Dad Joke of the Day
Q: How does cereal pay its bills?
A: With Chex.
📖 Vocab Word of the Day
Base Effect:
The mechanical impact on year-over-year comparisons caused by an unusually high or low reading in the prior year's same period rolling out of the calculation. When last year's number was elevated, this year's growth or inflation rate looks softer even if the underlying pace hasn't changed. When last year's was depressed, the annual rate looks scarier than reality.
Today's 3.5% headline CPI drop is a textbook base-effect story: June 2025's reading was hot, and rolling out that comparison automatically flatters this year's number. Economists strip out base effects by focusing on rolling three-month annualized measures, which tell the true underlying pace.
"The market cheered the softer CPI, but roughly half the improvement was a base effect from an unusually strong June 2025 comparison — a mechanical helper the Fed knows to look through."
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