Good Afternoon. On this date in 1799, a French soldier stumbled on the Rosetta Stone in the Nile Delta — the granite slab that finally cracked the code on Egyptian hieroglyphs.

Two hundred twenty-seven years later, markets are trying to crack a different code: whether June's cool CPI reading was a one-off or an actual trend.

Two days of good news does not make a trend, but it makes a much friendlier July.

—Rosie, Wyatt, Evan & Conor

🔥 What’s Hot: 🔥

🥶 What’s Not: 🥶

🔢 Big number: -0.3%. That's June's month-over-month producer price change — the biggest wholesale price drop in months and the second cool inflation report in two days. Two-hike odds for 2026 have collapsed back to a base case of one.

The news: Wholesale prices fell 0.3% in June, against a consensus for a 0.1% gain. Core PPI slipped 0.1%. Energy prices at the wholesale level dropped hard, and services inflation eased for the second straight month. It's the second cool inflation reading in 48 hours after Tuesday's soft CPI.

Why it matters: PPI feeds directly into the Fed's preferred PCE inflation gauge, so a soft PPI usually means a softer PCE at month-end. The bond market noticed — the 10-year Treasury ETF ticked up 0.30%, and September rate-hike odds have slid to roughly 68% from full two-hike pricing on Monday. That's a big two-day rethink.

Big picture: The Fed's been telling everyone it needs "more data" before cutting anything. It just got two green data points in a row. Whether that's enough to shift the September dot plot is the question Warsh sidestepped on Capitol Hill this afternoon. One nuance worth flagging: energy did most of the heavy lifting in June, and July wholesale gasoline is already back up as Middle East risk grinds along. If August PPI reverses, this two-day cool streak looks a lot more like a data blip than a durable shift. But for now, the market is doing what any dovish dataset tells it to do. Source: CNBC

The news: Morgan Stanley reported EPS of $3.46 against a $2.93 estimate — an 18% beat and the highest quarterly earnings in the firm's history. Revenue hit $21.35 billion, net income was up 66% year over year, and equities trading revenue jumped 69% to $6.30 billion. Wealth Management crossed $10 trillion in client assets for the first time. Bank of America wasn't far behind: EPS of $1.21 vs. $1.13, revenue $31.6 billion (+15% YoY), and it raised full-year net interest income guidance to the top end of its 6-8% range.

Why it matters: That's now six of six big banks beating on both lines this quarter, with three (MS, GS, BAC) also raising guidance. Trading desks are having their best run in years, wealth management fees are compounding, and BofA's efficiency ratio dropped to 59% — down 359 basis points from a year ago.

What's next: Regional banks report Thursday and Friday. If PNC, Truist, and USB follow the same script — trading strong, NIM stable, credit clean — the "financials are the new AI trade" story writes itself. MS still finished up just 0.52% and BAC +1.13%, so the sell-the-news current from yesterday's WFC and Citi hasn't fully broken. Meanwhile Morgan Stanley's ROTCE of 26.6% and book value of $67.80/share are numbers that would have looked delusional five years ago. Investment banking fees also jumped 65% at MS, hinting that the deal pipeline is finally opening up after two dry quarters. Source: CNBC

The news: Apple surged 4.11% to $327.80 — a fresh record — after Morgan Stanley lifted its price target to $360 and reiterated Overweight. Analyst Erik Woodring cited Apple's "pricing authority" on hardware plus its "accelerating AI monetization roadmap," and estimated the iPhone 18 lineup's higher prices could add 2-4% to FY27 EPS. Apple Intelligence also got approved in China through partnerships with Alibaba and Baidu, closing what had been the most obvious gap in Apple's AI story.

Why it matters: Apple captured a 20% share of the global smartphone market in Q2 — a record for the company. iOS 27's public beta went live, giving everyone hands-on with the revamped Siri. The China green light matters because Apple Intelligence has been stuck outside the country for most of the last year, and mainland iPhone sales had been sliding as a result.

Bottom line: A single Morgan Stanley note doesn't move Apple 4%. What moves it is when that note lands the same morning as a China regulatory win, a record market-share release, an iOS beta, and a cool PPI report. It's Apple's version of a perfect storm — with earnings on July 30 as the potential encore. Source: Investing.com

The news: Johnson & Johnson delivered Q2 revenue of $25.31 billion (+6.6% YoY) and adjusted EPS of $2.90 — both above consensus. It raised full-year sales guidance to $101.1 billion and adjusted EPS to $11.68, tracking toward the first $100B revenue year in the company's 140-year history. The pharma unit generated $16.38 billion, ahead of estimates on strength from Tremfya and Darzalex.

Why it matters: JNJ still dropped -2.13%. It's the second sell-the-news blockbuster this week after Tuesday's WFC and Citi reaction. Investors are basically saying: great, now beat it by more, or by a wider margin, or with less erosion from Abiomed heart pumps.

Big picture: Q2 earnings season has slowly become a game of expectations vs. results, and expectations are winning. Even blockbuster reports from JNJ, MS, and BAC are getting sold if guidance isn't wildly ahead of Street models. That's a late-cycle tell. Source: Reuters via US News

The news: Fed Chair Kevin Warsh sat for his second day of Humphrey-Hawkins testimony, this time facing the Senate Banking Committee. He reiterated the Fed has "no tolerance" for elevated inflation and is "fully committed" to returning to 2%. He offered zero hints about the timing of any rate moves. Senator Elizabeth Warren accused him of "inviting corruption" over disclosure gaps. Warren Buffett, in a separate interview, called Trump's Warsh pick a "good choice."

Why it matters: Warsh is walking a tightrope. Cool CPI+PPI gives him political cover to hold, cut, or lean dovish — but he inherited the job from Powell after Trump's public campaign for a friendlier Fed, and every dovish syllable will be read as capitulation. Today he stayed neutral.

What's next: The July FOMC is July 28-29. Retail sales drop Thursday morning. If consumers held up in June, expect Warsh's hawks-in-a-holding-pattern posture to survive the meeting. Fed funds futures now price roughly 68% odds of one more hike by September, down from a full two-hike pricing on Monday morning — a 30-point swing in two data-driven days. Source: CNN

The news: ASML posted Q2 net sales of €9.3 billion and net income of €2.9 billion, both ahead of estimates. Gross margin hit 54%. But the bigger news was the guide: the Dutch lithography monopolist now expects full-year net sales of €43-45 billion, up from a prior €36-40 billion range. That's the second raise this year. Intel confirmed adoption of ASML's next-generation High-NA lithography for advanced nodes.

Bottom line: ASML raising guidance twice in one year is roughly as rare as an April blizzard in Denver. The company sits at the choke point of every advanced AI chip on earth, and if it's saying demand is stronger than April's guidance suggested, that's the strongest possible signal that the AI capex cycle isn't peaking. The Intel High-NA adoption is a separate big deal — it locks Intel in on ASML's most expensive machine (roughly $400M per unit) for its next-generation Foundry process. The stock still barely moved — +0.50% — because the whole semi sector had a rough day. Source: CNBC

The news: SK Hynix's US-listed ADR (SKHY) plunged 9.07% to $176.33, giving back a chunk of Monday's +22% blowout. Barclays initiated coverage on the new ADR with an Overweight rating and a $330 price target — implying roughly 70% upside from Tuesday's close. The ADR is now trading at a 51% premium to SK Hynix's Korean-listed shares as retail investors chase the AI memory story stateside.

Big picture: Chips had their sharpest divergence day in a month. AMD dropped 3.78%, the SMH semiconductor ETF slid 2.24%, and Nvidia flat-lined at -0.27%. Meanwhile Apple, Microsoft, Amazon, Alphabet, and Meta all rallied 2.5-4%. The rotation isn't "out of tech" — it's out of semis and into mega-cap software, hardware, and consumer names on lower rates. Two-way action in the AI trade. Source: Aju Press

The news: The White House withdrew its proposed 20% fee on ships transiting the Strait of Hormuz, replacing it with a package of trade and investment commitments from Gulf states. Oil eased off session highs on the news, though Brent stayed elevated on lingering geopolitical risk. US oil ETF (USO) closed +0.34%.

What's next: The energy sector is squarely on the losing end today — Exxon -1.02%, Chevron -0.59% — as the risk premium leaks out of crude. Watch for OPEC+ commentary this weekend and Iran's response to whatever backchannel produced this reversal. If oil breaks lower into the $70s, that's another leg down for headline inflation heading into the July FOMC — and one more feather in the doves' cap. Tanker rates, which had spiked on the toll threat, should also normalize over the next two weeks. Source: Reuters via CNN

Q: What do you call a row of rabbits walking backwards?

A: A receding hare-line.

Convexity measures how the price of a bond changes as interest rates move — but unlike duration, which assumes a straight-line relationship, convexity captures the curve.

When rates fall, bonds with higher convexity gain more than duration alone would predict.

When rates rise, they lose less. It's the mathematical reason long-duration assets (think 30-year Treasuries and mega-cap growth stocks) get a disproportionate boost from a cooling inflation reading.

Today's PPI report was a small move — -0.3% vs. a +0.1% consensus is a 0.4-point miss — but convexity is a big reason Apple, Microsoft, and Amazon all rallied 2-4% off the back of it. The longer the duration, the more the curve does the heavy lifting.

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