Cool Inflation and Hot Software Fuel Record Highs

Andrew@CANSLIM RESEARCH

The Inflation Tailwind That Keeps on Giving

U.S. stocks pushed to fresh highs as tame inflation data cemented expectations for a Federal Reserve pause. July CPI matched forecasts at 3.4% year over year, while PPI cooled more than expected. This backdrop is easing pressure on rate-sensitive assets. It also gives investors room to stay focused on earnings and AI. The market now leans toward no change in rates next month, removing a major overhang. Strong corporate profits are still supporting the rally, with S&P 500 margins near record levels. The key question is whether this inflation relief lasts. Traders must watch Fed minutes, labor data, and oil prices.

A Takeover Rumor Ignites the Entire Software Sector

The biggest story was a Reuters report that private equity firm Silver Lake was in talks to acquire Workday. The news broke after 14:30 and triggered an explosive move. WDAY surged as high as 226.53 and closed at 206.60, up +17.93%. The spillover effect was extremely strong. ADBE gained +4.53%, CRM rose +4.15%, and NOW rallied to close at 127.20, up +1.83%. The online crowd quickly split into camps. One viewed the deal as a signal that private equity was buying unfairly punished SaaS names. Another mocked the market for revaluing an entire sector on one rumor. The more practical observation was that the rally occurred as semiconductors were sold, suggesting algorithms were moving capital from chips to software.

Memory Leads but Fades Into the Close

Memory stocks dominated the leaderboard but lost substantial ground by the close. SNDK closed at 1527.70, up +13.63%, retreating about 3% from its high of 1580.80. MU closed at 949.89, up +4.23%, after reaching an intraday high of 978. Both were pushed back by selling pressure during the final hour. This weakness is notable. The featured chart for SNDK currently shows the weakest technical pattern among top tickers. The stock’s failure to hold its highs suggests the move may be losing momentum. Investors should watch whether this is a simple pullback or the start of a deeper correction.

Semiconductor Equipment Cracks While the Index Soars

While software and memory surged, semiconductor equipment collapsed. AMAT plunged inexplicably ahead of its after-hours earnings report. The stock fell from an intraday high of 563.76 to close at 535.73, down -2.32%. COHR, another name in the optical communications chain, fell -8.09%. This divergence is a warning sign. The market’s gains were highly concentrated in technology and semiconductors, but even within that space, leadership is narrow. SPY closed at 777.84, up +0.69%, while QQQ led with a +1.20% gain. However, DIA rose only +0.14% and IWM gained just +0.25%. Breadth is thin, and the rally is being driven by a handful of names.

The Online Crowd Celebrates With an Uneasy Feeling

Global social sentiment is extremely euphoric, but it carries an absurd sense of “not knowing why I’m making money.” The disconnect between software and memory surging while semiconductor equipment collapsed led many to suspect algorithmic manipulation. Even while celebrating, bulls repeatedly muttered that “this is exit liquidity.” The fear/greed level sits at elevated greed, approximately 78 out of 100. Almost no one discussed defense on a day of new highs. Yet contrarian indicators were equally dense. Many participants voluntarily liquidated positions and moved to cash. The VIX rising alongside record index highs was repeatedly cited as an exit-liquidity signal. The community’s perception of the indices was severely disconnected from reality. SPY remained pinned within a narrow 776–779 range for most of the session. At the individual-stock level, however, volatility in WDAY, SNDK, and FIG was enormous.

The Fragile Foundation of a Record Rally

The market is climbing a wall of worry, but the foundation is fragile. Cool inflation and strong earnings are real positives. Yet valuations are rich, and the rally is vulnerable if inflation re-accelerates or earnings disappoint. Oil and trade policy remain wild cards. The weakness in SNDK and the collapse in AMAT show that even winning sectors have cracks. The online crowd’s unease, despite the euphoria, is a contrarian signal worth heeding. The market is making new highs, but the path forward will require careful stock selection. Leaders must hold their gains, and breadth must improve. Until then, treat every rally with respect but also with caution.

Sources: market news brief & global social sentiment data. Updated 2026-08-14 06:01 HKT. For educational purposes only — not investment advice.