Wall Street’s Rally faces a Reality Check 12/08/2025

HOT stories for today

US market wrap:

• U.S. equities slipped slightly on Monday, pulling back from recent record highs as traders awaited Tuesday’s July CPI report. The S&P 500 fell 0.3%, the Dow Jones dropped roughly 200 points (-0.5%), and the Nasdaq edged down 0.3%. Markets remain on edge over stagflation risks and uncertainty around the Federal Reserve’s next move on interest rates.
•  Investors largely brushed off President Donald Trump’s decision to extend his 90-day pause on higher tariffs for Chinese goods. Volatility spiked after the sudden dismissal of the Bureau of Labor Statistics commissioner, raising questions about the integrity of official inflation figures and rattling confidence in the $2.1 trillion TIPS market. Even so, Morgan Stanley strategists see room for a rotation into small-cap and lower-quality equities, particularly in industrials and financials, if CPI meets expectations.

Wall Street’s Rally faces a Reality Check

• Stifel strategists Barry Bannister and Thomas Carroll warn the S&P 500’s record run may be running on fumes. Large-cap stocks are trading at valuations not seen since 2021, and the “tariff tantrum” of April could soon have an encore. The duo sees mild stagflation ahead as companies hike prices to offset Trump’s tariffs, outpacing wage growth and squeezing consumer spending, the engine of 70% of U.S. GDP. Their year-end S&P target: 5,500, implying a potential 14% drop from current levels.
• While many expect Fed rate cuts this fall, Stifel doubts they’ll reignite risk appetite given stretched valuations and weakening PMIs. They suggest investors consider shifting to defensive, value names like Philip Morris (PM) and Abbott Labs (ABT) as turbulence looms.

Stocks on the move:

• E.l.f. Beauty (ELF): Shares of the cosmetics maker surged over 9% after Morgan Stanley upgraded the stock to overweight from equal weight. The bank argued that Wall Street’s profit forecasts for E.l.f. are “far too conservative,” citing potential upside from strategic pricing moves and revenue from its Rhode acquisition.
• C3.ai (AI): The AI software firm tumbled 22% after issuing soft fiscal Q1 guidance. The company projected revenue between $70.2M–$70.4M and a non-GAAP loss in the $57.7M–$57.9M range, disappointing investors.
• Nvidia (NVDA), Advanced Micro Devices (AMD): NVDA climbed 0.5% and AMD gained 1.5% after securing a groundbreaking deal with the Trump administration. Under the arrangement, both chipmakers will remit 15% of China-related chip sales to the U.S. government in return for export licenses.
• CoreWeave (private): The cloud infrastructure player jumped 7% after JPMorgan reiterated its overweight rating and raised its price target. The firm highlighted strong prospects in CoreWeave’s deal pipeline, while noting the shares’ elevated volatility requires investor risk tolerance.
• Intel (INTC): The semiconductor giant rallied 6% ahead of CEO Lip-Bu Tan’s White House meeting, following President Trump’s public call for his resignation over alleged links to Chinese firms.

Watchlist: INTC, CRWV, AMD, NVDA, CRCL, TME, COIN, ONON  

Today’s action

• Asia-Pacific equities mostly advanced Tuesday, with Japan’s Nikkei 225 setting a fresh record as traders welcomed the U.S.–China trade truce extension, giving both economic superpowers more breathing room to strike a deal. Attention in the region is also on the Reserve Bank of Australia, which is widely expected to cut its cash rate later today.
• U.S. stock futures were little changed Monday night ahead of critical inflation data. Dow Jones futures slipped 20 points (-0.05%), while Nasdaq 100 futures edged up 0.11% and S&P 500 futures gained 0.2%. Tuesday’s CPI release will set the tone for the week, with Thursday’s PPI report offering additional insight into wholesale inflation. Both will land before the Fed’s Jackson Hole symposium later this month, a key prelude to the September policy meeting.

Bitcoin

• The global crypto market cap has smashed past $4.1 trillion, powered by Bitcoin’s push toward $122K and Ethereum’s rally near $4,300, its highest since 2021. Institutional inflows hit a record $572M last week, bringing year-to-date totals to $30.7B, with Bitcoin and Ether leading the charge.
• Regulatory tailwinds added fuel, as President Trump extended his pause on higher China tariffs and eased crypto restrictions, sparking gains in Coinbase (COIN), Robinhood (HOOD), and MicroStrategy (MSTR). Analysts are dubbing it “crypto summer,” with IPO buzz from Bullish, Galaxy Digital, and Kraken adding momentum.
  Watchlist: BTC: 99,000–123,000 | ETH: 4,000–4,350 | SOL: 200–260

Forex

• The yen (JPY) weakened Tuesday, lifting USD/JPY to a one-week high near 148.50 as political uncertainty, tariff concerns, and expectations of delayed BoJ tightening weighed on the currency. Diverging Fed–BoJ policy outlooks kept pressure on the yen ahead of U.S. CPI data.
• EUR/USD rose to 1.1620, supported by improved sentiment ahead of Friday’s Trump–Putin meeting on Ukraine. Traders await U.S. inflation figures that could steer the Fed’s next move.
  Watchlist: EUR/USD: 1.1000–1.1650 | USD/JPY: 140–162

Basic Materials

• Gold (XAU/USD) bounced in Asian trade, reclaiming ground after Monday’s drop to a one-week low near $3,341. Softer USD momentum, amid rising Fed rate-cut bets, helped lift the metal, though a broadly positive risk tone keeps bulls cautious ahead of today’s U.S. CPI release.
• WTI crude climbed to about $63.35, recovering part of last week’s slide as traders eyed Friday’s planned Trump–Putin talks in Alaska aimed at ending the Ukraine war. Gains remain capped by lingering deflation worries in China. Focus now shifts to the API crude inventory report later today.
  Watchlist: Gold: 2,600–3,500 | US Oil: 55.60–75.80

Economic Calendar (EST):

08:30 am: USD Core CPI, CPI
10:00 am: USD FOMC Member Barkin Speaks
10:30 am: USD FOMC Member Schmid Speaks
02:00 pm: USD Federal Budget Balance


Earnings:

 SE                      Sea Limited
CAH                    Cardinal Health Inc.
CRCL                  Circle Internet Group
TME                    Tencent Music Entertainment
ONON                 On Holding AG

AMC (After Market Close): CRWV, EC


The TEFS Analyst team wishes you a successful day!