PPI Posts Largest Drop in Six Years as Apple Surges 4% to a Record High

Market Overview

Global markets focused on three key developments on Wednesday.

First, U.S. producer inflation cooled significantly. The Producer Price Index (PPI) fell 0.3% month-over-month in June, marking the largest decline in six years. Annual PPI growth came in at 5.5%, below the consensus forecast of 6.2%. Core PPI rose 0.2% from the previous month, also undershooting expectations, while the annual rate increased 4.7%. The data reinforced market expectations that inflationary pressures at the producer level are continuing to ease.

Second, U.S. Treasury yields and the U.S. dollar moved lower in tandem. The 10-year Treasury yield fell roughly 4 basis points to around 4.55%, while the 2-year yield declined approximately 6 basis points to 4.13%. The U.S. Dollar Index turned negative and touched its lowest level in nearly four weeks. Meanwhile, the offshore Chinese yuan strengthened beyond 6.77 per dollar during intraday trading, reaching its highest level in nearly a month.

Third, all three major U.S. equity indices finished higher. The Nasdaq Composite gained 0.62% to close at 26,269.23, the S&P 500 rose 0.38% to 7,572.40, and the Dow Jones Industrial Average added 0.29% to 52,658.64.

Apple led the Dow higher after reports that its AI partnership with Alibaba received regulatory approval in China. Apple shares surged 4%, closing at a fresh record high, while Alibaba advanced nearly 5%.

In China, second-quarter GDP expanded 4.3% year-over-year, with first-half growth reaching 4.7%. Industrial production remained resilient, but investment activity continued to weaken. Real estate development investment declined 18% from a year earlier.

Precious and industrial metals broadly retreated. COMEX July silver futures fell 2.83% to $57.11 per ounce, while July gold futures slipped 0.42% to $4,044 per ounce.

On the geopolitical front, crude oil edged higher after the U.S. military resumed maritime blockade operations targeting Iran and launched additional strikes. WTI August crude futures rose 0.33% to settle at $79.60 per barrel.

Market OutlookWill Cooling Inflation Translate Into Consumer Spending？

June's PPI report showed the sharpest monthly decline in six years, indicating meaningful relief in upstream pricing pressures. However, producer prices represent only the beginning of the inflation pipeline.

Today's U.S. retail sales report will provide an important test of whether consumer demand is also cooling or beginning to recover as price pressures ease. A combination of resilient retail spending and softer inflation data could further strengthen expectations for a more accommodative interest-rate outlook in the second half of the year.

Diverging Trends Between Semiconductor Equipment and Memory Markets

ASML delivered stronger-than-expected second-quarter results and significantly raised its full-year guidance. The company also announced plans to increase low-NA EUV production capacity by 30% by 2027, signaling continued expansion in advanced-node semiconductor capital expenditures.

In contrast, memory-related stocks faced heavy selling pressure. SK Hynix's U.S.-listed shares dropped 9%, while SanDisk declined more than 8%, highlighting a growing divergence between semiconductor equipment suppliers and memory manufacturers.

Taiwan Semiconductor Manufacturing Company (TSMC) is set to report earnings today. Investors will also closely monitor management's comments regarding ASML's planned lithography equipment price increases, which TSMC has publicly opposed. The discussion could provide important insight into pricing power across the semiconductor supply chain.

Key Events to WatchEconomic Data & Central Banks

• Bank of Korea Monetary Policy Meeting

• U.S. June Retail Sales Report

• U.S. Initial Jobless Claims

• U.K. May GDP Data

Earnings Releases

• Taiwan Semiconductor Manufacturing Company (TSMC)

• Netflix

China Market Developments

• ChangXin Memory Technologies IPO Subscription Begins on July 16

• Shenzhen Market's First Interim Earnings Reports:

• Wohua Pharmaceutical

• Unicatch Industrial

Global Events

• APEC Digital and Artificial Intelligence Ministerial Meeting

• BHP iron ore port workers scheduled for an eight-hour strike