Inflation moderated as Intel and Nvidia fueled the AI trade in last week's market

Here is a story making headlines in the economy: No surprises on inflation and new financing developments in the artificial intelligence trade drove the record-breaking action on Wall Street last week. The S & P 500 and Nasdaq both dropped modestly Friday but managed to post their third straight winning weeks. The S & P 500 rose above 7,800 during Thursday's session for the first time ever.

It closed at a record. The Dow bucked the trend, falling nearly 0. Here's a closer look at what drove the market.

Economic Details

Cooler inflation gives the Fed room to wait Two closely watched inflation reports helped fuel the week's market gains by easing concerns that the Federal Reserve will need to raise interest rates at its September meeting. Building on the prior week's weaker-than-expected jobs report , the consumer price index on Wednesday showed an increase of 0. 1% in July, while the annual inflation rate eased to 3.

Both were in line with estimates. Jim called the report " very benign . " The following day, the producer price index came in unchanged for the month, cooler than the 0.

2% increase economists expected. On an annual basis, the headline PPI increased 4. Together, the reports offered further evidence that inflation is moderating, even as it remains above the Fed's 2% target.

Analyst Views

Treasury yields moved lower as traders dialed back expectations for a September rate hike. By the end of the week, markets were pricing in a 67% chance that the Fed would keep its benchmark rate unchanged, up from 55% a week earlier, according to the CME Fed Watch tool . Intel's $20 billion bet on its AI future Intel's massive stock sale initially rattled investors, but we ultimately viewed the capital raise as another sign of management's confidence in the company's AI opportunity.

The chipmaker announced Monday that it planned to sell $15 billion of common stock, sending shares down 4%. Intel then increased the offering to $20 billion Tuesday after strong demand for the initial deal. We used Monday's weakness to buy more shares of Intel as it remains Jim's favorite way to play the AI buildout.

Building semiconductor manufacturing capacity is expensive, and we don't think CEO Lip-Bu Tan would raise this much capital unless he had confidence that customers will be there to support the investment. That conviction received another boost Wednesday when a regulatory filing revealed that Tan and one of his family members agreed to purchase a combined $12 million of stock in the offering. We like to see executives putting their own money behind the businesses they run, particularly alongside a capital raise.

Economists are analysing what the news means for the markets.