Inflation worsens, causing most Wall Street stocks to fall: large tech companies' earnings mask their losses

In Thursday's Wall Street stock market trading, most stocks fell after a disappointing report stated that wholesale inflation in the United States was worse than economists had expected last month. However, the rising stock prices of Amazon and other influential "big tech" companies have to some extent masked the losses of other companies.

The inflation report shows that wholesale prices in the United States jumped 3.3% year-on-year last month. This is much higher than the 2.5% increase predicted by economists and may indicate that as prices propagate throughout the system, American consumers will face higher levels of inflation. These data have forced traders to reassess their widely held view that the Federal Reserve will cut interest rates at its next meeting in September. Lower interest rates can promote investment prices in real estate, cars, or equipment and drive economic growth by reducing borrowing costs for American households and businesses, but there is also a risk of exacerbating inflation.

On Wall Street, Tapestry's stock price plummeted as the company stated it was feeling pressure from tariffs. The parent company of Coach and KateSpade New York brands has stated that it is feeling the pressure of tariffs. Deere's stock price also fell 6.8%, despite the machinery manufacturer's better than expected profits. Among the winners on Wall Street, Fossil Group has performed outstandingly, with its stock price jumping by 29.8%. Previously, the seller of this watch and other accessories released better than expected profit data. The performance of large tech stocks also helped cover up Wall Street's losses. Amazon's stock price rose 2.9%, continuing the previous day's increase. Due to Amazon's massive size and market value of $2.45 trillion, its stock volatility has a much greater impact on the S&P 500 index than that of ordinary companies.

The deterioration of wholesale inflation will have a significant impact on the cost situation of enterprises. The increase in wholesale inflation prices means that companies will face rising costs when purchasing raw materials, goods, etc., squeezing their profits. Essentially, this will lead to a decrease in the value of their stocks, resulting in a downward trend for the vast majority of stocks.

However, the rise in stock prices of large technology companies has to some extent obscured the downward trend in the market caused by intensified inflation. Generally speaking, large technology companies have a strong brand effect, a larger customer base, and advanced technological advantages. In the face of inflation, they may have a stronger cost transfer advantage by raising prices to sell products or services in order to maintain profit margins. Therefore, the rise in stock prices of large technology companies has to some extent offset the downward trend in the market, making the market losses appear less severe. But it does not mean that the risks hidden in the intensification of inflation caused by this do not exist, it is just masked by the factors of rising stock prices of large technology companies. It is necessary to continue to observe the development of inflation and whether the upward trend of stock prices of large technology companies can be maintained.

On the other hand, the link between inflation and differentiation may affect market fairness. One reason is that the vulnerability of more small and medium-sized enterprises may lead to the amplification effect of inflation cycles on their stock price performance and the profit elasticity of cost controlled and price competitive enterprises. Secondly, the vulnerability of small and medium-sized enterprises makes them more likely to accelerate the market driven concentration trend.

Therefore, behind the overall market losses, the short-term rise in stock prices of large technology companies brings hidden concerns to all markets. In the medium and long term, it poses a challenge for policy makers and market regulatory authorities to pay attention to inflation and the recovery of small and medium-sized markets, and to promote fair competition and healthy development in the market through policies. It puts forward the proposition for investors to rationally and seriously consider that the rise in stock prices of large technology companies does not necessarily mean that the overall market risk reduction level has been effectively and fully released. Timely investment decisions should be made based on macroeconomic environment, industry development trends, fundamental considerations, etc.