Latest / Finance TL;DR Daily / Manufacturing Roars, Palantir Soars, and the Fed Keeps an Open Mind
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- Manufacturing Roars, Palantir Soars, and the Fed Keeps an Open Mind 2026-08-04 Alex: Welcome to Finance TL;DR Daily, the podcast where we break down the biggest stories in finance. It's Tuesday, August fourth. And today, a factory survey that's got everybody talking rate hike again, even as one AI software company just posted a quarter its own CEO called otherworldly. Riley: Here's what's moving today. Alex: Let's start with that ISM manufacturing number, because it's a bit of a mixed bag dressed up as good news. The Institute for Supply Management's manufacturing PMI jumped to 55.6 in July. That's the highest reading since May 2022. Riley: Which on its face is a very strong number. Anything north of 50 means the sector's expanding, and this is the sharpest expansion in over four years. Alex: Right, and it wasn't just a fluke reading. New orders and production both showed strong expansion, and the employment index actually crossed into growth territory for the first time in 33 months. That's factories actually adding workers again. Riley: So where's the catch, because there's clearly a catch given how you framed that. Alex: The catch is prices. The prices paid index came in at 71.1. That's down slightly from June, but it's still the 22nd straight month of rising input costs. ISM's chair, Susan Spence, said pricing volatility showed up in 57% of negative comments from businesses, with the Iran war cited in 43%, lead times in 22%, and tariffs in 18%. Riley: That's a lot of businesses naming very specific, very current reasons for why costs keep climbing. It isn't just leftover pandemic supply chain noise anymore. Alex: No, and that's exactly why analysts see this as bolstering the case for the Fed to raise rates at the next meeting. You've got an economy that's clearly not slowing down, paired with cost pressure that refuses to ease off. Riley: Which is an odd position for the Fed to be in, mind you. Normally strength and inflation worry come from different signals. Here they're coming from the same report. Alex: Exactly the tension we're going to hear more about in a minute. Riley: Well, let's pivot to something rather more clean-cut good news, at least on the surface. Palantir. Shares surged as much as 27% after second quarter earnings that blew past what Wall Street was expecting. Alex: Twenty-seven percent in a single session is a huge move for a company already worth what Palantir's worth. Riley: It is, and the numbers explain why. Total revenue rose 93% year over year to 1.94 billion dollars, ahead of the 1.8 billion analysts had pencilled in. But the number that really stands out is U.S. commercial revenue, up 149% to 764 million dollars. Alex: That's the piece that matters, isn't it, because government contracts are one thing, but private companies actually paying for this at scale is the harder sell. Riley: It's the harder sell and it's the more durable one. Palantir signed 220 deals worth at least a million dollars in the quarter, including 73 deals over 10 million. Its remaining U.S. commercial deal value now sits at 6.24 billion dollars. Alex: And they didn't just beat, they raised guidance too. Riley: Full-year revenue guidance now sits between 8.15 and 8.16 billion dollars, up from the previous estimate, with adjusted free cash flow of 1.22 billion. CEO Alex Karp called the quarter, in his words, otherworldly. Alex: He also made a pointed comment about customers rejecting becoming, quote, vassal states of the language labs, in favor of private AI solutions. What do you make of that framing? Riley: I'd take it as Palantir trying to position itself as the alternative to just renting a chatbot from one of the big model makers. Whether that's the actual reason for the growth or just good marketing around it, the deal numbers are real regardless. Alex: Fair. And it's worth saying this ripples outward. Strong Palantir results tend to lift sentiment across the whole AI trade, not just the one stock. Riley: Now, sticking with the inflation thread from earlier. Philadelphia Fed President Anna Paulson gave some rather telling remarks on where she stands ahead of September. Alex: She backed the Fed's recent decision to hold rates steady, but said she's keeping what she called an open mind if inflation progress stalls. Riley: Which sounds like classic Fed hedging, but the detail underneath is more interesting. She estimates underlying inflation is currently running between 2.4 and 2.8%. Still comfortably above the Fed's 2% target. Alex: Even as second quarter consumption rose 3.2%. So people are spending plenty, prices aren't cooling as fast as hoped, and this comes right after the last FOMC meeting where three officials actually dissented in favor of a hike. Riley: Three dissents is not a small thing. That's a real split on the committee, not just background grumbling. Alex: What stood out to you in her comments specifically? Riley: The line about AI infrastructure investment creating, in her words, immediate inflationary pressure throughout the supply chain. That's a Fed official directly connecting the AI buildout everyone's celebrating to the inflation problem she's worried about. Alex: Which is a nice bridge, because that AI buildout is exactly what's driving our next story. Riley: It is. Caterpillar. Not a name people usually associate with the AI trade, but its stock jumped more than 10% in premarket trading after record second quarter results. Alex: Record is the right word. Sales and revenue hit 20.543 billion dollars, up 24% from 16.569 billion a year earlier. Riley: And adjusted profit per share more than doubled, to 8.17 dollars from 4.72, blowing past the 6.20 consensus estimate. Alex: CEO Joe Creed said it plainly: first time in company history they've cleared 20 billion dollars in sales in a single quarter. Riley: The driver here is construction and power-generation equipment tied to data center build-outs. That pushed Caterpillar's order backlog to an all-time high of 72.1 billion dollars. Alex: I'd argue that backlog number is actually the bigger story than the quarter itself. A record quarter tells you demand was strong three months ago. A 72 billion dollar backlog tells you it's not stopping anytime soon. Riley: That's fair, though the quarter is what moved the stock today. Either way, it reinforces the point Paulson was just making from the other direction. The AI infrastructure boom isn't confined to software and chips, it's showing up in heavy equipment orders too, and it's part of what's keeping price pressure alive across the economy. Alex: Strength and inflation, tied together again. Seems to be the theme of the whole day. Riley: So to wrap it up: factories are humming but costs keep climbing, which puts more pressure on the Fed's next move. Alex: And on the corporate side, Palantir and Caterpillar are showing the AI buildout is real, broad, and showing up in results well beyond the tech sector. Alex: This has been Finance TL;DR Daily. We'll see you tomorrow.