Wall Street Gains as Inflation Cools
The S&P 500 closed higher on Tuesday after June inflation data came in below expectations, easing some concerns about the path of Federal Reserve policy. The broad index rose 0.38% to finish at 7,543.59.
Nasdaq Leads the Major Indexes
The Nasdaq Composite advanced 0.9% and ended the session at 26,107.01, helped by a rebound in semiconductor stocks. The Dow Jones Industrial Average finished almost flat, rising 9.63 points, or 0.02%, to close at 52,508.27.
IBM Weighs on the Dow
IBM was a major drag on the Dow after its shares fell 25%. The company warned that second-quarter profits would come in below expectations because of softer demand in its software and infrastructure businesses.
Semiconductor Stocks Recover
Chip stocks bounced back after weakness in the previous session. The VanEck Semiconductor ETF gained 2.5%, while Applied Materials and Teradyne rose more than 3% each.
Micron and Lam Research Rally
Lam Research and Micron Technology climbed roughly 5%, adding strength to the semiconductor rebound. STMicroelectronics also moved higher, gaining more than 2% during the session.
June CPI Comes in Below Forecasts
The consumer price index fell 0.4% in June from the previous month, bringing the annual inflation rate down to 3.5%. Economists surveyed by Dow Jones had expected a smaller monthly decline of 0.2% and an annual inflation reading of 3.8%.
Rate Hike Expectations Ease
The softer inflation report reduced expectations for a near-term Federal Reserve rate increase. According to CME’s FedWatch Tool, the probability of a July rate hike dropped to 17%, down from 42% one day earlier.
September Still Remains in Focus
Even with July expectations falling, traders still see a strong chance of tightening later this year. Markets are pricing in almost a 60% probability that the Fed’s target rate will be a quarter point or half point higher after the September meeting.
Analysts Warn Relief May Be Temporary
Skyler Weinand, chief investment officer at Regan Capital, said the weaker CPI report suggests that inflation pressure linked to the Iran war may be fading. However, he warned that recent escalation in tensions could make the relief short-lived.
Warsh’s Hawkish Tone Still Matters
Weinand added that the inflation data likely keeps the Fed on hold for now, but noted that Chair Kevin Warsh has sounded hawkish in most of his recent communications. He said Warsh appears focused on bringing consumer prices under control, with interest rates still the Fed’s main tool.
Warsh Testifies Before Congress
Federal Reserve Chair Kevin Warsh testified before Congress on Tuesday. During the hearing, he said that “the inflation surge of the last five years will be a thing of the past,” giving investors another signal to assess as they weighed the central bank’s next steps.
Oil Pulls Back From Highs but Stays Up
Oil prices eased from their session highs after President Donald Trump dropped his demand for ships to pay a 20% fee to move through the Strait of Hormuz. Even so, crude remained higher on the day as the United States launched fresh strikes on Iran.
WTI and Brent Finish Higher
U.S. crude, which earlier topped 80 dollars per barrel, settled up 1.5% at above 79 dollars. Brent crude, the international benchmark, gained 1.7% and finished above 84 dollars per barrel.
Hormuz Tensions Stay in the Background
The move in oil followed Trump’s statement on Monday that he would reinstate a blockade on Iranian shipping through the Strait of Hormuz. The waterway remains a central focus for energy traders because of its importance to global crude flows.
Goldman Sachs Leads Bank Gains
Goldman Sachs rose 9% after reporting earnings that beat expectations. Other large banks also moved higher, with JPMorgan Chase gaining more than 2% and Bank of America rising almost 2% after releasing their second-quarter results.
A Session Driven by CPI and Earnings
Tuesday’s market action reflected a mix of softer inflation, easing July rate-hike expectations, strong bank earnings and renewed strength in semiconductor shares. At the same time, IBM’s sharp decline and ongoing oil-market tension kept the broader rally from becoming more decisive.
