US stocks rose as markets assessed a cooler-than-expected consumer inflation report, recalibrated bets on the AI trade, and monitored rising oil prices amid the renewed US-Iran war.
The Dow Jones Industrial Average (^DJI) fell 0.2%. The S&P 500 (^GSPC) rose 0.4%, while the tech-heavy Nasdaq Composite (^IXIC) picked up a stronger 1%.
Investors parsed a softer-than-expected Consumer Price Index report, which showed that inflation rose 3.5% in June on a yearly basis, below economists’ expectations of 3.8% inflation. On a core basis, inflation rose 2.6% year-on-year against expectations of 2.8%.
The figures are likely to take some pressure off the Federal Reserve, which has become more focused on the inflation situation, though the market has still priced in one 25-point hike to come within 2026. Ahead of the report, bond traders increased their bets that the Federal Reserve will hike interest rates at its July 28-29 meeting.
A combination of rate-hike speculation, capex spending concerns, and profit-taking has put AI chip stocks on the back foot, with newly listed US shares of South Korea’s SK Hynix (SKHY) dropping further after a successful US IPO on Friday. In the software sector, a dour earnings preview from IBM (IBM) sent shares sliding by more than 25%.
Oil prices, meanwhile, edged higher after Brent crude futures (BZ=F) notched their biggest single-day jump in years on Monday, with US plans to begin enforcing a blockade of the Strait of Hormuz on Tuesday afternoon in focus. President Trump said Tuesday that he was replacing 20% cargo fees he announced on Monday with investment deals that would bring money into the US.
A series of second quarter reports from JPMorgan (JPM), Bank of America (BAC), Wells Fargo (WFC), Citigroup (C), and Goldman Sachs (GS) showed a robust quarter for Wall Street profits and stock trading. Expectations were high going into the reports and into the second quarter earnings season generally.
