U.S. stock indexes rose on Tuesday as bond yields retreated after the latest U.S. inflation data came in cooler than expected, easing pressure on the Federal Reserve’s path for interest rates. The S&P 500 climbed 0.30%, the Dow Jones Industrial Average gained 0.60% and the Nasdaq 100 advanced 0.97%.
Market momentum was reinforced by remarks from Federal Reserve Chair Warsh, who said the economy remains resilient and that the labor market is broadly stable, while stressing the Fed has “no tolerance” for persistently high inflation. Investors also digested stronger-than-expected Chinese trade figures and the start of the next corporate earnings cycle later this week.
Key takeaways
- Price move: The S&P 500 rose 0.30%, the Dow gained 0.60%, and the Nasdaq 100 advanced 0.97%.
- Catalyst: Bond yields fell after U.S. June CPI came in below expectations, with the 10-year Treasury yield down 4 basis points to 4.58%.
- Market implication: Rate-sensitive segments, especially semiconductors and AI-related infrastructure, bounced, while software shares were pressured.
- Macro cross-currents: Better global trade data from China supported risk sentiment, but oil climbed sharply amid renewed Middle East tensions.
What drove the move
Equities gained traction after the June CPI report moderated inflation momentum. U.S. June headline consumer prices eased to 3.5% year-over-year from 4.2% in May, below the 3.8% increase expected. Core CPI fell to 2.6% year-over-year from 2.9% in May, also under the 2.8% forecast.
At the same time, Warsh’s comments helped reinforce expectations that the economy can hold up without inflation remaining elevated. He described growth as “solid,” said the labor market is broadly stable, and characterized the Fed’s stance with a “no tolerance” message toward persistently high inflation.
Overseas data provided additional support. China’s June exports rose 27.0% year-over-year, beating the 19.0% expectation, while imports increased 36.0% year-over-year versus 26.1% expected—marking the biggest rise in five years. Those figures helped improve the backdrop for global demand and company earnings outside the U.S.
Market reaction across sectors
Semiconductor and AI-infrastructure names led the rebound as investors appeared to look past Monday’s weakness. The iShares Semiconductor ETF rose more than 3%. Company-specific gains included Sandisk up more than 7% and multiple chip-related stocks higher by roughly 4% to 5% or more, including Advanced Micro Devices, Lam Research and Western Digital, among others.
Financial stocks also moved higher following a string of big-bank results. Shares of Goldman Sachs, JPMorgan Chase, Bank of America and Citigroup rose after they reported better-than-expected second-quarter earnings, according to the report summary.
Not all areas participated. Software stocks underperformed, led by a sharp drop in International Business Machines after it reported preliminary second-quarter revenue that came in below consensus. Several other enterprise software and cloud-related names fell as well, including Atlassian and Workday, alongside declines in ServiceNow, Adobe, Intuit and Salesforce.
Beyond equities, commodity-sensitive shares rallied. Gold, silver and copper were up sharply, with mining stocks higher across a range of names, including Southern Copper and Freeport McMoRan, as well as Newmont and Hecla Mining.
Rates, Treasuries and the oil headwind
Falling yields were central to the day’s tape. The 10-year Treasury yield dropped 4 basis points to 4.58%. Treasuries gained after the CPI data showed a smaller increase in June consumer prices, and the move was further supported by Warsh’s inflation-forward comments.
Oil, however, added a meaningful risk factor. West Texas Intermediate futures were up more than 2% at a one-month high and continued elevated pressure after Monday’s surge. The report said an interim peace agreement between the U.S. and Iran effectively collapsed, with the U.S. reimposing a naval blockade and launching additional airstrikes. Iran’s actions included attacks on oil tankers in Omani waters, according to the summary.
President Trump also said the Strait of Hormuz would remain open “with or without Iran,” with the U.S. acting as a “guardian” while seeking reimbursement for shipping protection—though details were not provided in the report. The implied concern for shipping security fed into crude prices.
Earnings season set to shape expectations
Investors were also looking ahead to the next wave of results. The report noted that Q2 earnings expectations appear strong, with forecasts compiled by Bloomberg Intelligence suggesting second-quarter earnings growth of about 23%—near the pace of the prior quarter’s blowout results referenced in the summary.
The same report said AI spending is expected to contribute heavily to earnings growth, with AI infrastructure stocks projected to account for nearly 60% of S&P 500 earnings-per-share growth in Q2. That narrative aligns with Tuesday’s leadership from semiconductors and related infrastructure.
Meanwhile, markets were still pricing the near-term policy path. The report said the market was discounting a 14% chance of a 25 basis point rate hike at the July 28–29 FOMC meeting.
What to watch next
With the CPI catalyst already in hand, traders will likely focus next on early earnings prints starting this week and any follow-through in Treasury yields as investors weigh inflation data against Fed messaging. Oil’s direction may remain a key swing factor given the geopolitical developments described in the report, while upcoming economic releases and additional central-bank commentary could further recalibrate expectations for rate cuts or hikes.
