Wall Street closed higher on Tuesday as a cooler-than-expected U.S. inflation print pushed down Treasury yields and lifted risk assets. The S&P 500 finished up 0.38%, the Nasdaq 100 gained 1.10% and the Dow edged up 0.02%, while September E-mini S&P and Nasdaq futures rose 0.35% and 1.05%, respectively.
Investors’ focus quickly shifted from the inflation data to forward expectations for the Federal Reserve. Stocks also drew support from a rebound in semiconductors and strength in major banks following better-than-expected second-quarter results, while parts of the software sector lagged after IBM warned its preliminary revenue missed consensus.
Key takeaways
- Price move: The S&P 500 rose 0.38% and the Nasdaq 100 climbed 1.10% as yields fell after CPI data.
- Catalyst: U.S. June CPI came in below expectations, with both headline and core inflation easing.
- Sector signal: Semiconductors rebounded and banks rallied on earnings beats, while software fell, led by IBM.
- Implication: Rate-cut optimism strengthened at the margin, but Fed officials indicated policymakers still need more evidence that inflation is returning to target.
- Macro trade-off: Oil rose sharply amid Middle East tensions, adding a potential inflation risk even as bond yields eased.
What drove the move
According to U.S. data, June CPI eased to +3.5% year over year from +4.2% in May, ahead of expectations of +3.8%. Core CPI also cooled to +2.6% year over year from +2.9% the prior month, better than the forecast of +2.8%. The combination reduced pressure on yields and supported equity valuations.
Bond-market dynamics mirrored the inflation report. The 10-year Treasury yield fell about 4 basis points to 4.58%, helping lift growth-oriented sectors such as technology and semiconductors.
Fed communication added further support. Fed Chair Warsh said the economy is resilient and growing at a solid pace, with labor conditions broadly stable and nominal wage growth solid, while emphasizing the Fed has “no tolerance” for persistently high inflation. Chicago Fed President Austan Goolsbee said the CPI report was “surprisingly benign,” but noted policymakers would need more than one month of data to determine whether inflation is moving back toward the Fed’s 2% goal.
Outside the U.S., trade data from China also supported broader growth expectations. According to the report, China’s June exports rose +27.0% year over year, beating expectations of +19.0%, while imports increased +36.0% year over year versus expectations of +26.1%—the largest rise in five years.
Market reaction across sectors and standout stocks
Semiconductors helped lead the rebound. Semiconductor names and related exchange-traded exposure moved higher after Monday’s decline, with the iShares Semiconductor ETF closing up more than 2%. Several major chipmakers—including Sandisk, Nvidia, Lam Research, Micron Technology and Intel—finished up more than 4%, while other AI- and infrastructure-linked names such as Applied Materials, ASML, KLA and Microchip Technology advanced more than 3%.
U.S. bank stocks rose as investors reacted positively to second-quarter results from major lenders. Shares of Goldman Sachs, JPMorgan Chase, Bank of America and Wells Fargo climbed after they reported better-than-expected Q2 earnings.
In contrast, software stocks retreated. IBM fell sharply after it reported preliminary second-quarter revenue that missed consensus, pulling down the group more broadly. Additional declines followed in other software names, including Atlassian and ServiceNow, as well as weakness across several large-cap enterprise software providers.
Among high-profile moves, CrowdStrike gained more than 12% to lead S&P 500 and Nasdaq 100 gainers, reflecting strength across cybersecurity. Mining stocks also rallied, with gold, silver and copper prices rising, lifting copper producer Southern Copper and gold-related names such as Newmont and Barrick.
Rates, oil and the bigger picture
In rates, the Treasury complex leaned toward relief. The 10-year T-note yield ended the session down roughly 4.7 basis points to 4.577%, after trading off a recent high. Traders also appeared to shift attention toward policy-path assumptions: market pricing indicated swaps were discounting a 14% chance of a +25 basis point ECB hike at its next meeting on July 23. The article also noted markets were pricing a 17% chance of a +25 basis point rate hike at the next FOMC meeting on July 28–29.
Oil remained a complicating factor. WTI rose more than 1% to a one-month high after the interim peace deal between the U.S. and Iran was described as having effectively collapsed. The report cited the U.S. reinstating a naval blockade and launching another wave of airstrikes, while Iran attacked oil tankers in Omani waters transiting the southern route of the Strait of Hormuz. The possibility of increased disruption to shipping lifted crude, even as prices later pared back from highs after President Trump said he would replace a 20% U.S. reimbursement fee for protecting the Strait of Hormuz with trade and investment deals with Gulf states.
With the earnings season now underway, the direction of rates and inflation data may determine how markets interpret company reports. The article cited Bloomberg Intelligence forecasts suggesting second-quarter earnings could rise about 23%, close to first-quarter growth near 30%, with AI spending expected to be a major driver of sector earnings expansion.
Heading into the next session, investors are likely to watch additional corporate results that could confirm whether the earnings momentum cited by Bloomberg Intelligence holds up, while keeping a close eye on further inflation signals that can sway Treasury yields. Upcoming milestones for global rate expectations include ongoing central-bank communication and scheduled economic releases that can influence expectations for the Fed and other major policymakers.
