U.S. stock indexes climbed on Tuesday, with the S&P 500 rising and the Nasdaq 100 leading gains after bond yields fell following a better-than-expected U.S. June consumer inflation report. The move was also supported by comments from Federal Reserve Chair Warsh, who said the economy remains resilient and the labor market is broadly stable.
Semiconductor and AI-related stocks rebounded, while software shares lagged after IBM dropped sharply on preliminary quarterly revenue that missed expectations. Oil prices advanced as tensions in the Middle East escalated after an interim U.S.-Iran peace effort broke down.
Key takeaways
- Price move: The S&P 500 rose, the Dow added modestly, and the Nasdaq 100 outperformed, while U.S. index futures moved higher.
- Catalyst: Bond yields eased after June CPI came in below expectations, easing pressure on growth stocks.
- Catalyst: Fed Chair Warsh’s remarks on inflation tolerance and labor market stability supported risk sentiment.
- Implication: Investors appeared to rotate toward economically sensitive and AI-linked segments, even as software names faced earnings-related headwinds.
- Headwind to watch: A higher oil price and renewed shipping risk around the Strait of Hormuz added volatility to the macro outlook.
What drove the move
Stocks gained traction as U.S. Treasury yields retreated. The 10-year Treasury yield fell by about 5 basis points to 4.57%, according to the article, after the U.S. June CPI report surprised to the downside. June headline inflation eased to 3.5% year over year from 4.2% in May, versus expectations of 3.8%, while core CPI declined to 2.6% from 2.9% and also beat forecasts.
Fed Chair Warsh reinforced the tone, stating that the U.S. economy is growing at a solid pace and that the labor market remains broadly stable. He also said the Fed has “no tolerance” for persistently high inflation, a combination markets generally interpret as supportive for the near-term path of policy expectations when inflation prints cool.
Global data also provided support. The report noted better-than-expected Chinese trade figures, including a 27.0% year-over-year increase in exports and a 36.0% rise in imports, both exceeding consensus targets. That improved the backdrop for global growth expectations at a time when markets are assessing whether disinflation can continue without hurting demand.
Market reaction across sectors and stocks
Semiconductor stocks rose as investors looked for a rebound following Monday’s pullback. The iShares Semiconductor ETF advanced more than 2%, and names including Lam Research, KLA Corp, and Microchip Technology were up more than 3%. Advanced Micro Devices and other chipmakers also gained, alongside broad strength in AI infrastructure exposures.
Financials participated in the rally after major banks reported better-than-expected second-quarter results, as cited in the article. Goldman Sachs, JPMorgan Chase, Bank of America, and Citigroup were all referenced as having delivered earnings stronger than consensus.
Software stocks moved lower, led by IBM’s steep decline. The article said IBM fell about 24% after reporting preliminary second-quarter revenue that came in below consensus, dragging down a wider group of software names. Atlassian and Workday were among those down more than 4% in the report, with other large software companies also trading lower.
Cybersecurity stocks were a bright spot. CrowdStrike gained more than 9% to lead S&P 500 and Nasdaq 100 gainers in the article, and Okta, Zscaler, and Palo Alto Networks were also described as rising strongly.
In commodities-linked equities, mining shares rallied along with the prices of gold, silver, and copper, according to the report. Several miners were cited as up at least a few percentage points.
Rates, oil, and the earnings calendar
Interest rate futures reflected the inflation relief. The article reported September 10-year Treasury note contracts were higher on the day and that the 10-year yield declined toward 4.567%. It also stated that swaps were discounting roughly a 12% chance of a 25-basis-point rate hike at the next FOMC meeting on July 28–29.
Crude oil acted as a counterweight to the rally. WTI crude rose more than 1% to a one-month high and had jumped sharply on Monday, according to the report. The article linked the oil strength to developments involving Iran: it said the interim peace deal collapsed, the U.S. reimposed a naval blockade, and launched another wave of airstrikes. It also cited attacks on tankers in Omani waters and heightened risks around the Strait of Hormuz.
Within equities, investors are also positioning ahead of a busy earnings window. The article said Q2 earnings outlooks are broadly bullish, citing Bloomberg Intelligence projections that Q2 earnings may rise about 23%, with AI spending expected to drive a large portion of incremental growth. It added that large-cap AI infrastructure stocks could account for nearly 60% of estimated S&P 500 earnings-per-share growth in the quarter.
For individual earnings catalysts referenced in the report, Goldman Sachs led Dow gainers after it posted Q2 equities and trading revenue above consensus, while IBM’s preliminary revenue miss weighed on software sentiment.
What to watch next
With disinflation-supported yields underpinning the market bid, investors will likely focus on whether incoming data continues to confirm a cooling inflation trend. The next key catalysts include the upcoming stretch of Q2 earnings reports listed in the article—among them Bank of America, JPMorgan Chase, Wells Fargo, and Citigroup—along with additional Fed-related guidance and further updates on energy-market developments tied to the Strait of Hormuz.
