The U.S. stock market rose, buoyed by unexpectedly slow inflation and strong earnings from major banks. Semiconductor stocks, which had plummeted the previous day, rebounded, lifting the tech-heavy Nasdaq index. However, IBM's more than 25% drop kept the Dow Jones Industrial Average relatively flat.
On July 14, the Dow Jones Industrial Average closed up 10.02 points (0.02%) at 52,508.66. The S&P 500 index rose 28.55 points (0.38%) to finish at 7,543.89. The Nasdaq Composite index gained 233.83 points (0.90%), closing at 26,107.01.
The U.S. Consumer Price Index (CPI) for June came in lower than market expectations, improving investor sentiment. According to the Labor Department, the June CPI fell 0.4% from the previous month, marking the largest decline since April 2020.
Year-over-year inflation also decreased, dropping from 4.2% in May to 3.5%. The core CPI, excluding food and energy, remained steady from the previous month and rose 2.6% compared to the same month last year. Energy prices fell 5.7% over the month, contributing to the overall decline in prices.
As inflation slowed, concerns about an early interest rate hike by the Federal Reserve eased. The futures market now reflects an 83.4% probability that the Fed will keep interest rates unchanged at its July meeting, a significant increase from the previous day's 58.3%.
Kevin Warsh, the Fed Chair, made his first appearance before Congress since taking office, emphasizing the central bank's commitment to price stability. He stated, "We will not tolerate high inflation," and pledged to bring inflation down to the Fed's target of 2%.
Major banks, which have begun reporting their second-quarter earnings, also supported the market's rise. Goldman Sachs surged 9% after reporting net income that exceeded market expectations, driven by significant increases in merger and acquisition and trading revenues.
JPMorgan Chase recorded its highest-ever quarterly net income, rising 2.5%. Bank of America gained 1.9%. In contrast, Citigroup and Wells Fargo fell 5.3% and 2.7%, respectively, due to concerns over rising costs.
Semiconductor stocks rebounded after a sharp decline the previous day. AMD rose over 3% following an upgrade from a brokerage firm. Micron and Intel also saw gains.
However, IBM's stock plummeted 25.2% amid growing concerns about its future performance. Analysts predict that the company's growth may fall short of expectations as IT spending shifts from software to data center infrastructure.
International oil prices increased due to concerns that tensions between the U.S. and Iran could disrupt oil supplies through the Strait of Hormuz. West Texas Intermediate (WTI) crude rose 1.5% to $79.34 per barrel, while Brent crude climbed 1.7% to $84.73.
U.S. Treasury yields fell as inflation eased. The yield on the 10-year Treasury note dropped 2.06 basis points to 4.589%. The more sensitive two-year yield fell 6.75 basis points to 4.196%. The dollar index also decreased by 0.33% to 100.94.
Market analysts caution that the easing inflation is heavily reliant on falling oil prices, suggesting it may be premature to celebrate. The recent rise in oil prices could impact future inflation indicators, making the situation in the Middle East a key variable for the stock market.
* This article has been translated by AI.
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