Monday’s market pain flipped into some modest Tuesday gains.
The Nasdaq Composite (NASDAQINDEX: ^IXIC) index rose 0.9% by 12:05 p.m. ET, extending its recovery from a volatile morning session. The S&P 500 (SNPINDEX: ^GSPC) gained 0.3%, while the Dow Jones Industrial Average (DJINDICES: ^DJI) fell 0.2%.
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SK Hynix (NASDAQ: SKHY) surged 18.5%, recovering Monday’s 8.4% decline and then some. The memory chipmaker inspired a broad semiconductor rally that underpinned the Nasdaq Composite jump. The semiconductor sector led this recovery after yesterday’s sell-off, which was triggered by a historic collapse in Korean markets.
IBM’s “we didn’t see this coming” moment
The catalyst for Tuesday’s chip rally came from an unexpected source: IBM (NYSE: IBM) admitting it misjudged a massive shift in corporate spending priorities.
In a premarket warning, CEO Arvind Krishna said “numerous large deals” failed to close in the final weeks of June because customers had decided they’d rather spend money on servers, storage, and memory chips than on IBM software and services.
“While we anticipated some supply chain related impact in our expectations, we did not anticipate the magnitude of the capex reprioritization,” Krishna wrote in a preliminary Q2 report, adding that IBM had “faltered” in adapting quickly enough.
In other words, many companies are panic-buying hardware before prices go up, and IBM’s sales team watched helplessly as the software portions of IT budgets got redirected to chipmakers.
IBM shares collapsed 24.9%, erasing 429 Dow points. It’s Big Blue’s worst market day since the Black Monday crash in 1987.
On the other hand, IBM’s pain is the chip industry’s gain. Most semiconductor stocks trended up on Tuesday, led by a 2.6% Nvidia (NASDAQ: NVDA) jump and a 5.1% gain for Micron Technology (NASDAQ: MU) shareholders.
Financial services giant Goldman Sachs (NYSE: GS) reported a quarter so strong it shielded the Dow from IBM’s impact. Goldman smashed Wall Street’s Q2 2026 targets across the board. The company benefits from broad market volatility and several gigantic public offerings. Goldman was a lead underwriter for the SK Hynix and Space Exploration Technologies (NASDAQ: SPCX) offerings, for instance.
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The investment bank jumped 7.4%, single-handedly adding 459 Dow points.
In other news, Federal Reserve Chairman Kevin Warsh told Congress that inflation is a “tax on the American people.” Warsh promised “regime change” at the central bank.
Wall Street also enjoyed a mild inflation report. The June Consumer Price Index rose 3.5% year over year, below the 3.8% estimate but still well above the Fed’s 2% long-term target. Markets were pricing in a 51.9% chance of a September rate hike before the data dropped.
Meanwhile, oil prices climbed 2%. The U.S. military conducted a third consecutive night of strikes against Iran, and the United Arab Emirates reported at least two tankers came under Iranian fire. President Trump said trade deals with Gulf states would replace the 20% Strait of Hormuz shipping fee he’d proposed on Monday. The renewed military strikes are undermining the diplomatic progress that lowered June’s inflation figures.
The bigger picture
Tuesday’s market action confirms the ongoing rotation into hardware and away from software. Technology and financial stocks are doing the heavy lifting, while industrials and consumer names are mostly treading water.
SK Hynix’s 18.5% bounce one day after falling below its IPO price is either a sign that Monday’s sell-off was overdone or proof that tech valuations have become fundamentally unpredictable.
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Anders Bylund has positions in International Business Machines, Micron Technology, and Nvidia. The Motley Fool has positions in and recommends Goldman Sachs Group, International Business Machines, Micron Technology, and Nvidia. The Motley Fool has a disclosure policy.
Goldman Sachs Saves the Dow From IBM’s Worst Day in 39 Years was originally published by The Motley Fool
