A rebound in chip shares put the Nasdaq out front, while the Dow’s gains were more subdued. The Labor Department’s Consumer Price Index showed inflation cooled more than analysts expected in June, largely due to abating energy price pressures amid last month’s signs of progress in U.S.-Iran peace negotiations. U.S. Federal Reserve Chair Kevin Warsh sat for his first congressional testimony since his confirmation, in part to lay out the central bank’s plan to contain upward price pressures. Warsh’s testimony occurred while the battle for control over the Strait of Hormuz has led to ramped-up airstrikes between the United States and Iran and boosted crude oil prices, reviving fears of upward price pressures.
Still, following the CPI report, financial markets were pricing in an 83.4% likelihood that the Fed will let its key interest rate stand at the conclusion of its July policy meeting, up from 58.3% on Monday. Markets expect at least one 25-basis-point rate hike before year-end, according to CME’s FedWatch tool.
“The inflation report seems to have weakened the argument that the Fed is going to raise rates,” said Chuck Carlson, chief executive at Horizon Investment Services in Hammond, Indiana. “It gives the Fed cover, for now.”
“(Warsh) is saying we can bring down inflation, and that’s what the people he was speaking to want to hear,” Carlson added. “And maybe inflation is going to come down without having to raise rates.”
EARNINGS SEASON KICKS OFF Second-quarter earnings season began with five big U.S. banks reporting solid results, buoyed by trading strength and dealmaking. Goldman Sachs surged after it surpassed second-quarter profit expectations, as dealmaking picked up pace and geopolitical uncertainties boosted its trading business. JPMorgan Chase and Bank of America both advanced after delivering consensus-beating profits. But Citigroup slid as worries over expenses overshadowed its profit beat. Wells Fargo also declined.”It’s a big earnings week, so we finally get to hear from corporate America,” said Tom Hainlin, national investment strategist at U.S. Bank Asset Management in Minneapolis. “What we continue to look for from the banks is what are they seeing in terms of consumer health? So far, good news on that front.” IBM shares tumbled after the company warned second-quarter revenue would fall below estimates.
According to preliminary data, the S&P 500 gained 28.69 points, or 0.38%, to end at 7,544.03 points, while the Nasdaq Composite gained 236.48 points, or 0.91%, to 26,109.65. The Dow Jones Industrial Average rose 28.92 points, or 0.05%, to 52,527.56.
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