Dow edges higher as Nasdaq rallies on cooler CPI, chip stocks rebound

• June CPI fell month-over-month (consensus was -0.2%) with annual inflation slowing to 3.5% versus 3.8% expected, prompting markets to reduce rate hike expectations from 58.3% to 83.4% probability of a July pause
• Semiconductor stocks rebounded sharply with VanEck Semiconductor ETF up ~2%, Applied Materials and Teradyne up ~4%, and Lam Research and Micron up ~5%
• Major banks reported strong Q2 earnings with Goldman Sachs beating expectations by 9% on trading and dealmaking strength, while IBM plunged on weak profit guidance

Market Summary: Cooler CPI Drives Stock Rally, Chip Sector Rebounds

Key Market Movements

US stocks advanced Tuesday following softer-than-expected inflation data. The S&P 500 rose 0.38% to 7,544.03, the Nasdaq Composite gained 0.91% to 26,109.65, and the Dow Jones edged up 0.05% to 52,527.56.

Inflation Data

The Labor Department reported June CPI declined month-over-month (specific percentage not fully disclosed in excerpt), while annual inflation slowed to 3.5%—below economist expectations of 3.8%. The softer print significantly shifted Fed rate expectations, with markets now pricing an 83.4% probability of unchanged rates at the July meeting, up from 58.3% previously.

Sector Performance

Technology/Semiconductors (Winners): The VanEck Semiconductor ETF climbed approximately 2%. Notable gainers included Lam Research and Micron Technology (+5%), Applied Materials and Teradyne (+4%), and STMicroelectronics (+2%).

Technology (Loser): IBM plunged sharply after issuing a weak profit outlook.

Financials (Mixed): Goldman Sachs rallied +9% on an earnings beat driven by strong trading revenue and dealmaking activity. JPMorgan and Bank of America each gained over 2% after beating estimates. Wells Fargo declined despite solid results as investors focused on expense trends.

Energy Markets

Oil prices rose despite easing Middle East tensions after President Trump withdrew a proposed 20% Strait of Hormuz transit fee. US crude settled up 1.5% above $79/barrel, while Brent crude rose 1.7% above $84/barrel on supply concerns from renewed US-Iran strikes.

Outlook

Fed Chair Kevin Warsh stated the "inflation surge of the last five years will be a thing of the past," though markets still expect at least one 25-basis-point hike before year-end.