Dow rises 150 points as Big Tech leads gains after soft inflation data

• Big Tech leaders Amazon, Microsoft, Alphabet, and Apple gained 3-4%, while semiconductor stocks declined sharply with Micron down 7%, Intel down 5%, and the SMH ETF falling 2%
• Producer Price Index fell 0.2% monthly versus expectations of no change, pushing the probability of a July Fed rate hike down from 31% to 10% according to CME FedWatch Tool
• S&P 500 companies are expected to deliver 23.7% year-over-year earnings growth for Q2, though Middle East tensions and potential energy price increases remain a risk to the inflation outlook

Market Summary: Dow Gains 150 Points on Soft Inflation Data

Key Market Movements

US equities closed higher Wednesday, with the Dow Jones Industrial Average rising 150.25 points (+0.29%) to 52,658.52. The S&P 500 gained 0.38% to 7,572.42, while the Nasdaq Composite climbed 0.62% to 26,269.23.

Sector Rotation: Big Tech vs. Semiconductors

A pronounced rotation favored large-cap technology stocks while semiconductors retreated sharply. Amazon, Microsoft, and Alphabet each rose approximately 3%, with one unnamed tech stock gaining 4%. Conversely, chipmakers suffered significant losses: Micron Technology fell 7%, Intel dropped 5%, and Lam Research declined over 4%. The VanEck Semiconductor ETF (SMH) lost 2%.

Inflation Data Boosts Sentiment

Producer Price Index (PPI) data came in softer than expected, with economists anticipating no monthly change. Annual producer inflation stood at 5.5%. This followed Tuesday's cooler-than-expected Consumer Price Index, strengthening the case for moderating inflationary pressures.

Fed Rate Expectations Shift

The probability of a July Fed rate hike plunged to 10% from 31% a week earlier, according to CME's FedWatch Tool. However, futures markets indicate a 60% probability of rates being 0.25-0.50 percentage points higher by October.

Earnings Season Strength

S&P 500 companies are expected to deliver 23.7% year-over-year earnings growth for Q2. Payment processor stocks gained after reports that Stripe and Advent International offered $60.50 per share for an unnamed payments company.

Geopolitical Concerns

Escalating US-Iran tensions over the Strait of Hormuz raise concerns about potential energy price spikes that could reignite inflation.