Tech Rallies on AI Hopes, But Broader Market Stumbles After CPI-Driven Rate Fears

The stock market opened with strong momentum Monday, fueled by upbeat news that NVIDIA (NVDA) would resume sales of its H20 chips in China. The rally was bolstered by optimism around AI chip sales, with Advanced Micro Devices (AMD) also signaling plans to re-enter the Chinese market. That enthusiasm helped the Nasdaq Composite notch another record close, while NVIDIA surged 4.0% and AMD added solid gains of its own.

The strength in semiconductors lifted the PHLX Semiconductor Index by 1.3%, and the S&P 500 Information Technology sector stood out as the day’s sole gainer, up 1.3%. The rally was further supported by reports of major investments in AI infrastructure from tech giants like Alphabet (GOOG) and CoreWeave (CRWV), both announcing new AI data center projects.

However, the optimism didn’t last across the board. A hotter-than-expected June CPI report poured cold water on the early rally. While core CPI rose just 0.2% month-over-month, lower than expected, markets grew uneasy as details in the report pointed to creeping inflation in specific categories. Apparel prices rebounded with a 0.4% jump, and household furnishings spiked 1.0%, raising red flags about possible tariff-related price pressures.

Bond yields surged in response, putting downward pressure on equities. The 10-year Treasury yield climbed to reflect renewed concern that the Federal Reserve may stay cautious on rate cuts in the face of sticky inflation.

As a result, the S&P 500 couldn’t hold onto early gains, slipping into the red and ending the day lower despite briefly setting a new intraday high of 6,302. Losses were widespread, with nearly 90% of S&P 500 stocks finishing in negative territory. The Russell 2000 dropped 2.0%, the S&P Midcap 400 slid 1.8%, and the equal-weighted S&P 500 fell 1.4%.

Financials were hit especially hard, down 1.7%, after some big names failed to hold their post-earnings momentum. JPMorgan Chase (JPM) and BlackRock (BLK) both beat expectations but saw sharp declines, with the latter losing nearly 6%. Wells Fargo (WFC) tumbled 5.5% after disappointing net interest income guidance. Citigroup (C), bucking the trend, jumped 3.7% on better-than-expected results.

In the end, while tech and AI optimism offered a brief lifeline, inflation concerns and rising rates kept a lid on the broader market’s performance, highlighting the fragility of this rally in the face of macroeconomic headwinds.

Our FTinvest 11 portfolio followed the market’s lead today, sliding steadily throughout the session. The index gave up 0.86%, settling at 792.13 by the closing bell—just above the 790 mark that had previously served as a key support level.

While recent sessions saw the portfolio testing new highs, today’s decline reflects broader market caution amid renewed concerns over inflation and monetary policy. Despite the pullback, FTinvest 11 remains within striking distance of its all-time highs, suggesting resilience in the longer-term trend.