Cooling Inflation Sparks Tech Rebound Despite Rising Oil Prices and Busy Earnings Day

Stocks navigated a packed calendar of economic data, corporate earnings, Federal Reserve commentary, and geopolitical developments on Tuesday, with the S&P 500 gaining 0.4% and the Nasdaq Composite advancing 0.9% as technology stocks rebounded from Monday’s selloff. The Dow Jones Industrial Average finished little changed, as strong bank earnings offset weakness in several large industrial names.

Markets opened broadly higher after the June Consumer Price Index report came in softer than expected. Headline CPI declined 0.4% for the month, compared with expectations for a 0.2% decline, while core CPI was unchanged versus forecasts for a 0.2% increase. On an annual basis, headline inflation slowed to 3.5% from 4.2%, while core inflation eased to 2.6% from 2.9%.

The inflation report prompted investors to reassess the Federal Reserve’s policy outlook. According to CME FedWatch, the probability of the Fed leaving interest rates unchanged at its July meeting rose to 83.4%, up sharply from 58.3% the previous day. However, markets continue to assign a better-than-even chance—56.5%—of a rate hike at the September meeting.

Treasury yields moved lower in response to the inflation data, helping offset another surge in energy prices. WTI crude oil briefly traded above $80 per barrel after President Trump formally notified Congress that the United States is at war with Iran. Later in the day, the president clarified that the U.S. naval blockade would apply only to vessels departing Iranian ports, temporarily easing oil prices before they resumed their advance. Crude ultimately settled up $0.98, or 1.3%, at $79.40 per barrel.

Lower yields provided support for growth stocks, allowing the information technology sector to lead the market with a 1.3% gain. Investors once again stepped in to buy weakness across semiconductor stocks, lifting the Philadelphia Semiconductor Index 2.5%.

NVIDIA climbed 4.1% to lead the “Magnificent Seven,” while memory-chip shares also rebounded alongside another powerful advance in SK hynix’s U.S.-listed ADRs. Bloomberg reported that the premium of the ADRs over the company’s Korean-listed shares has widened to nearly 50% following the launch of U.S. options trading, underscoring strong investor demand.

Technology gains helped offset a sharp decline in IBM, which fell more than 25% after issuing disappointing second-quarter guidance that missed expectations on both earnings and revenue. Meanwhile, management’s comments regarding temporary shifts in enterprise spending boosted cybersecurity stocks, with CrowdStrike jumping more than 12% to become the top-performing S&P 500 stock.

Financial stocks delivered a mixed performance despite another strong round of bank earnings. Goldman Sachs surged 9.0% after posting one of the strongest earnings beats of the group, while JPMorgan Chase and Bank of America also traded higher following solid quarterly results. Citigroup and Wells Fargo declined despite exceeding expectations, limiting the financial sector’s gain to 0.2%.

Communication services added 1.1%, supported by Alphabet’s nearly 2.0% advance after the company broke ground on its largest solar and battery storage project to date, further expanding the infrastructure supporting its growing AI data center footprint.

The Vanguard Mega Cap Growth ETF rose 1.0%, helping the market-cap-weighted S&P 500 outperform the equal-weighted S&P 500, which slipped 0.4%.

Defensive sectors lagged as investors rotated back into growth. Health care fell 1.9%, while consumer staples declined 1.4%.

Elsewhere, smaller companies also posted modest gains, with both the Russell 2000 and S&P MidCap 400 advancing roughly 0.5%.

Despite a flood of market-moving news—including inflation data, major bank earnings, Fed expectations, and escalating geopolitical tensions—the market once again revolved around two familiar themes: semiconductor leadership and oil prices. Softer-than-expected inflation helped investors look beyond higher crude prices, allowing technology stocks to regain leadership and the major indices to recover a meaningful portion of Monday’s losses.

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