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Financial Markets 07/14 15:23
NEW YORK (AP) -- Stocks rose Tuesday after a report showed U.S. inflation
was not as bad last month as economists expected. That was even though oil
prices continued to climb on worries that the United States and Iran may return
to all-out war.
The S&P 500 added 0.4% to recover some of its 0.8% loss from the prior day.
The Dow Jones Industrial Average added 9 points, or less than 0.1%, and the
Nasdaq composite climbed 0.9%.
Stocks got help from easing yields in the bond market, which fell after a
report said U.S. consumers had to pay prices for gasoline, food and other costs
of living that were 3.5% higher last month than a year earlier. That wasn't as
bad as May's 4.2% inflation rate or the 3.9% that economists expected for June.
Less bad inflation takes pressure off the Federal Reserve, which is
considering raising interest rates. Higher rates would keep a lid on inflation,
but they also slow the economy and hurt prices for all kinds of investments.
Following the inflation report, traders see less than a 17% chance that the
Fed will raise its main interest rate at its next meeting in a couple weeks.
That's down from the nearly 42% probability they saw the day before, according
to data from CME Group.
Rebounds for big, influential tech stocks also helped steady the market.
They've swung sharply in recent weeks on worries that they shot too high in the
euphoria around artificial-intelligence technology and that the voracious
demand for AI chips and data centers may fade if they don't produce the
promised profits and productivity.
Micron Technology rose 4.9%, and Nvidia climbed 4.1%. A day before, they
were two of the heaviest weights on the S&P 500 after falling 4.4% and 3.5%,
respectively.
To be sure, big risks remain for inflation. Fighting in the Middle East is
threatening to close the Strait of Hormuz, the narrow waterway that oil tankers
use to exit the Persian Gulf and deliver crude to customers worldwide.
The price for a barrel of Brent crude, the international standard, briefly
topped $87 in the morning. Following its leap of nearly 10% on Monday, it got
back to where it was before the United States and Iran signed their interim
deal to halt their fighting in the middle of last month.
Brent's price later pared its gain and settled at $84.73, up 1.7% from
Monday's settlement. It eased after Donald Trump backed away from his threat
made Monday to charge 20% on all cargo going through the strait to reimburse
the U.S. military for its protection.
Wall Street's other big focus this week is the start of earnings reporting
season, as companies tell investors how much profit they made from April
through June. The pressure is on companies to deliver big growth to justify how
high their stock prices have jumped. Indexes are near records despite the
recent swings caused by worries about AI stocks.
Bank of America, Citigroup, JPMorgan Chase, Goldman Sachs and Wells Fargo
all on Tuesday reported fatter profits for the latest quarter than analysts
expected. Their reports showed strength for their trading desks and suggested
spending by U.S. consumers remains resilient.
Their stocks mostly rose following the results. Goldman Sachs jumped 9%, but
Citigroup fell 5.3%.
IBM was the heaviest weight on the S&P 500 and the biggest reason the Dow
lagged behind other indexes after dropping 25.2%. That was its worst day since
at least 1972, according to data provider FactSet.
CEO Arvind Krishna said performance for IBM's software and infrastructure
businesses fell short of expectations last quarter after customers shifted
their spending toward servers, storage and memory to get ahead of expected
price increases caused by the AI boom.
"These conditions require our teams to execute perfectly, and this quarter
we faltered," Krishna wrote in a letter to investors. "We did not adapt and
move quickly enough, and numerous large deals failed to close on the timelines
we expected, driving the majority of our shortfall."
All told, the S&P 500 rose 28.25 points to 7,543.59. The Dow Jones
Industrial Average added 9.63 to 52,508.27, and the Nasdaq composite climbed
233.83 to 26,107.01.
In the bond market, the yield on the 10-year Treasury dropped to 4.58% from
4.62% late Monday. That halted its run higher from 3.97% before the war with
Iran began.
Fed Chairman Kevin Warsh testified before lawmakers on Capitol Hill for the
first time since taking over leadership of the central bank. He pledged to make
high inflation "a thing of the past" but offered no signal about the Fed's next
steps.
In stock markets abroad, indexes inched higher in Europe following a
stronger finish in Asia.
Japan's Nikkei 225 added 0.7% as SoftBank Group Corp. rose 3.3%. It's a big
investor in AI, and Chairman Masayoshi Son gave a speech in Tokyo where he
derided the idea that there is a bubble in investments in capacity for AI.
Stocks rose 1.4% in Shanghai after the government reported China's exports
jumped 27% in June from a year earlier as AI drove strong demand for computer
chips and other technology.
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AP Business Writer Elaine Kurtenbach contributed to this report.
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