U.S. stocks opened higher on Tuesday after weaker-than-expected June inflation data dented expectations of an immediate Federal Reserve interest rate hike.
Investors also weighed the second-quarter profits and corporate performance of major U.S. banks, while focusing on rising oil prices due to renewed tensions in the Middle East.
The S&P 500 rose about 0.12%, and the Nasdaq Composite rose about 0.44%.
The Dow Jones Industrial Average fell about 0.29% under pressure from IBM.
The Labor Department announced that the Consumer Price Index (CPI) rose 3.5% year-on-year in June, lower than the 3.8% expected by economists.
On a monthly basis, the CPI fell by 0.4%, but the decline was smaller than expected.
Following this report, traders sharply lowered their expectations for short-term interest rates to rise.
According to market pricing, the probability of an interest rate hike at the next Federal Reserve meeting has decreased significantly, but expectations for a rate hike in September remain high.
Investors are also awaiting Federal Reserve Chairman Kevin Warsh’s semi-annual monetary policy testimony before Congress later in the day for further clues about the central bank’s policy outlook.
IBM slumps as earnings season begins
Corporate earnings remained the main focus as Wall Street’s second quarter reporting season accelerated.
IBM shares plunged more than 25% in trading after the company predicted preliminary second-quarter revenue to be lower than analysts expected and warned that profits would be lower due to weaker demand across its software and infrastructure businesses.
The weaknesses spread to other software companies.
Oracle fell 0.79%, while ServiceNow and Accenture each fell more than 5% in the session.
Meanwhile, major U.S. banks traded higher after reporting better-than-expected quarterly profits.
Goldman Sachs rose 4.2% as stronger trading activity and higher market volatility drove record results for its equity trading business.
JPMorgan Chase, Citigroup, Bank of America and Wells Fargo all rose after the companies reported second-quarter profits that beat analysts’ expectations.
Investors are closely watching earnings reports for signs of corporate resilience following the S&P 500’s strong rally this year, with analysts expecting the index’s second-quarter earnings growth to be close to 24%.
Chip stocks rebound as oil prices remain high
Semiconductor stocks rebounded after Monday’s sharp selloff, contributing to gains in the technology-heavy Nasdaq index.
The iShares Semiconductor ETF rose about 3.6% in trading.
The VanEck Semiconductor ETF also rose more than 2.7%.
Among individual chipmakers, Applied Materials rose more than 4.11% and Teradyne rose about 5.8%.
Lam Research and Micron Technology each rose more than 4%, while STMicroelectronics rose more than 2.9%.
Despite the rally in tech stocks, overall market gains were limited as oil prices remained high.
US crude oil traded above $80 a barrel, while Brent crude rose more than 4% to over $86 a barrel after President Donald Trump announced plans to reinstate a blockade of Iranian ships passing through the Strait of Hormuz.
The announcement followed new military exchanges between the United States and Iran and renewed concerns about global energy supplies.
