Nasdaq gains 0.8% on soft CPI as chipmakers rally 4.8%

The Nasdaq Composite rose 0.8% and the S&P 500 added 0.3% after June inflation came in cooler than expected, boosting rate-cut hopes.

"The softer-than-expected CPI print undercut the Fed's recent hawkish leanings, sending the dollar lower as markets pared back Fed expectations," said Uto Shinohara, senior investment strategist at Mesirow Currency Management.

The consumer price index increased 3.5% in the 12 months through June, down from 4.2% in May and below the 3.9% economists had forecast. Core CPI on a month-over-month basis was unchanged after gaining 0.2% in May. The 10-year Treasury yield fell to 4.58% from 4.62%, while the dollar index dropped 0.6% to 100.68. Traders now see less than a 13% chance of a Fed rate hike at the July meeting, down from 42% a day earlier, according to CME Group data.

The relief may prove temporary. Brent crude rose 2.4% to $85.29 a barrel after U.S. and Iranian forces traded attacks near the Strait of Hormuz, threatening to push energy costs higher and reignite inflation pressures. Fed Chair Kevin Warsh, testifying before Congress for the first time since taking office, pledged to make high inflation "a thing of the past" but offered no signal on the central bank's next steps.

Semiconductor stocks led the tech rally, with Micron Technology jumping 4.8% and Nvidia adding 2.8%, recovering a portion of the prior session's losses. The rebound came after both stocks fell more than 3% Monday on concerns that AI-driven demand may not sustain its current pace.

IBM was the heaviest weight on the S&P 500 and the biggest drag on the Dow, plunging 25.5% in what could be its worst single-day decline since at least 1972, according to data provider FactSet. Chief Executive Officer Arvind Krishna said the company's software and infrastructure businesses fell short of expectations as customers shifted spending toward servers and storage to get ahead of AI-related price increases.

Bank earnings provided a counterweight. Goldman Sachs jumped 7.6% after reporting fatter-than-expected quarterly profits, while JPMorgan Chase, Bank of America and Wells Fargo also beat analyst estimates. Citigroup bucked the trend, falling 4%.

Gold rose 2.1% to $4,083.99 an ounce as the weaker dollar boosted demand for the precious metal. In Asia, Japan's Nikkei 225 added 0.7% and Shanghai stocks rose 1.4% after China reported exports jumped 27% in June from a year earlier.

This article is for informational purposes only and does not constitute investment advice.