A softer U.S. June CPI report reset the tone for Wall Street overnight, sending the major indexes higher and pulling money back into growth names tied to AI infrastructure. The Dow Jones Industrial Average edged up 0.02%, the S&P 500 rose 0.38%, and the Nasdaq Composite gained 0.90%. The action was selective rather than market-wide, centered on easing rate pressure and renewed buying in AI hardware.
June CPI slowed to 3.5% year over year, below market expectations and down from 4.2% in May. On a monthly basis, CPI fell 0.4%, the first monthly decline in six years, with gasoline prices acting as the main drag. Core CPI held at 0.2% month over month. That suggested services inflation has not fully broken lower, but it was enough for traders to cut back July hike bets.
July rate-hike pricing shifts sharply after CPI
CME FedWatch data showed that after the CPI release, the market-implied probability of the Federal Reserve keeping rates unchanged in July jumped to 83.4% from 58.3% the previous day. The probability of a July hike fell from about 42% to about 17%.
Chuck Carlson, chief executive officer at Horizon Investment Services, said the inflation report “undermined the case for a Fed rate increase” and gave the central bank “cover to stand still for now.”
Federal Reserve Chair Kevin Warsh did not offer markets a dovish readout in his first congressional testimony. He said the cooler June CPI print does not mean the job is done, stressed the Fed’s “zero tolerance” stance on high inflation, said policy would remain data-dependent, and called the central bank’s independence “sacrosanct.” Christopher Hodge, chief U.S. economist at Natixis, said the data at least spared Warsh from being forced into an immediate rate increase. Brian Therien of Edward Jones said Warsh reinforced his anti-inflation credibility without committing to a specific policy path.
VIX falls back, but Middle East risk keeps oil elevated
The CBOE Volatility Index, or VIX, which tracks expected market volatility over the next 30 days, fell 3.85% to 16.50 on July 14, returning to an area often associated with lower short-term risk. That points to fading near-term fear, though not to the disappearance of underlying risks tied to war, oil, or rates. It looked more like traders pulling back hedges than a clean reset in the macro backdrop.
On geopolitics, Trump abruptly withdrew a plan to impose a 20% transit fee through the Strait of Hormuz and instead said trade and investment agreements with Gulf states would replace that fee mechanism. That briefly eased concern over global energy transport. Yet tensions did not actually cool. On the same day, the U.S. resumed a maritime blockade targeting Iranian ports and coastal areas and launched a new round of airstrikes. Iran was also accused of retaliating against U.S. bases and oil tanker targets in the Gulf, leaving the Hormuz risk premium intact.
Oil prices gave up part of their intraday gains but still finished higher, with WTI and Brent trading near $80 and $85, respectively. Goldman Sachs said the more important inflation signal may not be crude itself, but tightness in distillates and refined products. In that view, shipping disruptions alone, even without a full closure of the strait, could be enough to push energy prices higher again.
ClearView Energy Partners estimated that if the 20% Hormuz fee had actually been implemented, and with oil assumed at $78 a barrel, U.S. gasoline costs could have risen by about 37 cents per gallon. The report said that helps explain why Trump quickly backed away from the plan, as energy inflation and cost-of-living pressure ahead of midterm elections are areas the White House does not want to test.
Treasury yields ease as foreign holdings climb to the second-highest level on record
As inflation cooled, Treasury yields reversed their prior climb. The 10-year U.S. Treasury yield fell back to 4.58%, easing some of the valuation pressure on growth stocks. The U.S. dollar index remained range-bound at elevated levels. Markets are now looking toward the producer price index and labor-market data in the coming weeks to judge whether the inflation slowdown has staying power.
Gold traded in a narrow range. Lower Treasury yields reduced the opportunity cost of holding bullion, while the escalating Middle East situation kept safe-haven demand alive. Those two forces offset each other.
U.S. Treasury data showed foreign investors increased their holdings of Treasuries by $18.5 billion in May to $9.37 trillion, the second-highest level on record. Canada increased holdings by $38.7 billion, the U.K. added $11.1 billion, and mainland China increased by $8.2 billion. Japan cut holdings by $66.8 billion. The report said that even with high rates and geopolitical tension running at the same time, Treasuries remain the core anchor for global reserve capital, though the behavior of major holders is diverging.
AI trade regains control as chips, memory, and optical names lead flows
After a sharp pullback in the previous session, the AI complex bounced hard, and growth stocks once again became the center of fund flows. The main story was not a broad market rally. It was a return of risk appetite focused on a narrower set of winners. Cooler CPI lowered discount-rate pressure, while strong bank earnings suggested the profit side of corporate America had not broken down. Money then rotated out of defensive positioning and back into AI hardware, storage, semiconductors, and optical communications.
Semiconductors were the strongest group. The Philadelphia Semiconductor Index climbed 2.54%, while a semiconductor ETF rose about 2.51%. Investors read the softer inflation print as relief for tech valuations and kept leaning into the expansion themes around AI servers, high-bandwidth memory, advanced DRAM, and data-center capital spending.
Memory was one of the most crowded parts of the tape. Demand from AI servers for high-bandwidth memory and premium storage products is still rising, while supply is not expected to ramp quickly in the near term. Longer-dated orders and higher pricing assumptions have strengthened the earnings case. JPMorgan said the supply-tight memory backdrop is likely to remain in place and that no large-scale new capacity is expected before early 2028.
Optical communications stocks also rallied, showing that investors are extending the trade beyond GPUs and HBM into internal data-center connectivity, silicon photonics, optical modules, and advanced packaging.
Bank stocks played a different role. They helped stabilize confidence after second-quarter results from large lenders generally came in ahead of expectations. Trading, investment banking, and wealth management were key drivers, showing that Wall Street trading desks still have strong earnings power in a high-volatility market and an AI financing cycle. Tom Hainlin, a strategist at Bank of America Asset Management, said the market is most focused on what banks are seeing in consumer health, and the early signal looks positive.
There were clear weak spots. Software and traditional IT services lagged because corporate budgets are shifting toward AI servers, storage, memory, and data-center infrastructure. Some legacy software orders are being delayed or squeezed out. Goldman Sachs warned that this capital-spending rotation could make the “software bear market” scenario more concrete, meaning the AI boom is not lifting all of tech equally but reshaping where profits sit.
Stock movers: SK Hynix ADR jumps, IBM posts its worst day in 115 years
SK Hynix ADR surged 27.29%, the biggest winner of the session, marking its largest single-day gain since listing. Its premium to the company’s Korea-listed shares briefly widened to more than 50%. Catalysts included the formal launch of SK Hynix ADR options on a U.S. options exchange and continued bullish calls from SemiAnalysis on HBM demand. Short-dated options trading was heavily concentrated on the upside, showing that traders are once again betting on sustained AI server demand.
Micron Technology rose 4.92% and ranked among the most actively traded U.S. stocks, helped by rising expectations for HBM, DRAM, and AI server storage demand. Institutions expect profit to expand sharply in fiscal 2026 and 2027, and JPMorgan said tight memory supply could last at least until early 2028.
SanDisk gained 5.01%, supported by the memory upcycle and expectations for large cloud orders. Goldman Sachs, Wedbush, and Evercore ISI stayed constructive on earnings durability, while some analysts argued the market is underestimating the visibility of revenue and profit over the next few years. AMD rose 2.57%. ASML gained more than 2%, and Applied Materials and Teradyne rose more than 3%.
Nvidia added 4.06%. The company is considering a partnership with Mitsubishi Heavy Industries to integrate cooling systems and energy-management capabilities into the next generation of AI data-center “AI factory” infrastructure. Investors took that as another sign Nvidia is extending its position across the broader data-center ecosystem.
Intel rose 4.50% after saying it will invest 5 billion euros in Ireland to upgrade European capacity and install advanced manufacturing equipment to support Xeon 6 and next-generation Xeon processors. The investment equals roughly 30% of Intel’s planned $17 billion in capital expenditures for 2026 and was framed as a European supply-chain move tied to demand for AI and high-performance computing.
IBM plunged 25.21%, its biggest one-day fall in 115 years, after preliminary second-quarter results came in below market expectations. The company’s CEO said IBM failed to adjust quickly enough as customer budgets shifted toward servers, storage, and memory, and said several large deals did not close on the expected timeline. Goldman Sachs said the result may support the “software bear market” argument, with AI infrastructure spending crowding out traditional software and services budgets.
SpaceX fell 2.20% for a third straight day, closing at $136.08, only slightly above its $135 IPO price. The stock is down about one-third from its post-listing high, wiping out nearly $850 billion in market value. Mahoney Asset Management’s chief executive officer said SpaceX has not yet found a bottom and that supply pressure tied to insider lockup expirations in coming months bears close watching.
Oracle dropped 2.74% as investors worried about its debt load and execution risk tied to the $300 billion data-center project related to OpenAI. Investors are re-examining a central question in the AI infrastructure buildout: who carries the capital spending burden and who captures the profit.
Apple slipped 0.77%. The company is reportedly evaluating PrismML’s large-model compression technology with the goal of running a 27-billion-parameter model locally on the iPhone, laying groundwork for a Siri upgrade and stronger on-device AI capabilities. The report was positive over a longer horizon, but it did not offset the near-term pressure from the split inside large-cap tech. Microsoft fell 1.55% as money shifted from AI software platforms into hardware-linked names such as memory, chips, and optical communications.
Optical networking names moved sharply higher. AXT Inc rose more than 12%, Applied Optoelectronics gained nearly 7%, Lumentum advanced more than 5%, POET Technology rose more than 4%, Ciena gained more than 3%, and Corning and Broadcom rose more than 2%. Tower Semiconductor also said it is advancing 300mm silicon photonics, silicon-germanium processes, and advanced packaging capacity upgrades in Japan, reinforcing the market’s focus on optical interconnect demand inside AI data centers.
Bank earnings support sentiment as Goldman Sachs and JPMorgan stand out
Goldman Sachs climbed 9.00%, its best single-day performance of the year. Second-quarter profit beat expectations, and equity-trading revenue hit a quarterly record of $4.6 billion. Market volatility and the AI investment boom both lifted trading and investment-banking revenue.
JPMorgan gained 2.50%. Second-quarter net income jumped 41.2% year over year to $21.16 billion, while earnings per share reached $7.70, well above the expected $5.59. The bank set a U.S. banking industry record for quarterly profit. Equity-markets revenue surged 86% to $6 billion, investment-banking revenue rose 45% to $3.9 billion, and full-year guidance for net interest income was raised to $105.5 billion.
Bank of America rose about 1.9% after earnings topped expectations. Equity trading set a quarterly record, and investment banking benefited from a recovery in dealmaking. The result was read as a sign that consumer and corporate activity remains resilient.
Citigroup fell 5.3%. The bank reported second-quarter net income of $5.8 billion, up 45% year over year, revenue of $24.8 billion, up 14%, and earnings per share of $3.15. Even though Citi raised its dividend by 12% and launched a $30 billion buyback plan, cost pressure overshadowed the profit beat. Wells Fargo fell about 2.7%. Its results came in better than expected, but investors stayed cautious on the quality of revenue and the durability of future growth, highlighting divergence even inside bank stocks.
Lucid swings sharply and Buffett discloses a long-term donation plan
Lucid closed down about 16% after an extreme intraday move. The stock had fallen more than 50% at one point on market chatter that the company was considering privatization or a Chapter 11 bankruptcy filing. Lucid later denied the rumor, calling the related report “entirely false,” and said it has enough liquidity to support operations well into next year. The stock recovered part of the decline after that statement.
Stride fell about 5.6% after Anthropic introduced Claude for Teachers for K-12 educators in the U.S. with advanced AI features offered at no cost. Investors worried that the move could pressure the core business of education technology companies.
Shares tied to Berkshire Hathaway also drew attention. Warren Buffett said he plans to gradually dispose of his remaining Berkshire shares over the next eight years and donate part of the proceeds, after converting some Class A shares into Class B shares, to charitable foundations. The total value was put at just over $5.9 billion. The report said this was less a conventional sell signal and more a continuation of a long-term philanthropy and succession plan.
What markets are watching next
The next immediate focus is the U.S. June PPI report due at 20:30 on July 15. The report said CPI has opened a window for bulls, but PPI will determine whether the “cooling inflation” trade can continue. If PPI also softens, Treasury yields and the dollar could face more pressure, and technology shares, especially AI hardware, may stay firm. If PPI reaccelerates, markets may reprice energy shocks and corporate cost pressure, and the VIX could rebound from around 16.
At 22:00 on July 15, Warsh’s congressional testimony and subsequent comments from Federal Reserve officials will also be in focus. Warsh has already made clear that cooler CPI does not mean the mission is complete. Markets will watch whether he pushes a more hawkish tone. If he continues to suppress expectations for rate cuts and keeps the option of another hike this year alive, rate-sensitive technology shares could turn volatile again. If he acknowledges the data improvement, equity bulls may gain firmer policy cover.
Earnings from Johnson & Johnson, Morgan Stanley, BlackRock, and ASML are also due on July 15, providing the next set of signals on corporate profits and sector rotation.