U.S. June PPI came in below market expectations, adding to the cooling inflation signal already seen in the earlier CPI release. Traders quickly marked down the odds of additional near-term Federal Reserve tightening, and the possibility of a short-term rate hike was largely priced out. U.S. stocks ended higher across the board, with the Dow Jones Industrial Average up 0.29%, the S&P 500 rising 0.38%, and the Nasdaq Composite gaining 0.62%.
The market response was clear. Money rotated back into large-cap technology names, while pressure on growth-stock valuations eased. The Magnificent Seven index rose 2.47% and did much of the heavy lifting for the Nasdaq. By contrast, the Philadelphia Semiconductor Index fell 2.08%, with memory-related names taking the hardest hit.
Fed officials stayed cautious even as inflation data improved
Cooling inflation did not produce a uniform Fed message. At a congressional hearing, Warsh said the Fed remains independent and argued that price increases tied to AI infrastructure buildouts do not automatically amount to genuine, sustained inflation. Whether that pressure becomes lasting inflation, he said, still depends on supply and demand conditions as well as monetary policy. He also said current inflation gauges have limitations and that he is paying closer attention to data in the coming months.
Fed Governor Cook struck a firmer tone. She said supply shocks linked to AI investment, tariffs, and tensions in the Middle East have pushed inflation risks back above employment risks. If inflation does not keep moving lower, she said, further action cannot be ruled out.
New York Fed President Williams was more restrained. In his view, inflation remains elevated, but there are signs it may be topping out, and current policy remains sufficient to guide inflation back toward the 2% target. Taken together, the remarks suggested that the Fed is in no rush to hike again, but neither is it preparing to pivot quickly into aggressive easing.
Donald Trump continued to pressure the central bank on rates, saying holding steady is “better than raising rates” and that he wants to see rates come down. He said he expects inflation to be lower by year-end and hinted there may be resistance inside the Fed.
The latest Beige Book pointed to a U.S. economy that is still expanding at a modest pace. Economic activity increased in 11 of the Fed’s 12 districts, and the labor market stayed broadly stable. Energy prices were described as the biggest variable for inflation going forward, while shortages of technical workers in some regions continued to push wage costs higher.
Oil held between Middle East tensions and inventory pressure
Geopolitical risk in the Middle East continued to support crude prices. The report said U.S. forces had been in contact for five days of strikes on Iran, aimed at military facilities linked to threats against freedom of navigation through the Strait of Hormuz. Trump said Iran is “very eager to make peace,” though he also said oil prices may stay volatile for some time. If the Iran situation stabilizes, he said, crude could fall to $55 a barrel.
WTI crude and Brent crude traded around $80 and $85, respectively. Inventory data kept a lid on further gains. U.S. Energy Information Administration data showed weaker demand drove a sharp build in distillate inventories, while U.S. crude output remained high. Total petroleum exports increased, but were still below recent pre-war averages.
Goldman Sachs analyst Yulia Grigsby said that if the risk of a Strait of Hormuz closure were to materialize, the market could face a supply shortfall of about 13.4 million barrels a day. Under that scenario, much more visible demand destruction and inventory drawdowns would be needed to rebalance the market.
Short-dated Treasury yields fell and the dollar weakened
After the PPI release, buyers moved quickly into the front end of the Treasury market. The 2-year yield fell by about 7 basis points, while the 30-year yield slipped by about 2 basis points, leaving the curve steeper.
HSBC rate strategist Dhiraj Narula said markets had lowered the implied probability of the next FOMC hike, pulling yields moderately lower. At the same time, the rebound in oil prices since July has kept investors alert to upside inflation risk, which helps explain why yields remain near the higher end of this year’s range.
The U.S. dollar index weakened alongside Treasury yields, falling about 0.43% on the day and erasing more than half of the gains seen since Warsh took office. For equities, a softer dollar also improves profit translation for multinational technology companies, which helps explain part of the strength in mega-cap tech.
Over the next day or two, institutional attention is set to center on U.S. retail sales, initial jobless claims for the week ended July 11, the Philadelphia Fed manufacturing index, and earnings from Taiwan Semiconductor Manufacturing Co. and Netflix. The bigger question for macro traders is not any single print. It is whether cooler inflation can coexist with resilient consumer demand. If retail sales hold up and claims do not rise, the market may keep trading the soft-landing view. If consumption weakens sharply, optimism around lower rates could give way to concern about growth.
AI leadership shifted from chips toward platforms
Cooling inflation and a solid start to earnings season improved risk appetite. Money rotated out of memory-chip shares, which had already posted steep gains, and into large platform names with steadier cash flow. Traders still see AI as the market’s central theme, but some of the strongest-performing memory and chip names became targets for profit-taking as capital moved toward more liquid companies with a more stable narrative.
Goldman Sachs’ trading desk said hedge funds were aggressively selling technology and communication-services stocks, with selling pressure in the 98th percentile of the past year. Long-only institutional investors, however, were still net buyers of those same sectors.
AI-related corporate developments added to the flow. Anthropic could reportedly launch an IPO as soon as October this year, with its valuation said to have climbed to $965 billion. Jensen Huang appeared in Tokyo to push Nvidia’s cooperation with Japanese industrial, robotics, automotive, and gaming sectors. Trump, meanwhile, criticized New York for pausing approvals for large AI data centers and called the tax revenue and jobs tied to data centers “liquid gold.”
Apple hit another record, PayPal surged, and SpaceX stayed under pressure
Apple rose 4.01% and extended its record run, with market value approaching $5 trillion. The report said Apple is actively looking for chip acquisition targets to strengthen its AI server capabilities. Market chatter around AI model adaptation for Apple in China also reinforced expectations that the company’s AI strategy is moving closer to commercial rollout. Other major technology names moved higher as well: Microsoft rose 2.78%, Amazon gained 3.02%, Alphabet Class A added 3.17%, Meta climbed 3.07%, and Nvidia edged up 0.33%.
PayPal jumped 17%, making it the best-performing stock in the S&P 500. A report said Stripe and private equity firm Advent had made a takeover offer worth more than $53 billion. The move lifted sentiment across fintech and payments names, with Circle up 3.88%.
Memory-chip stocks were the day’s biggest losers. SK Hynix dropped 9%, SanDisk fell 8.12%, Micron lost 8.02%, Western Digital fell more than 8%, and AMD declined 3.46%. The report also cited market chatter that AI cloud computing company CoreWeave is trying to hedge against falling memory-chip prices through derivatives. That fueled concern that massive semiconductor capital spending may not translate into free cash flow.
ASML rose 2.23% after pointing to strong AI demand and sharply raising its 2026 sales outlook to 43 billion euros to 45 billion euros. At the same time, its largest customer, TSMC, strongly opposed ASML’s potential price increase plans, arguing that equipment costing more than 350 million euros per unit is too expensive and currently suitable only for R&D.
Intel fell 4.43%. The company confirmed it had purchased and was using ASML’s high-end High NA EUV machines for some Panther Lake processor production, but the stock still moved lower with the broader chip sector. Reports from KeyBanc and FactSet said Intel 18A yields had improved from 65% to 85%, though near-term trading remained focused on the cooling semiconductor trade.
Oracle gained 3.56% after Oracle and NetApp launched a fully managed cloud storage service that natively integrates enterprise NetApp storage into Oracle Cloud Infrastructure for AI and mission-critical enterprise workload migration. The market continued to assign a premium to cloud infrastructure and AI data-service names.
SpaceX closed down 0.60%, extending its losing streak to four straight trading days. Shares fell as low as $132.15 intraday, below the $135 offering price. With a Starship test flight and the company’s first quarterly earnings report approaching, short sellers have been increasing positions aggressively. Short interest has reached 28%, and paper gains for shorts are nearing $3.9 billion.
Johnson & Johnson fell 2.69% after earnings. The company raised the midpoint of its 2026 operational sales guidance to $100.6 billion, but sales of its core product Stelara dropped 55.7% because of biosimilar competition, while Abiomed sales in its MedTech cardiovascular segment fell 2%.
AST SpaceMobile fell 12% in after-hours trading after announcing plans to privately place $1 billion principal amount of senior convertible notes due 2034. The company said the funds would support expanded launch resources and possible acquisitions, while the market focused on potential dilution.
What markets are watching next
On July 16, the U.S. is due to release June retail sales, weekly initial jobless claims for the period ending July 11, and the Philadelphia Fed manufacturing index. Those figures are set to shape expectations for both the resilience of the U.S. economy and the path of Fed policy.
Before the market opens on July 16, earnings are expected from TSMC, UnitedHealth, GE Aerospace, U.S. Bancorp, State Street, and Abbott. TSMC’s report stands out because it is expected to test demand for AI chips, advanced packaging capacity, and capital spending intensity. A strong guide could ease the selling pressure in semiconductors. Weaker-than-expected margin or capex figures could extend the correction.
After the close on July 16, Netflix, Intuitive Surgical, and Alcoa are scheduled to report. Netflix’s results are expected to test the earnings quality of large-cap growth stocks, while Alcoa is being watched as a read on industrial demand and the commodity cycle.
Around July 17, the launch window opens for Starship’s 13th test flight. The outcome is being treated as a key near-term catalyst for the bull-bear battle in SpaceX. A successful test could ease some of the pressure tied to trading below the offering price. A failure or delay, combined with earnings and lock-up concerns, could make the stock more volatile.