NEW YORK: The S&P 500 and the Nasdaq rose on Tuesday after softer-than-expected inflation data fueled hopes the Federal Reserve could adopt a less hawkish stance on interest rates, while upbeat second-quarter results lifted most of the big bank stocks.
The data showed that the consumer price index rose 3.5 percent in June from a year earlier, below Reuters-polled economists’ forecast of 3.8 percent.
Following the report, traders sharply pared back expectations for near-term policy tightening, with a nearly 15 percent chance of a quarter-point rate increase at the Fed’s upcoming meeting, down from 35 percent before the data.
“After today’s benign core inflation release, it appears less likely that the FOMC (Federal Open Market Committee) will raise rates over the next few meetings,” said Jeffrey Roach, chief economist for LPL Financial.
“However, we may still be at an inflection point, given the risk that the energy shock could spill over into other categories of consumer prices.”
Fed Chairman Kevin Warsh also drew attention during congressional testimony, where he vowed to “do my job” if challenged by President Donald Trump. The remark marked his most direct comment yet on how he would respond to potential political pressure on the central bank.
IBM shares tumbled nearly 25.8 percent after the software and consulting firm forecast preliminary second-quarter revenue below estimates. The move put the stock on track for a one-day drop worse than the 1987 “Black Monday” crash.
Big bank results kick started the second-quarter earnings season on Wall Street.
Goldman Sachs gained 7.3 percent after it exceeded second-quarter profit expectations, as dealmaking picked up pace and market volatility due to the Middle East war boosted the equities business to a record.
JPMorgan Chase added 1.9 percent after reporting higher second-quarter profit.
Bank of America gained 2 percent after beating estimates for second-quarter profit. On the other hand, Wells Fargo and Citigroup eased 2.3 percent and 4 percent, respectively, even after upbeat quarterly results.
The S&P 500 financial sector was up 0.6 percent, while technology led the gains with a 1.5 percent rise.
At 12:01 p.m. ET, the Dow Jones Industrial Average fell 105.25 points, or 0.20 percent, to 52,393.39, the S&P 500 gained 16.16 points, or 0.22 percent, to 7,531.50 and the Nasdaq Composite gained 185.05 points, or 0.72 percent, to 26,058.23.
Nasdaq recovered after the tech-heavy index fell 1.6 percent on Monday.
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