NEW YORK (AP) — Stocks are holding steadier on a calmer Wall Street Tuesday after a report showed U.S. inflation was not as bad last month as economists expected. That was even though oil prices continue to jump on worries that the United States and Iran may return to all-out war.
The S&P 500 added 0.2% to recover some of its 0.8% loss from the prior day. The Dow Jones Industrial Average was up 142 points, or 0.3%, as of 10:15 a.m. Eastern time, and the Nasdaq composite was 0.3% higher.
Stocks got help from easing yields in the bond market, which fell after a report said U.S. consumers had to pay prices for gasoline, food and other costs of living that were 3.5% higher last month than a year earlier.
While that’s more than nearly everyone would like, it wasn’t as bad as May’s 4.2% inflation rate or the 3.9% that economists expected for June. Less bad inflation could take pressure off the Federal Reserve, which is considering raising interest rates.
Higher rates can keep a lid on inflation, but they also slow the economy and hurt prices for all kinds of investments.
Following the inflation report, traders see less than a 15% chance that the Federal Reserve will raise its main interest rate at its next meeting later this month. That’s down from the nearly 42% probability seen the day before, according to data from CME Group.
Rebounds for several big, influential stocks of computer chip companies also helped steady the market. They’ve been swinging sharply in recent weeks on worries that they shot too high in the euphoria around artificial-intelligence technology.
Micron Technology rose 1.8%, and Nvidia added 0.5%. A day before, they were two of the heaviest weights on the S&P 500 after falling 4.4% and 3.5%, respectively.
To be sure, big risks remain for inflation. Fighting in the Middle East is threatening to close or slow traffic in the Strait of Hormuz, the narrow waterway that oil tankers use to ship crude from the Persian Gulf to customers worldwide.
The price for a barrel of Brent crude, the international standard, rose another 2.6% to $85.43. Following its leap of nearly 10% on Monday, it's back to where it was before the United States and Iran signed their interim deal to halt their fighting in the middle of last month.
Wall Street’s other big focus this week is the start of earnings reporting season, as companies tell investors how much profit they made from April through June.
The pressure is on companies to deliver big growth to justify how high their stock prices have jumped. Indexes are near records despite the recent swings caused by worries about AI stocks.
Bank of America, Citigroup, JPMorgan Chase, Goldman Sachs and Wells Fargo all on Tuesday reported fatter profits for the latest quarter than analysts expected. Their reports showed strength for their trading desks and suggested spending by U.S. consumers remains resilient.
Their stocks rose following the results, including jumps of 8.1% for Goldman Sachs and 2.1% for Bank of America.
On the losing end of Wall Street was IBM, which was the single heaviest weight on the S&P 500. It dropped 24.8% after CEO Arvind Krishna said performance for its software and infrastructure businesses fell short of expectations last quarter.
IBM’s customers in late June shifted their spending toward servers, storage and memory to get ahead of expected price increases caused by the AI boom.
“These conditions require our teams to execute perfectly, and this quarter we faltered,” Krishna wrote in a letter to investors. “We did not adapt and move quickly enough, and numerous large deals failed to close on the timelines we expected, driving the majority of our shortfall.”
In the bond market, the yield on the 10-year Treasury dropped to 4.57% from 4.62% late Monday. It halts a run higher from 3.97% before the war with Iran began.
Fed Chair Kevin Warsh will answer questions from lawmakers on Capitol Hill later in the day for the first time since taking over leadership of the central bank. In his prepared testimony, he pledged to make high inflation “a thing of the past” but offered no signal about the Fed’s next steps.
Besides the Fed's upcoming meeting on interest rates, July is full of potential flashpoints that could shake the stock market and potentially knock it lower before rising again by the end of the year, according to Thomas Carroll, strategist at Stifely Nicolaus. That includes Middle East tensions, earnings reports from the biggest U.S. stocks and volatile jobs data.
In stock markets abroad, indexes were mixed in Europe following a stronger finish in Asia.
Japan’s Nikkei 225 added 0.7% after SoftBank Group Corp. rose 3.3%. It’s a big investor in AI, and Chairman Masayoshi Son gave a speech at a company event in Tokyo where he derided the idea that there is a bubble in investments in capacity for AI.
Stocks rose 1.4% in Shanghai after the government reported China’s exports jumped 27% in June from a year earlier as AI drove strong demand for computer chips and other technology.
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AP Business Writer Elaine Kurtenbach contributed to this report.
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