Wall Street Morning News: CPI cools, semiconductors rebound, banks’ earnings get off to a strong start, but IBM plunges 25%

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CPI shows negative growth for the first time in six years; inflation cools reigniting risk appetite, and the odds of a rate hike in July plunge

All three major US stock indexes closed higher across the board. The Dow Jones Industrial Average inched up 0.02%; the S&P 500 rose 0.38%; and the Nasdaq Composite climbed 0.90%. It’s not a broad-based bull market—this is a typical “rate-pressure easing + a concentrated rush into AI hardware.”

US June CPI became the ignition point for overnight trading. The data showed year-over-year CPI fell to 3.5%, below market expectations and down notably from May’s 4.2%; month-over-month CPI dropped 0.4%, the first monthly negative growth in six years, with a sharp decline in gasoline prices as the core drag. Core CPI stayed at 0.2% month-over-month, meaning services inflation hasn’t fully surrendered, but it’s enough for traders to cut July rate-hike bets first.

CME FedWatch showed that after the CPI was released, the probability the Fed would keep rates unchanged in July jumped from 58.3% the prior day to 83.4%, while the probability of a July rate hike fell from about 42% to about 17%. Chuck Carlson, CEO of Horizon Investment Services, said the inflation report “weakened the rationale for Fed rate hikes,” giving the Fed “cover to stand pat for now.”

But Fed Chair Kevin Wosch didn’t hand investors a dovish gift. In his congressional hearing debut, he emphasized that the cooling of June CPI doesn’t mean the job is done. The Fed has “zero tolerance” for high inflation, will still act based on data, and reiterated that the Fed’s independence is “sacred and inviolable.” Christopher Hodge, chief US economist at Natixis, believes the CPI at least helped avoid a situation where Wosch would be forced to raise rates immediately. Brian Therien of Edward Jones noted that Wosch strengthened anti-inflation credibility without committing to a specific path.

VIX falls back into the low-risk zone; Middle East situation keeps escalating, oil prices trade in a high-range

The VIX volatility index (commonly called the “fear index”), which measures market volatility expectations over the next 30 days, continues to ease. On July 14 it closed at 16.50, down 3.85%, returning to the low-risk zone near 16. Being around 16 means short-term market panic has clearly ebbed, but it doesn’t mean risks are gone—it’s more like traders temporarily pulling back hedges rather than war, oil-price risk, and interest-rate risk being truly reset to zero.

Although Trump suddenly withdrew the plan to impose a 20% transit fee on the Strait of Hormuz, saying instead it would replace the fee mechanism with a trade and investment agreement with Gulf countries, easing global concerns about energy shipping in the short term, the Middle East situation has not actually cooled.

This easing tempers extreme expectations for shipping costs and energy-driven inflation. But on the same day, the US resumed a naval blockade of Iranian ports and coastal areas and launched a new round of airstrikes. Iran was also reportedly retaliating against US forces’ bases in the Gulf and tanker targets, and the Hormuz risk premium has not disappeared.

Oil therefore surged and then pulled back but still closed higher. WTI and Brent crude traded in a range around $80 and $85, respectively. A Goldman strategy view reminds that the real inflation signal may not lie in crude oil itself, but in the tightness of distillate fuel and refined products. As long as shipping volumes are constrained—rather than the Strait being completely shut—energy prices can be pushed higher again.

ClearView Energy Partners estimates that if the 20% Hormuz charge truly takes effect, assuming a $78 oil price per barrel, it could raise US gasoline costs by about 37 cents per gallon. This is also the practical reason Trump quickly retreated from the fee plan: energy-inflation and cost-of-living pressure ahead of midterm elections are political hotspots in the White House that it’s unwilling to touch.

Gold chops around; US Treasury yields fall; overseas US Treasury holdings in May rise to the second-highest on record

As inflation cools, US Treasury yields end their prior streak of continuous increases. The yield on the 10-year US Treasury note fell to 4.58%, further easing pressure on growth-stock valuations.

The US dollar index remains in a choppy range near the high end. The market is currently more focused on the upcoming Producer Price Index (PPI) and employment data over the next few weeks to confirm whether this inflation cooling trend is sustainable.

Gold is also trading in a range. On one hand, falling Treasury yields reduce the cost of holding gold; on the other, the escalation in the Middle East continues to provide safe-haven demand. The two forces offset each other, leaving gold broadly range-bound.

According to US Treasury data, in May overseas investors increased their holdings of US Treasuries by $18.5 billion to $9.37 trillion, the second-highest level in history. Canada added $38.7 billion, the UK added $11.1 billion, and mainland China added $8.2 billion; Japan, however, cut holdings by $66.8 billion. The market generally links this to currency-market intervention and capital allocation shifts. This data shows that in an environment with high interest rates and geopolitical conflicts, US Treasuries remain the core anchor for global reserve capital—but the behavior of major holders is diverging.

AI trading regains market leadership; chip stocks become the first stop for returning capital

After the sharp adjustment in the previous trading session, the AI sector rebounded strongly, and growth stocks returned to being the core destination for market inflows.

Last night, the key phrase in US stocks wasn’t “broad-based higher,” but rather structural aggression as risk appetite returned. Cooling CPI lowered discount-rate pressure, and big banks’ earnings again showed US corporate profits haven’t collapsed. Capital then moved from defensive positions back into AI hardware, storage, semiconductors, and optical interconnect.

Semiconductors were the strongest main storyline overnight. The Philadelphia Semiconductor Index surged 2.54%, and the semiconductor ETF rose about 2.51%. The market interpreted the cooling of inflation as easing technology valuation pressure, while continuing to bet on expanded AI server spending—HBM, high-end DRAM, and data-center capital expenditures.

The storage supply chain became the most intensely targeted segment on the board. Demand for high-bandwidth memory and high-end storage in AI servers is still rising, and the supply side cannot release quickly in the short term. In the long term, higher expected orders and price revisions together reinforce profit imagination. JPMorgan believes the tight storage supply landscape will persist and that there won’t be large-scale new capacity additions before early 2028.

The optical communications sector also rose in sync, reflecting capital shifting from GPUs and HBM toward internal data-center connectivity—silicon photonics, optical modules, and advanced packaging—spreading out.

Bank stocks played the role of stabilizing market confidence. Large banks’ Q2 earnings generally came in above expectations, with trading, investment banking, and wealth management as highlights, showing that even in a high-volatility market and during the AI financing cycle, Wall Street trading desks still have strong profitability. Tom Hainlin, US asset management strategist at Bank of America, said the market cares most about the health of consumers that banks see, and initial signals are largely positive.

But there are cracks on the tape too. Software and traditional IT services faced pressure. The reason is that corporate budgets are tilting toward AI servers, storage, memory, and data-center infrastructure—some traditional software orders are being delayed or squeezed out. Goldman warned that a shift in AI capital expenditures may solidify the “software bear market” scenario, meaning the AI boom isn’t spreading money evenly—it’s reshaping where profits pools in the tech industry flow.

Specific project actions and stock-price movements:

• SK Hynix ADR surged 27.29%, becoming the biggest winner overnight, setting the largest single-day gain since listing. The premium versus South Korean domestic shares at one point widened to over 50%. The catalyst mainly came from the official launch of SK Hynix ADR options on the US Options Exchange, combined with top research institutions SemiAnalysis continuing to firmly stay bullish on HBM high-bandwidth storage demand. Large amounts of capital concentrated into short-term options, with call options dominating trading activity. This shows the market has re-accelerated its bet that AI server demand will keep bursting.

• Micron Technology rose 4.92%: trading value ranked among the top in US stocks. It benefited from upward revisions in expectations for storage demand driven by HBM, DRAM, and AI servers. Institutions expect its profits to surge in fiscal years 2026 to 2027. JPMorgan believes supply tightness in the storage industry will at least continue until early 2028.

• SanDisk rose 5.01%: driven by optimism about the storage upcycle and large cloud computing orders. Goldman, Wedbush, Evercore ISI, and other institutions continue to be bullish on the sustainability of its earnings; some analysts say the market is underestimating its revenue and profit visibility over the coming years. AMD rose 2.57%, ASML rose more than 2%, and Applied Materials and Teradyne rose more than 3%.

• Nvidia rose 4.06%: Nvidia is considering partnering with Mitsubishi Heavy Industries, incorporating cooling-system and energy-management capabilities into the next-generation AI data-center “AI factory” ecosystem. The market interpreted this as Nvidia continuing to expand its position in the data-center ecosystem.

• Intel rose 4.50%: the company announced it will invest €5 billion in Ireland, upgrade European capacity, and install advanced manufacturing equipment to deliver Xeon 6 and the next-generation Xeon processors. This investment is about 30% of Intel’s $17 billion planned capital expenditures for 2026 and is seen as a European supply-chain move betting on AI and high-performance computing demand.

• IBM plunged 25.21%: it recorded the largest single-day drop in 115 years. Its preliminary results in Q2 came in below market expectations. The CEO admitted it failed to adapt in time as customers’ budgets tilted toward servers, storage, and memory, and several large deals did not complete by the expected timelines. Goldman believes this may validate the pressure of a “software bear market,” as AI infrastructure capital expenditures are squeezing traditional software service budgets.

• SpaceX fell 2.20%: down for three straight days, closing at $136.08, just one step away from the $135 IPO issue price. Since its post-listing high, it has cumulatively dropped about one-third. Its market cap has evaporated by nearly $93.7k. Mahoney Asset Management’s CEO said SpaceX hasn’t bottomed yet; the supply pressure from insider unlocks over the coming months needs close monitoring.

• Oracle fell 2.74%: the market is worried about its high debt level and the execution risk of its $300 billion data-center project tied to OpenAI. Investors are beginning to revisit the question of “who bears the capital expenditures and who gets the profits” as AI infrastructure expands.

• Apple fell 0.77%: the company is reportedly assessing PrismML’s model-compression technology for large models, aiming to run a 27 billion-parameter model locally on iPhones, paving the way for Siri upgrades and on-device AI capabilities. The news is somewhat positive for the medium to long term, but in the short run it couldn’t offset the split pressure among large tech stocks.

• Microsoft fell 1.55%: with AI hardware staying strong, software-platform-type giants faced pressure. Some capital rotated away from AI application layers toward hardware segments such as storage, chips, and optical communications.

• Optical communications sector surged: AXT Inc rose more than 12%, Applied Optoelectronics rose nearly 7%, Lumentum rose more than 5%, POET Technology rose more than 4%, Ciena rose more than 3%, and Corning and Broadcom rose more than 2%. Tower Semiconductor announced it would advance 300mm silicon photonics and silicon-germanium process and advanced packaging capacity upgrades in Japan, strengthening market imagination for optical interconnect demand within AI data centers.

• Goldman Sachs rose 9.00%: best single-day performance this year. Q2 profit beat expectations; stock-trading revenue hit a quarterly record of $4.6 billion. Market volatility and the AI investment frenzy together boosted revenues from trading and investment banking.

• JPMorgan Chase rose 2.50%: Q2 net profit surged 41.2% year over year to $21.16 billion. Earnings per share were $7.70, far above the expected $5.59, setting the highest quarterly profit in US banking history. Stock market revenue jumped 86% year over year to $6.0 billion; investment banking revenue rose 45% to $3.9 billion. Full-year net interest income guidance was raised to $105.5 billion.

• Bank of America rose about 1.9%: earnings beat expectations. Stock-trading business set a quarterly record, and investment banking benefited from the M&A recovery. The market views this as a sign that activity from consumers and companies remains resilient.

• Citigroup fell 5.3%: Q2 net profit was $5.8 billion, up 45% year over year; revenue was $24.8 billion, up 14%; earnings per share were $3.15. Despite announcing a 12% increase in dividends and a $30 billion share repurchase plan, expense pressure outweighed profit highlights.

• Wells Fargo fell about 2.7%: even though earnings beat expectations, investors remained cautious about the quality of its income and the elasticity of future growth. Clear internal divergence appeared within the bank-stock complex.

• Lucid fell about 16%: it plunged more than 50% at one point. Rumors circulated that it was considering going private or filing for Chapter 11 bankruptcy protection. The company then denied the rumors, saying the relevant reports were “completely untrue,” and stated that liquidity is enough to support operations for a longer time into next year; the decline narrowed noticeably.

• Stride fell about 5.6%: Anthropic launched Claude for Teachers, aimed at US K-12 teachers, offering advanced AI features for free. The market worries it will impact the core business of education-technology companies.

• Berkshire Hathaway-related stocks drew attention: Buffett announced a plan to gradually dispose of the remaining Berkshire shares over the next 8 years. After converting some Class A shares to Class B, he will donate to charitable foundations. Total market value is slightly above $5.9 billion. This isn’t a traditional sell signal—it’s more like progress on long-term charitable arrangements and an inheritance plan.

Next to watch:

• July 15 20:30 US June PPI data: CPI has already opened a window for bulls, but PPI will determine whether the “inflation-cooling trade” can continue. If PPI also falls, Treasury yields and the dollar may continue to come under pressure, and tech stocks—especially AI hardware—are likely to stay strong. If PPI rebounds, the market will reprice energy shocks and corporate cost pressure, and the VIX may rebound from around 16.

• July 15 22:00 Wosch’s testimony to Congress and subsequent remarks by Fed officials: Wosch has made it clear that cooling CPI isn’t “mission accomplished.” The market will watch whether he further reinforces hawkish wording. If he continues to suppress rate-cut fantasies and keeps a rate-hike option for the rest of the year, rate-sensitive tech stocks may see volatility. If he acknowledges improving data, US stock bulls could get a more solid policy buffer.

• July 15: earnings releases from Johnson & Johnson, Morgan Stanley, BlackRock, and ASML.