The S&P 500 rose on Tuesday after June inflation data came in weaker than expected, though the index's gain was kept in check as traders assessed rising oil prices and a slew of corporate earnings releases.
The broad market index was up 0.2%, while the Nasdaq Composite advanced 0.5%. The Dow Jones Industrial Average fell 88 points, or 0.2%.
The consumer price index in June fell 0.4% on the month, bringing the annual inflation rate to 3.5%. Economists polled by Dow Jones had called for a 0.2% decline last month and expected the inflation rate to come in at 3.8%.
With easing inflation, expectations that the Federal Reserve would hike interest rates this year reduced following the release. Odds that the central bank would hike rates at its July meeting dropped to 17% from 42% the day prior, per the CME's FedWatch Tool. However, traders are still expecting a hike at the meeting in September, seeing a 63% chance that the target rate will be a quarter or half point higher.
Treasury yields were well off their lows of the day as investors turned their attention back to oil and the upcoming comments from Fed Chairman Kevin Warsh.
"Tuesday's weaker-than-expected CPI print suggests the inflation surge driven by the Iran war is fading, but this may just be a temporary relief as tensions have escalated in recent days," said Skyler Weinand, chief investment officer at Regan Capital. "The weaker inflation data likely keeps the Fed on hold for now and reduces any rate hike odds, but we remind investors that almost every communication that has emanated from Chair Warsh during his short tenure so far has been hawkish."
"Warsh is looking to get consumer prices under control and the best tool the Fed currently has is raising interest rates," he added.
Semiconductor stocks offered a boost to equity futures, as they rebounded after a sell-off in the previous session. The VanEck Semiconductor ETF (SMH) traded more than 3% higher. Applied Materials gained more than 6%, and Teradyne popped 7%, while Lam Research and Micron Technology rose more than 5% apiece. STMicroelectronics added more than 4%.
However, gains were muted as U.S. crude topped $80 per barrel, while international benchmark Brent crude futures added 4% to above $86 a barrel. This comes after President Donald Trump on Monday said he would reinstate a blockade on Iranian shipping through the key Strait of Hormuz.
"We are reinstating the THE IRANIAN BLOCKADE, so named because it is only stopping Iran's ships or customers from entering or leaving," Trump said in a post on Truth Social.
The announcement sent oil prices surging and stocks sliding on Monday. Brent crude soared more than 9% for its biggest one-day gain since 2020.
Gains were also kept in check by a 22% drop in shares of International Business Machines after the company warned second-quarter profits will be lower than expected due to soft demand in its software and infrastructure businesses.
