Written by: Trend Research

The U.S. June CPI rose 3.5% year-on-year, significantly lower than expected, and fell month-on-month for the first time in six years. The core CPI growth narrowed to 2.6%, leading to a sharp increase in market expectations for the probability of maintaining the interest rate unchanged in July from 58.3% to 83.4%. Walsh maintained a hawkish tone in his first congressional hearing, but mild inflation data alleviated market concerns about recent rate hikes. Large bank earnings season began strongly, with Goldman Sachs up over 9% and JPMorgan up 3.17%, but IBM plummeted 25%, marking the largest single-day drop in its history, becoming the biggest drag on the Dow. The S&P 500 rose 0.38%, the Dow was up only 0.02%, and the Nasdaq rose 0.90%. SK Hynix's U.S. ADR soared about 27%, and chip stocks strengthened across the board. Gold broke through $4,000, Bitcoin approached $65,000, hitting a three-week high, while oil prices fell back after a surge due to tensions in the Hormuz region, following comments from Trump.

Market Performance

The S&P 500 rose 0.38%, closing at 7543.59 points. The Dow rose 0.02%, closing at 52508.27 points, with IBM’s 25% plunge dragging the index down by about 425 points, partially offset by Goldman Sachs' contribution of about 550 points. The Nasdaq rose 0.90%, closing at 26107.008 points. The Nasdaq 100 rose 1.10%, closing at 29586.287 points. The Russell 2000 rose 0.39%, closing at 2964.764 points. The VIX fell 3.85%, closing at 16.50.

The earnings reports of large banks showed significant polarization. JPMorgan rose 3.17%, posting a record quarterly profit, with trading business performance exceeding market expectations, and its holdings in Visa contributed approximately $4.6 billion in earnings. Goldman Sachs performed even better, with its stock price surging over 9%, fueled by $4.6 billion in trading profits in the tumultuous second quarter. Bank of America also set a quarterly record in trading business, closing up 1.91%. Citigroup’s core business data was actually good, but cost pressures led to a decline of over 5% in its stock price. Wells Fargo’s earnings numbers were also solid, yet the market did not respond positively, with the stock price down 2.65%.

IBM, however, dampened the market, as its management cut its second-quarter revenue guidance and indicated it would allocate more funds to AI infrastructure, which was interpreted as a concern for the outlook of its traditional software business, leading to a 25% drop in stock price, a record single-day loss for the company. The entire SaaS sector was temporarily affected and fell sharply, but funds entered the market at lower prices, and the declines were mostly erased by the close.

The Seven Giants Index rose 0.97%. NVIDIA rose 4.06%, Google A was up 1.99%, Meta rose 0.66%, Tesla was up 0.36%, Amazon rose 0.07%, Apple fell 0.77%, and Microsoft was down 1.55%. The Philadelphia Semiconductor Index rose 2.54%, closing at 12661.93 points. TSMC ADR fell 0.21%, AMD rose 2.57%. SK Hynix ADR surged around 27%, Micron rose about 5%, and SanDisk rose 5%. In Goldman Sachs' AI-themed segments, AI semiconductors rose 3.19%, AI software infrastructure rose 3.24%, optical communication rose 2.92%, and agent-based AI rose 2.93%. Excluding AI components, the remaining part of the S&P 500 overall fell about 0.71%.

The semiconductor ETF rose 2.51%, with the technology sector ETF seeing the same increase, the banking sector ETF down 0.06%, and the global aviation and daily consumer goods ETFs down by as much as 1.38%, while the healthcare ETF fell 1.93%.

WTI crude oil rose 2.1%, closing at $79.79 per barrel. Brent crude oil returned above $80, reaching a one-month high. Spot gold broke through $4,000, briefly testing $4,100 during the day. Bitcoin surged from around $61,000 to nearly $65,000, peaking at $64,583.93, marking a three-week high.

The short-end U.S. Treasury reacted first, with the 2-year Treasury yield falling 8 basis points, the 10-year yield down 4 basis points to 4.58%, and the 30-year only down 2 basis points. The U.S. dollar index fell 0.4%.

Macro and Outlook

The day's market performance was almost entirely determined by one piece of data. The June CPI increased only 3.5% year-on-year, well below previous market concerns, and showed a negative value month-on-month for the first time in six years. Core inflation also narrowed to 2.6%. This result caused the rate hike anxiety that had previously overshadowed the market to dissipate by more than half in an instant, as institutions generally described this data as an unexpected downward surprise, believing that the likelihood of the Federal Reserve taking action in the near future has dramatically decreased.

However, this does not mean that the inflation risk is completely resolved. At least one more rate hike is priced in within this year, with the probability of a second rate hike still around fifty percent. The market has more of a breathing space rather than a signal that the inflation issue has been resolved.

Walsh's performance in the congressional hearing was quite thought-provoking. Despite the weaker CPI data that day, he did not take the opportunity to soften his stance, but instead continued to emphasize that controlling inflation is an active choice, reiterating that the 2% target will not waver. Analysts interpret this as him reinforcing the Federal Reserve's credibility in fighting inflation without providing any specific path commitments, while the gentle inflation data conveniently gave him the room to maneuver.

AI-related stocks showed a polarized performance that day. On one hand, SK Hynix’s U.S. ADR surged about 27%, and Micron also rose, with the tightness of the storage chain showing no signs of cooling; on the other hand, IBM fell sharply due to its lowered second-quarter revenue guidance and management's indication of allocating more capital to AI infrastructure, which was interpreted by the market as a signal of pressure on its traditional software business. The stock price evaporated a quarter in a single day. This contrast shows that current funds have a high preference for assets that can directly benefit from AI hardware demand; once a company is labeled as an "investor" rather than a "beneficiary," the sell-off can be swift and severe. Excluding AI-related stocks, the rest of the S&P 500 actually fell, indicating that the market breadth is not healthy.

During Asian trading, there were reports that Samsung was considering issuing ADRs in the U.S., prompting a surge in the Korean stock market; however, by the end of the day, Samsung denied the rumors, bringing a brief frenzy around the storage chip topic to an end, illustrating how swiftly capital reacts to any market signals related to storage.

The large banks' earnings season also displayed derisive differences. JPMorgan and Goldman Sachs capitalized on the severe fluctuations in the second-quarter market to achieve record high trading income, and their stock prices surged as a result; in contrast, Citigroup faced investor backlash despite solid core business data due to pressures on the expense side, while Wells Fargo faced a similar situation, with positive earnings not translating to stock price gains. This indicates that the market's evaluation criteria for bank stocks is no longer simply "whether it exceeded expectations"; instead, details regarding cost control and capital returns are receiving more attention.

The oil market displayed a classic geopolitical roller coaster. During the night, there were reports that U.S. military struck a strategic position of Iran near the Hormuz Strait, combined with reports of a tanker attack from the UAE direction, causing WTI to briefly spike above $80. However, Trump quickly issued a signal of de-escalation on his social media platform, indicating that he would substitute previously planned tariffs with trade and investment arrangements promised by Gulf states, leading to a retraction of most of the oil price increase. This back-and-forth also reminds the market that the previous assumption that the U.S. would not stand by while global energy supply was disrupted before the midterm elections is being repeatedly tested by reality, and any loosening of rhetoric in the future should not be taken lightly. Some analysts point out that, rather than the spot oil price itself, the tightening degree of the product oil market deserves closer attention, as heating oil futures have already reached a new high since the outbreak of the conflict.

Trend Perspective

The day's performance validated a clear logical chain: the cooling of inflation alleviated interest rate hike anxiety, and market risk appetite rebounded accordingly, but this rebound was highly concentrated in a few segments. The 27% surge in SK Hynix and the over 9% rise in Goldman Sachs represent two different certainties, one being the certainty of AI hardware demand and the other the certainty of trading business in a volatile market. Both types of assets benefit from uncertainty rather than an overall improvement in fundamentals.

IBM's plunge serves as a warning signal. It indicates that the market still harbors doubts about corporate capital expenditures shifting towards AI infrastructure; once this shift affects the cash flow visibility of traditional business, investors' reactions will be very severe. This contrasts sharply with SK Hynix's surge, both involved in the AI narrative, one identified as a beneficiary and the other potentially identified as a resource misallocator.

There are two key variables that need monitoring. One is whether Walsh can sustain market confidence in the Federal Reserve's anti-inflation capability without specific commitments. The second is the real trajectory of the Hormuz situation; Trump’s actions of replacing tariffs with trade agreements indicate that there is still considerable political maneuvering space regarding geopolitical risks, and short-term oil price direction may continue to be driven by political rhetoric, with supply and demand fundamentals becoming secondary factors.

The earnings season has just begun, and more technology and consumer companies will release results in the coming weeks. Whether the market breadth can shift from the current extreme concentration to a more balanced broad rise will directly determine how far this rebound can reach.