Major US stock indices closed higher on Wednesday following a report showing the key June Producer Price Index (PPI) inflation measure cooled more than anticipated. Federal Reserve Chair Jerome Powell, testifying before a Senate committee, repeatedly expressed dissatisfaction with inflation, stating, "Recent inflation data does not perfectly reflect underlying inflation conditions. The labor market looks quite good, but inflation is less favorable. I am not satisfied with any inflation measure. We will review our tools, including the balance sheet and interest rates, to see if adjustments are needed to address inflation." The Fed's Beige Book indicated that from late May through June, economic activity increased slightly to modestly in 11 of the 12 Federal Reserve Districts, with the overall pace of growth roughly similar to the prior period.
In the stock market, the Dow Jones Industrial Average rose 150.37 points, or 0.29%, to close at 52,658.64. The Nasdaq Composite gained 162.22 points, or 0.62%, finishing at 26,269.23. The S&P 500 increased by 28.81 points, or 0.38%, to settle at 7,572.40. The Philadelphia Semiconductor Index fell over 2%. Apple (AAPL.US) shares surged 4%, while ASML Holding NV (ASML.US) gained 2%. SK Hynix (SKHY.US) dropped 9%, SanDisk (SNDK.US) declined 8%, and Intel (INTC.US) fell 4.4%. The Nasdaq Golden Dragon China Index closed 2.9% higher, with Alibaba (BABA.US) up 4.7% and Baidu (BIDU.US) rising 1.5%.
European Market Performance
The German DAX 30 index fell 135.16 points, or 0.54%, to 25,009.22. The UK's FTSE 100 dropped 15.76 points, or 0.15%, to 10,513.63. France's CAC 40 rose 15.58 points, or 0.19%, to 8,382.43. The Euro Stoxx 50 declined 14.44 points, or 0.23%, to 6,265.75. Spain's IBEX 35 fell 81.81 points, or 0.42%, to 19,274.79. Italy's FTSE MIB dropped 437.00 points, or 0.83%, to 52,425.50.
Asian Market Movements
Japan's Nikkei 225 index rose 1.49%, while South Korea's KOSPI index gained 6.24%.
Currency and Commodity Markets
The US Dollar Index, which measures the greenback against a basket of six major currencies, fell 0.43% to settle at 100.488. By the end of New York trading, 1 euro bought $1.1466, up from $1.1423. 1 pound sterling traded at $1.3536, up from $1.3382. 1 dollar fetched 162.05 Japanese yen, down from 162.20. 1 dollar traded for 0.8047 Swiss francs, down from 0.8092, and for 1.4043 Canadian dollars, down from 1.4067. 1 dollar was worth 9.5898 Swedish krona, down from 9.6586.
In cryptocurrencies, Bitcoin briefly surpassed $65,000 before trading slightly down 0.09% at $64,804.57. Ethereum rose over 2% to $1,920.29.
August delivery West Texas Intermediate crude oil futures gained 26 cents, or 0.33%, to settle at $79.60 per barrel. September delivery Brent crude futures rose 22 cents, or 0.26%, to close at $84.95 per barrel.
Spot gold edged higher to $4,059.96 per ounce, while spot silver traded at $57.783.
Key Economic Developments
Fed Chair Powell, speaking at the "Federal Reserve Semi-Annual Monetary Policy Report" hearing, stated that recent inflation data does not fully reflect underlying pressures. He noted that any central bank is pleased when data moves in the right direction, and one-off price changes do not necessarily lead to inflation. Regarding the impact of artificial intelligence, he suggested that AI investments are likely beneficial for employment in the short term and will bring disruptive changes. AI investment could be very positive for jobs as the US builds out infrastructure. Powell mentioned he is seeking access to a range of new AI models and currently sees AI's impact on demand arriving faster than its impact on supply.
The core PPI for June, which excludes food and energy, rose 4.7% year-over-year and 0.2% month-over-month, weaker than expected. The headline PPI growth slowed, with a year-over-year increase of 5.5%. The report noted that falling energy costs last month helped ease inflationary pressures. This may provide the Fed with more room to delay interest rate hikes, especially after another report on Tuesday showed June CPI was also more moderate than expected. However, this respite may not last long as Middle East conflicts have escalated again. The report showed energy prices fell 6.4% in June, and transportation and warehousing prices also declined. Nonetheless, freight rates remain elevated due to rising fuel costs and a driver shortage linked to tighter immigration policies. Meanwhile, food prices fell for the first time in three months, having generally risen this year due to factors including adverse weather, war, and tariffs.
The Fed's Beige Book indicated overall US price levels increased at a modest pace. Nine of the twelve Districts reported moderate price increases, two reported stronger increases, and one reported a smaller increase, with the overall pace of increase unchanged or slower than the prior period. The report stated that rising energy, transportation, and raw material costs pushed up business input costs, with some firms attributing pressure to Middle East conflicts and tariff impacts. Consumer prices continued to rise, squeezing profit margins for some businesses. Views on future inflation trends were mixed, with some expecting inflation to remain at current levels and others believing falling fuel prices could ease pressure.
Fed Governor Cook stated on Wednesday that it is prudent to wait a while for inflation to slow, but she is prepared to act if it does not slow soon. Cook noted, "I believe we should allow more time from now on to observe how inflation develops. However, I still believe risks remain skewed toward higher inflation, due to the investment boom in AI, tariffs, and price pressures from the war in Iran. If we do not see signs of inflation slowing soon, I am prepared to act. I am fully committed to achieving our inflation target; this commitment is unwavering." Cook contrasted the current situation with that of a year ago, when inflation was far above the Fed's 2% target and the job market seemed stable but faced risks of slowing. "I note a significant shift in the balance of risks compared to about a year ago, with inflation risks now outweighing employment risks," she said.
Fed President Williams stated that inflation remains too high, and the Fed must ensure it sustainably returns to the 2% target, with current monetary policy stance being appropriate. However, he sees encouraging signs that inflation may have peaked and expects it to gradually decline over coming quarters: to 3.25% by year-end, then moving toward the 2% target, ultimately reaching it in 2028. Williams forecasts real GDP growth to remain between 2.0% and 2.25% this year and the next two years. He expects the unemployment rate to dip slightly to around 4.0%, noting the labor market has shown resilience and stability.
President Trump stated that one of the biggest future drivers of jobs is data centers, calling them large, powerful, and "money machines" for their states. For political reasons, New York Governor Kathy Hochul halted all data center construction or planning in the state. These companies are now seeking locations in Alabama, Florida, Texas, Arizona, and many other states. Tax revenue and job opportunities are like liquid gold! New York made a bad decision. All this revenue and other benefits will flow to red states and some blue states seeking data centers as cash cows, where taxes are lower and record jobs are created. New York should immediately change its policy.
The Bank of Canada held its policy rate at 2.25% for a sixth consecutive meeting, matching market expectations. Policymakers see the Canadian economy recovering while oil-driven inflationary pressures are receding. The central bank stated in its Monetary Policy Report, "After a year of weakness, the Canadian economy is showing signs of improvement. Growth is expected to pick up, and inflation is expected to gradually decline from recent highs. But uncertainty remains high." The BoC said in its rate statement that current borrowing costs remain appropriate to support the recovery and return inflation to the 2% target. "Governing Council will continue to assess the resilience of the Canadian economy and the inflation outlook, and stands ready to adjust monetary policy as needed." The BoC expects growth, at an annualized rate, to reach 2.5% in Q2 and 1.5% in Q3. Due to weak growth early in the year, officials previously significantly lowered the 2026 growth forecast to 0.7%, but raised forecasts for 2027 and 2028 to 1.8% each. The BoC expects overall inflation to average 2.5% in 2026, higher than the previous 2.3% forecast, and expects it to return to the 2% target by early next year.
Germany's sovereign wealth fund, Kenfo, plans to increase its allocation to private markets from 25% to 30% over the next two years, while reducing exposure to private equity. According to its annual report, Kenfo expects to expand its real estate and infrastructure portfolios to meet its target allocation. "We still see attractive returns in these markets," said Verena Kempe, Head of Investment Management at Kenfo. She cautioned that a more cautious strategy is needed going forward as private equity has underperformed in recent years. Some investors have reduced private equity investments due to rising interest rates and challenges from AI to software investments. Kenfo also adjusted its stance on US Treasuries. The fund reduced its US Treasury holdings from 600 million euros a year ago to about 200 million euros by the end of 2025, then added over 500 million euros by the end of June. Kenfo CEO Anja Mikus stated, "We have no plans to stop investing in Treasuries, as they remain a very important part of the government bond market. Current yields can be as high as 2.8%, exceeding yields on many other sovereign bonds. We are pursuing a flexible strategy."
Individual Stock Updates
According to reports, ASML Holding NV (ASML.US) plans to raise prices for its chipmaking equipment, a move that could put it at odds with its largest customer, Taiwan Semiconductor Manufacturing (TSM.US), which has reportedly begun opposing the plan. ASML's advanced EUV equipment is essential for chipmakers to produce advanced semiconductors, with AI driving a surge in demand. ASML CFO Roger Dassen mentioned on the company's earnings call that a price adjustment for its less advanced equipment—low-numerical aperture EUV—is possible. He said, "We continue to improve the production efficiency of low-NA EUV, which naturally provides us with quite strong headroom for potential future price increases." However, he added that any price changes would not have a pricing impact "tomorrow" due to long order cycles.
Analyst Ming-Chi Kuo stated that Apple's (AAPL.US) recent stock performance aligns with his previous expectations. Prior to WWDC26, he was optimistic about Apple's stock performance in the second half of 2026, believing that as long as Apple's long-term growth logic remains unchanged, short-term news changes would not alter the stock trend. He noted that Apple's stock previously pulled back due to profit-taking after WWDC26 and news of product price increases but still hit new intraday highs during recent market volatility, validating his earlier judgment on the stock's trajectory.
On Wednesday, SpaceX (SPCX.US) shares fell below their IPO price of $135 for the first time since going public, just over a month after the company sparked an investment frenzy, set a record for the largest IPO ever, and briefly made Elon Musk the world's first trillionaire. SpaceX shares had reached an all-time high of $225.64—a peak that momentarily pushed the company's market value above tech giants Microsoft and Amazon. This decline marks the first time investors who bought at the IPO price are facing a paper loss, potentially testing market confidence in the stock. It also serves as a reminder that Wall Street's enthusiasm can cool quickly, even for a company as large as SpaceX, which raised about $85.7 billion and reached a valuation of approximately $2.1 trillion at the end of its first trading day.
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