On July 14th in New York, the second-quarter earnings season for U.S. stocks commenced, with five major Wall Street financial giants reporting explosive profit growth. This, coupled with the latest inflation data cooling more than anticipated, drove the Nasdaq Composite and S&P 500 indices to close up by 0.9% and 0.4%, respectively. However, dragged down by a 25% plunge in tech giant IBM following an earnings warning, the Dow Jones Industrial Average ended the day largely flat.
Wall Street's Big Five See 39% Profit Surge as Investment Banking Rebounds
Fueled by a vibrant market for initial public offerings (IPOs) and the fervor for artificial intelligence (AI) investments, the combined profits of five major U.S. financial institutions, including JPMorgan Chase and Goldman Sachs, surpassed $49 billion in the second quarter, representing a significant 39% year-over-year increase.
Data indicates that amid a general rise in market risk appetite and propelled by multiple positive factors, including the historic IPO of SpaceX, revenues from Wall Street investment banking, trading, and advisory businesses climbed substantially. Among them, Goldman Sachs Group saw its stock price surge more than 9% after reporting record quarterly profits, while Citigroup Inc. closed down 5% against the market trend due to expectations of higher future operating expenses.
US June CPI Rises 3.5% Annually, Market Broadly Lowers Bets on Fed Rate Hikes This Year
Data released by the U.S. Bureau of Labor Statistics on the same day showed that the Consumer Price Index (CPI) for June increased by 3.5% year-over-year, while on a monthly basis, it fell significantly by 0.4% from the previous month, a performance notably lower than the market's general expectation of 3.8%. Analysis pointed out that a sharp drop in gasoline prices during the month was the primary driver behind the inflation cooldown exceeding forecasts.
Following the data release, Treasury yields fluctuated lower, and market expectations for a near-term Federal Reserve interest rate hike underwent a sharp adjustment. Data from CME Group showed that traders' probability forecast for a Fed rate hike at this month's policy meeting plummeted from 42% the previous day to approximately 16%. Additionally, international oil prices gave back some of their recent gains after U.S. President Trump indicated plans to delay implementing a 20% fee on all cargo transiting the Strait of Hormuz.
Fed Chair Warsh Reiterates Inflation Fight Commitment, Warns 'Job Not Done'
Addressing the inflation report that showed a more significant-than-expected decline, the new Federal Reserve Chair, Kevin Warsh, offered a measured perspective during questioning by lawmakers in Congress.
Warsh welcomed the steady decline in the inflation rate but explicitly cautioned against "cherry-picking" from the inflation data, emphasizing that this by no means indicates the Fed has "already won the battle" against high prices. He reiterated a commitment to maintaining price stability and explained to lawmakers that his ideal price stability refers to an inflation level where "ordinary families and businesses do not have to factor it into their decision-making."
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