U.S. stocks closed higher early Tuesday morning, Beijing time.
The Dow Jones Industrial Average rose 10.02 points, or 0.02%, to 52,508.66. The Nasdaq Composite climbed 233.83 points, or 0.90%, to 26,107.01. The S&P 500 gained 28.55 points, or 0.38%, to 7,543.89.
International Business Machines Corp (IBM) shares plunged after the company issued a profit warning, citing weaker-than-expected demand in its software and infrastructure segments for the second quarter.
Semiconductor stocks rebounded following a sell-off in the previous session. The VanEck Semiconductor ETF (SMH) advanced 2%. Shares of Applied Materials, Inc. and Teradyne, Inc. both gained more than 4%. Lam Research Corporation and Micron Technology, Inc. rose more than 5%. STMicroelectronics increased over 3%.
The Consumer Price Index (CPI) for June fell 0.4% month-over-month, bringing the annual inflation rate down to 3.5%. Economists surveyed by Dow Jones had anticipated a 0.2% decline for the prior month and an inflation rate of 3.8%.
The softer inflation data led to reduced market expectations for a Federal Reserve interest rate hike this year. According to the CME FedWatch Tool, the probability of a rate hike at the July meeting dropped from 42% to 17%. However, traders still anticipate a rate increase at the September meeting, with a 63% probability assigned to a 25 or 50 basis-point hike in the target rate.
"Tuesday's weaker-than-expected CPI data suggests the inflation spike triggered by the war in Iran is subsiding, but this could be a temporary respite as tensions have escalated in recent days," said Skyler Wenand, Chief Investment Officer at Regan Capital.
"The soft inflation figures might lead the Fed to hold off for now and reduce the likelihood of a rate hike, but we caution investors that nearly all messaging from Chairman Wash during his brief tenure has been hawkish," he added.
"Wash wants to get consumer prices under control, and the Fed's best tool for that right now is raising rates," he continued.
Federal Reserve Chairman Kevin Wash testified before Congress on Tuesday, stating that "the inflation surge of the past five years will become a thing of the past."
Oil prices retreated from their highs after U.S. President Trump abandoned his demand for a 20% fee for vessels passing through the critical Strait of Hormuz. U.S. crude futures, which had earlier surpassed $80 per barrel, were last up 1% to above $78. The international benchmark Brent crude futures also rose 1% to above $84.
This followed President Trump's announcement on Monday that he would reinstate a blockade on Iranian shipping through the strait.
Banking stocks were led higher by Goldman Sachs Group, Inc., whose shares surged 7% after the bank reported earnings that exceeded expectations. Major banks JPMorgan Chase & Co. and Bank of America Corporation also released their second-quarter results, with both gaining approximately 1%.
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