A cooler-than-expected June CPI print reset Fed hawkishness and carried the S&P 500 and Nasdaq to fresh highs, even as an IBM blow-up pinned the Dow flat.
June inflation cooled to 3.5% year over year against a 3.8% consensus, and the tape took it as a green light. The S&P 500 added 0.38% to 7,543, the Nasdaq Composite gained 0.9% to 26,107 on a semiconductor bid, and small caps firmed as rate-hike odds bled out of the curve. The Dow was the outlier, essentially flat at 52,508 after IBM cratered roughly 25% on a Q2 profit warning that dragged the price-weighted index single-handedly.
Energy was the standout, with XLE up 3.2% as Iran-Hormuz tensions kept crude bid and offered a hedge against the risk-on move elsewhere. Bank earnings were a wash: JPMorgan beat on EPS and revenue but sold off 2.5% as investors faded the print. Breadth leaned green, and the CPI relief points to dealers lengthening into positive gamma, a setup that typically pins realized vol lower into the back half of the week.
The risk: a Hormuz escalation that spikes oil undoes the disinflation narrative overnight, and any hawkish surprise from continued Fed testimony or the next slate of bank earnings would give dealers a reason to sell the rip. Watch SPX 7,500 as the line separating trend from fade.