U.S. stocks traded higher Tuesday after a cooler-than-expected June inflation report bolstered hopes the Federal Reserve can keep interest rates unchanged in the near term, though gains were tempered by a sharp drop in IBM shares and another jump in oil prices, CNBC reports.
The S&P 500 was up about 0.4% in afternoon trading, while the Nasdaq Composite gained roughly 0.8%. The Dow Jones Industrial Average added more than 100 points, lifted by an 8% surge in Goldman Sachs after the bank reported stronger-than-expected quarterly earnings.
The Labor Department said the Consumer Price Index fell 0.4% in June, lowering the annual inflation rate to 3.5%. Economists had expected a smaller monthly decline of 0.2% and an annual rate of 3.8%.
The softer inflation reading prompted traders to scale back expectations for another interest-rate increase this month.
CME FedWatch data showed the probability of a July rate hike fell to about 17%, down from roughly 42% a day earlier, although markets still see a better-than-even chance of a rate increase at the Fed's September meeting.
"The weaker-than-expected CPI report suggests the inflation pressures tied to the Iran conflict are easing," Skyler Weinand, chief investment officer at Regan Capital, said in a note.
Weinand cautioned, however, that renewed geopolitical tensions and recent comments from Federal Reserve Chairman Kevin Warsh suggest policymakers remain focused on keeping inflation under control.
Chipmakers rebounded after Monday's selloff, helping support the broader market. The VanEck Semiconductor ETF climbed nearly 2%, while Applied Materials, Lam Research, Teradyne, Micron Technology and STMicroelectronics all posted solid gains.
Those advances were partly offset by a sharp rise in energy prices. U.S. crude oil climbed above $80 a barrel, while Brent crude topped $85 after President Donald Trump said Monday he would reinstate a blockade on Iranian shipping through the Strait of Hormuz.
IBM also weighed on the market. Shares of the technology company plunged about 24% after it warned second-quarter profit would fall short of expectations because of weaker demand for its software and infrastructure businesses.