Wall St rises on cooler inflation data, big bank earnings

By Ragini Mathur and Avinash P

July 14 (Reuters) – Wall Street’s main indexes rose on Tuesday after softer-than-expected inflation data fueled hopes the Federal Reserve could adopt a less hawkish stance on interest rates, while upbeat second-quarter results lifted most of the big bank stocks.

The data showed that the consumer price index rose 3.5% in June from a year earlier, below Reuters-polled economists’ forecast of 3.8%.

Following the report, traders sharply pared back expectations for near-term policy tightening, with a 15% chance of a quarter-point rate increase at the Fed’s upcoming meeting, down from 35% before the data.

“It suggests the inflation surge driven by the Iran war is fading, but this may just be a temporary relief as tensions have escalated in recent days,” said Skyler Weinand, chief investment officer at Regan Capital.

“The weaker inflation data likely keeps the Fed on hold for now and reduces any rate hike odds, but we remind investors that almost every communication that has emanated from Chair Warsh during his short tenure so far has been hawkish.”

In prepared testimony for the first of two congressional hearings this week, Federal Reserve Chairman Kevin Warsh reiterated that restoring inflation to the Fed’s 2% target remains his top priority.

EARNINGS IN FOCUS

IBM shares tumbled nearly 24% after the software and consulting firm forecast preliminary second-quarter revenue below estimates. A fall of more than 22.9% at the close would mark the stock‘s biggest one-day drop since the “Black Monday” crash of 1987.

Shares of some other software companies also fell, tracing declines in IBM. Oracle dropped 1.7% and Service Now fell 5.6%. Accenture declined 2.8%.

Big bank results kick-started the second-quarter earnings season on Wall Street.

Goldman Sachs gained 6.5% after it exceeded second-quarter profit expectations, as dealmaking picked up pace and market volatility due to the Middle East war boosted the equities business to a record.

JPMorgan Chase and Citigroup added 1.8% and 1.5%, respectively, after reporting higher second-quarter profit.

Bank of America gained 1.4% after beating estimates for second-quarter profit, while Wells Fargo eased 0.3%.

The S&P 500 financial sector was up 0.3%. Nine of the 11 sectors were trading higher on the S&P 500.

Investors scrutinized the results for early signals on the health of corporate America and the earnings season could prove pivotal for this year’s equity rally, which has lifted the benchmark index by 10%.

At 9:52 a.m. ET, the Dow Jones Industrial Average rose 76.77 points, or 0.16%, to 52,580.94, the S&P 500 gained 23.46 points, or 0.32%, to 7,539.07 and the Nasdaq Composite gained 155.24 points, or 0.60%, to 26,028.42.

Nasdaq recovered after the tech-heavy index fell 1.6% on Monday.

Chip stocks steadied after sharp losses in the previous session, with the Philadelphia SE Semiconductor index adding 3.1%.

Geopolitical tensions were also on investors’ radar after the U.S. and Iran exchanged attacks in the Gulf and lifted oil futures to their highest level in four weeks.

Advancing issues outnumbered decliners by a 2.31-to-1 ratio on the NYSE and by a 1.61-to-1 ratio on the Nasdaq.

(Reporting by Ragini Mathur and Avinash P in Bengaluru; Editing by Mrigank Dhaniwala and Maju Samuel)