Cooling US Inflation Boosts Nasdaq; IBM Plunge Weighs on Dow
A sharper-than-expected drop in US inflation and strong bank earnings pushed the Nasdaq higher, though a profit warning from IBM dragged the Dow into negative territory and signalled a potential shift in enterprise IT spending toward AI hardware.
As of midday on July 14, US equity indices diverged sharply. The Nasdaq Composite climbed 0.81% to 26,083.42 and the S&P 500 gained 0.26% to 7,535.12. Conversely, the Dow Jones Industrial Average sank 0.19% to 52,401.14, dragged lower by a sudden reversal in a major blue-chip technology stock.
The broader market strength stemmed from a highly favourable June inflation report. US consumer prices rose 3.5% annually, while the Consumer Price Index contracted by 0.4% month-over-month. A 9.7% drop in gasoline prices served as the primary catalyst for the monthly deflation.
The cooler inflation data immediately pushed bond yields lower. This easing in financial conditions is significant for monetary policy, as it affords new Federal Reserve chairman Kevin Warsh substantial room to avoid or delay raising interest rates in the near term.
Lower rates and a stable macroeconomic outlook provided a tailwind for the financial sector, which is highly sensitive to borrowing costs. JPMorgan Chase and Goldman Sachs both saw their shares surge as they kicked off the second-quarter earnings season with predominantly positive results.
The same optimistic environment failed to rescue the Dow, which suffered almost entirely from a steep selloff in IBM. The company issued a stark Q2 pre-announcement, warning investors that weakness in its software and infrastructure businesses had materially hurt its upcoming results.
IBM CEO Arvind Krishna provided specific context for the shortfall, stating that customers are "diverting investments to hardware, including servers, storage, and memory." This admission forces investors to reset expectations for IBM's near-term stock performance.
More importantly, IBM's warning serves as tangible evidence that capital is actively rotating into the physical supply chain supporting artificial intelligence. This structural shift helps explain the Nasdaq's outperformance. Hardware-adjacent names like Tower Semiconductor and CleanSpark both rallied on upbeat company-specific news, reinforcing the narrative that chip and other hardware makers utilized in the AI build-out likely have more room to run.
