U.S. equities closed higher on Wednesday, with the Dow Jones Industrial Average adding 150 points, as a softer-than-expected producer inflation report and a strong start to second-quarter earnings season buoyed market sentiment. The gains were led by large-cap technology stocks, even as semiconductor shares extended recent losses.
The Dow rose 0.29% to 52,658.52, while the S&P 500 advanced 0.38% to 7,572.42. The Nasdaq Composite climbed 0.62% to finish at 26,269.23, driven by a rotation out of chipmakers and into mega-cap tech names.
Big Tech Rallies as Semiconductors Retreat
Investors shifted focus from semiconductor stocks to large-cap technology companies, pushing shares of Amazon, Microsoft, and Alphabet up roughly 3% each, while Apple gained 4%. In contrast, chipmakers faced pressure: Micron Technology dropped 7%, Lam Research fell more than 4%, Intel lost 5%, and Advanced Micro Devices declined 3%. The VanEck Semiconductor ETF (SMH) also slid 2%.
Outside tech, strong corporate earnings supported the broader market. BlackRock and Morgan Stanley both reported quarterly profits that exceeded Wall Street expectations, reinforcing optimism about the early stages of the earnings season. PayPal surged after Reuters reported that Stripe and private equity firm Advent International had jointly offered to acquire the payments company for $60.50 per share, a significant premium to its previous close.
Analysts currently expect S&P 500 companies to deliver year-over-year earnings growth of 23.7% for the second quarter, according to LSEG data.
Softer Inflation Eases Near-Term Fed Concerns
Investor sentiment was further bolstered by fresh evidence that inflation continues to moderate. The Producer Price Index unexpectedly declined 0.3% in June, compared with economists' expectations for no monthly change. The report followed Tuesday's cooler-than-expected Consumer Price Index reading, strengthening expectations that inflationary pressures may be easing. The annual producer inflation rate stood at 5.5%.
The latest inflation data reduced expectations that the Federal Reserve will raise interest rates at its July meeting. According to CME's FedWatch Tool, markets now assign roughly a 10% probability of a 25-basis-point rate increase this month, down sharply from 31% a week earlier. Despite the improved inflation outlook, investors continue to expect the Fed could raise rates later this year; futures markets indicate about a 60% probability that interest rates will be a quarter- or half-percentage point higher by the conclusion of the October meeting.
New York Federal Reserve President John Williams said inflation appears to be moving in the right direction, while Fed Governor Lisa Cook indicated she remains prepared to act if inflation fails to slow further.
Geopolitical Risks Remain in Focus
While inflation data supported equities, investors continued to monitor escalating tensions in the Middle East. The latest inflation readings largely reflected conditions before the recent escalation between the United States and Iran over the Strait of Hormuz. Renewed military action has raised concerns that higher energy prices could eventually revive inflationary pressures and complicate the Federal Reserve's policy outlook.
Even so, Wednesday's combination of softer producer inflation, solid corporate earnings, and strength in large-cap technology stocks helped push all three major U.S. indexes higher despite continued weakness across semiconductor shares. For further context, the drop in producer prices was largely driven by a plunge in energy costs, which provided a temporary reprieve for markets.
This article is for informational purposes only and does not constitute financial advice.
