IBM falls as big banks and chip stocks move higher
IBM IBM.N shares tumbled nearly 25.8% after the software and consulting firm forecast preliminary second-quarter revenue below estimates. The move put the stock on track for a one-day drop worse than the 1987 "Black Monday" crash.
Big bank results kick started the second-quarter earnings season on Wall Street.
Goldman Sachs GS.N gained 7.3% 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 JPM.N added 1.9% after reporting higher second-quarter profit.
Bank of America BAC.N gained 2% after beating estimates for second-quarter profit.
On the other hand, Wells Fargo WFC.N and Citigroup C.N eased 2.3% and 4%, respectively, even after upbeat quarterly results.
The S&P 500 financial sector .SPSY was up 0.6%, while technology .SPLRCT led the gains with a 1.5% rise.
"A lot of people sold bank shares thinking things were going to reverse, that interest rates were going to rise and dampen profits. It's nowhere in sight," said Jamie Cox, managing partner at Harris Financial Group.
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 S&P 500 by about 10%. The benchmark was less than 1% below its record closing high from early June.
At 12:01 p.m. ET, the Dow Jones Industrial Average .DJI fell 105.25 points, or 0.20%, to 52,393.39, the S&P 500 .SPX gained 16.16 points, or 0.22%, to 7,531.50 and the Nasdaq Composite .IXIC gained 185.05 points, or 0.72%, to 26,058.23.
Nasdaq recovered after the tech-heavy index fell 1.6% on Monday.
Chip stocks steadied after sharp losses in the previous session, with heavyweight Nvidia NVDA.O adding 2.4%.
The Philadelphia SE Semiconductor index .SOX rose 3.4% after two straight sessions of losses.
Markets also found some relief after President Donald Trump backed away from a proposal to charge a 20% fee to guard the Strait of Hormuz, saying instead he would seek investment deals with Gulf states.
Advancing issues outnumbered decliners by a 1.86-to-1 ratio on the NYSE and by a 1.5-to-1 ratio on the Nasdaq.
Stocks rise on softer inflation data and bank earnings
The S&P 500 and the Nasdaq 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 nearly 15% chance of a quarter-point rate increase at the Fed's upcoming meeting, down from 35% before the data.
"After today's benign core inflation release, it appears less likely that the FOMC (Federal Open Market Committee) will raise rates over the next few meetings," said Jeffrey Roach, chief economist for LPL Financial.
"However, we may still be at an inflection point, given the risk that the energy shock could spill over into other categories of consumer prices."
Fed Chairman Kevin Warsh also drew attention during congressional testimony, where he vowed to "do my job" if challenged by President Donald Trump. The remark marked his most direct comment yet on how he would respond to potential political pressure on the central bank.
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