A second straight cool inflation reading and a wave of upbeat bank earnings pushed the Dow and small caps higher by midday Wednesday, even as a selloff across memory-chip and hardware stocks dragged the Nasdaq 100 into the red.
Headline producer prices dropped 0.3% in June versus expectations for no change, with the annual rate cooling to 5.5% from 6.2%, while core PPI rose a smaller-than-expected 0.2%.
The print echoed Tuesday's soft CPI report and further trimmed the risk that the Federal Reserve raises rates at its upcoming meeting.
Treasury yields drifted lower after the PPI data. The 10-year yield fell about 3 basis points to 4.56%, while the more policy-sensitive 2-year yield dropped roughly 6 basis points to 4.15%.
Markets are now pricing in roughly a 49% probability of a Fed rate hike in September, down from about 70% a week ago.
The Dow Jones Industrial Average added about 0.2%, or roughly 92 points, to 52,600. The S&P 500 was little changed at 7,540, pinned near the flatline as financial gains battled semiconductor losses.
The Nasdaq 100 fell 1.3% to 29,201 as the memory complex collapsed. The small-cap Russell 2000 outperformed, rising about 0.2%.
An escalating Middle East conflict and calm energy markets remained the session's quiet subplot. Fresh explosions were reported near U.S. military sites in Kuwait and in Erbil, Iraq, and U.S. Central Command confirmed strikes on Iranian military targets to protect Strait of Hormuz shipping. Yet, West Texas Intermediate crude slipped 0.2% to around $79.15 a barrel. Brent crude eased 0.3% to roughly $84.44, retreating back below $85.
In precious metals, the pullback continued. Gold eased 0.4% to around $4,039 an ounce and sits about 6.7% below where it started the month, while silver fell 1.9% to roughly $57.53.
Wednesday's Performance In Major US Indices
Here's how the major ETFs tracked:
- The Vanguard S&P 500 ETF (VOO) slipped 0.2%.
- The SPDR Dow Jones Industrial Average ETF Trust (DIA) rose 0.2%.
- The Invesco QQQ Trust (QQQ) fell 1.3%.
- The iShares Russell 2000 ETF (IWM) gained 0.2%.
Semiconductors Crater, Banks And Retailers Buck The Selloff
By sector, the Communication Services Select Sector SPDR Fund (XLC) led the tape, up 2.1%, followed by the Consumer Discretionary Select Sector SPDR Fund (XLY), up 1.1%. The Financial Select Sector SPDR Fund (XLF) added 0.6% as banks cheered a strong start to earnings season.
On the downside, the Technology Select Sector SPDR Fund (XLK) was the worst performer, sliding 2.7%, with the Energy Select Sector SPDR Fund (XLE) down 1.8%, the Industrials Select Sector SPDR Fund (XLI) off 1.4% and the Materials Select Sector SPDR Fund (XLB) down 1.0%.
The epicenter of the selloff was in semiconductors. The VanEck Semiconductor ETF (SMH) plunged 4.1%, the single worst-performing industry group of the session, with the iShares Semiconductor ETF (SOXX) close behind, as memory and hardware names cratered.
Sandisk Corp. (SNDK) fell 13% and Dell Technologies Inc. (DELL) dropped 14.2%. Western Digital Corp. (WDC) and Micron Technology Inc. (MU) also suffered double-digit losses.
Optical suppliers Applied Optoelectronics Inc. (AAOI) and Lumentum Holdings Inc. (LITE) tumbled 14.3% and 11.5%, respectively, with the AI-hardware group.
Among the day's biggest gainers, BlackRock Inc. (BLK) jumped 6.7% after its Q2 results topped estimates, leading a broad rally in asset managers.
PayPal Holdings Inc. (PYPL) topped the leaderboard, surging 16.3%, after reports that Stripe and buyout firm Advent International had offered $60.50 per share for the payments company — a bid valuing PayPal near $53 billion.
