US stock indexes edged higher on Wednesday, with the S&P 500 touching a one-month high, after June producer prices rose less than expected and the Empire State manufacturing survey beat forecasts. The S&P 500 gained 0.23%, the Dow Jones Industrial Average added 0.26%, and the Nasdaq 100 rose 0.31%, as dovish inflation data and strong AI-related earnings from ASML supported sentiment.
Inflation Data and Fed Commentary
The Labor Department reported that the June Producer Price Index for final demand rose 5.5% year-over-year, below the 6.0% reading in May and missing expectations of 6.2%. Core PPI, excluding food and energy, increased 4.7% year-over-year, also weaker than the 5.1% forecast. The data reinforced expectations that inflation may be peaking, a view echoed by New York Fed President John Williams, who said there are "encouraging reasons to expect that inflation has peaked and should edge down in coming quarters." Markets are now pricing in only a 10% chance of a rate hike at the Federal Reserve's July 28-29 meeting.
Tech and AI Earnings Drive Gains
Technology stocks provided a tailwind after ASML, the Dutch maker of lithography machines essential for advanced chip production, reported strong earnings that underscored booming demand for AI chips. Software stocks rebounded from Tuesday's losses, with Atlassian and Thomson Reuters up more than 4%, and Adobe, Workday, and Microsoft also posting gains. However, chipmakers and AI infrastructure stocks were mixed, with the iShares Semiconductor ETF slipping 0.28% as Sandisk and Western Digital fell more than 3%.
Geopolitical Tensions and Oil Prices
Crude oil prices rose nearly 1% on Wednesday, adding to a 10% surge this week, as a US-Iran peace deal collapsed. The US launched a fifth straight day of airstrikes on Iran and maintained a naval blockade, while Iran retaliated with missile and drone attacks on Kuwait. President Trump vowed to intensify the campaign until Iran stops attacks in the Strait of Hormuz. The rising oil prices initially weighed on Treasury notes, but they recovered after the soft PPI data.
Earnings Outlook and Key Movers
Second-quarter earnings season is gaining momentum, with Bloomberg Intelligence forecasting a 23% year-over-year increase in S&P 500 earnings, driven largely by AI spending. AI infrastructure stocks are expected to contribute nearly 60% of earnings-per-share growth. Among individual stocks, PayPal surged more than 15% after Reuters reported that Stripe and Advent International made a joint $53 billion offer to buy the company. BlackRock jumped 7% after reporting adjusted EPS of $13.91, well above the consensus estimate. Elevance Health plunged more than 8% after its updated guidance disappointed, dragging down other health insurers.
Global Markets and Economic Data
Overseas markets were mixed. The Euro Stoxx 50 edged down 0.02%, while Japan's Nikkei 225 rose 1.49% and China's Shanghai Composite fell 0.29%. Chinese economic data was mixed: second-quarter GDP grew 4.3% year-over-year, slightly below expectations, but June industrial production and retail sales beat forecasts. Eurozone industrial production unexpectedly fell 0.2% month-over-month in May, while ECB's Joachim Nagel said energy prices remain a key factor for inflation and that monetary policy will stay vigilant.