Inflation Reignites Tariff Fears
June’s consumer inflation data revealed a clear uptick, as the Consumer Price Index jumped 2.7% year over year—its highest in four months—with price increases directly tied to tariff escalations from the Trump administration. While the headline matched expectations, core inflation also ticked up to 2.9%, feeding investor anxiety that more tariff-driven price hikes are on the horizon, especially with threats of 30% tariffs on European and Mexican goods looming for August 1.
Bond markets responded with a jump: the 10-year Treasury yield climbed to 4.5%, and the 30-year yield returned above 5% for the first time since May. This moved expectations for Federal Reserve rate cuts further into the distance, even as President Trump publicly pressed for aggressive reductions in interest rates to offset inflationary pressures.
Stocks Split: Tech Soars, Blue Chips Wobble
Markets finished Tuesday in defensive formation. The Dow plunged more than 400 points, industrials and financials sold off in the face of higher inflation and mixed earnings, and the S&P 500 fell 0.4% after retreating from record highs. Only the Nasdaq escaped unscathed, with Nvidia’s 4% surge powering the tech-heavy index to a new record as chipmakers cheered a sudden reprieve from US-China export curbs.
Big bank earnings set a tepid tone. JPMorgan and Citigroup reported strong trading and investment banking revenue, but shares wobbled in response to cautious guidance and muted optimism. Meanwhile, Wells Fargo cut its net interest income outlook, sending shares lower, while BlackRock missed revenue expectations and fell sharply despite CEO Larry Fink’s long-term optimism for the firm and AI-driven infrastructure investing.
AI and Chipmakers Dominate the Spotlight
The day belonged to chips and artificial intelligence. Nvidia rallied on news it will soon resume AI chip sales to China, propelling not just itself but related stocks like AMD, Micron, and TSMC. The reversal in export restrictions not only boosted US shares, but also lifted Chinese tech giants Alibaba and Baidu, both of which are poised for AI spending sprees thanks to renewed access to American hardware.
Apple and supply chains drew headlines as well. A $500 million rare earths deal with MP Materials sent the miner’s shares soaring 20%+, reinforcing the tech sector’s bid to insulate itself from trade uncertainty. The agreement aligns with Apple’s broader push to bring more of its supply chain stateside, especially as it faces new tariff threats from Washington.
Crypto and Market Sentiment Hit Turbulence
It was a rocky day for digital assets. Crypto-related stocks slid as Congress failed to advance several digital asset bills, including the much-discussed GENIUS Act for stablecoin issuers. Bitcoin dropped below $117,000, while Coinbase and major stablecoin players gave up recent gains.
Despite the broader volatility, investor sentiment toward the economy remained unexpectedly bullish. According to Bank of America’s latest fund manager survey, only 9% of respondents now expect a "hard landing" for the economy within the next year, a dramatic turnaround from earlier in the spring when nearly half of those surveyed braced for recession as tariffs ramped up.
Looking Ahead: Volatility in Focus
With the S&P 500 extending its long streak above the 20-day moving average, technical analysts warn of potential pullbacks as volatility typically spikes in mid-to-late summer. All eyes remain on the next round of tariffs, the trajectory of inflation, and whether the Fed—and President Trump—can strike a balance that allows both Wall Street and Main Street to breathe a little easier.
