The stock market absorbed a crowded slate of developments today, allowing the S&P 500 (+0.4%) and Nasdaq Composite (+0.9%) to recover some of yesterday's losses while the DJIA finished flat. As in the previous session, swings in semiconductor stocks and crude oil remained central to the market's direction, while investors also digested a softer inflation report, Fed commentary, and earnings from several major banks.

Stocks opened to relatively broad gains following the release of the June CPI report, which showed headline deflation (-0.4%; Briefing.com consensus: -0.2%) and a flat core CPI reading (Briefing.com consensus: +0.2%), slowing the year-over-year CPI rate to 3.5% from 4.2% and the core rate to 2.6% from 2.9%. The release had a tangible impact on the market's implied expectations of the Fed's policy path, with CME FedWatch now assigning an 83.4% probability to the FOMC leaving rates unchanged at the July meeting, up from 58.3% yesterday. However, the FedWatch tool still assigns a greater than 50% probability (56.5%) to a rate hike at the September meeting.

Treasury yields moved lower in response to the release, which was a welcome sight for a market that faced another surge in energy prices today. WTI crude oil surged past the $80 per barrel mark this morning after President Trump formally notified Congress that the U.S. is at war with Iran. President Trump announced just before midday that the U.S. naval blockade would apply only to ships departing Iranian ports, which briefly sent oil lower, though it steadily rose throughout the afternoon. Crude oil futures settled today's session $0.98 higher (+1.3%) at $79.40 per barrel.

Additionally, the improved rate backdrop helped support gains across mega-cap technology stocks, which were largely the driver of today's index-level gains. The top-weighted information technology sector (+1.3%) finished with the widest gain as investors stepped in to buy yesterday's dip across semiconductor stocks, sending the PHLX Semiconductor Index 2.5% higher. NVIDIA (NVDA 211.81, +8.28, +4.07%) was a "Magnificent Seven" standout, while memory names rebounded alongside another sharp gain in SK hynix Inc.'s (SKHY 194.16, +41.81, +27.44%) ADRs. Bloomberg reported that the premium of the ADRs over the company's Korean-listed shares widened to nearly 50% as options on the ADRs began trading in the U.S.

Strength across semiconductor names helped offset a massive slide in IBM (IBM 217.07, -73.16, -25.21%) after the company issued disappointing Q2 guidance that fell short of expectations on both EPS and revenue. Commentary around temporary customer spending shifts gave a boost to cybersecurity stocks, helping CrowdStrike (CRWD 210.73, +22.82, +12.14%) finish as the best-performing S&P 500 component.

Goldman Sachs (GS 1140.00, +94.09, +9.00%) finished with the second-widest gain in the S&P 500, which also helped offset IBM's weakness in the DJIA. The company delivered perhaps the strongest earnings beat among this morning's slate of major bank reports. JPMorgan Chase (JPM 342.89, +8.36, +2.50%) and Bank of America (BAC 60.62, +1.12, +1.88%) also moved higher after earnings, while Citigroup (C 133.30, -7.41, -5.27%) and Wells Fargo (WFC 85.52, -2.14, -2.45%) moved lower despite also topping expectations, limiting the financials sector's (+0.2%) gain.

Elsewhere, the communication services sector (+1.1%) was an outperformer, supported by a solid gain in Alphabet (GOOG 357.33, +6.66, +1.90%) after the company broke ground on its largest solar and battery storage project to date to help power data centers.

The Vanguard Mega Cap Growth ETF finished 1.0% higher, contributing to the outperformance of the market-weighted S&P 500 (+0.4%) over the S&P 500 Equal Weighted Index (-0.4%).

Meanwhile, the defensive health care (-1.9%) and consumer staples (-1.4%) sectors were the biggest laggards as investors rotated back into more growth-oriented pockets of the market.

Outside the S&P 500, the Russell 2000 (+0.4%) and S&P Mid Cap 400 (+0.5%) captured similar gains to the S&P 500.

Despite a crowded slate of earnings, inflation data, Fed commentary, and geopolitical developments, today's market action remained heavily influenced by the familiar back-and-forth across semiconductor stocks and oil prices. Softer-than-expected inflation helped investors look past another surge in crude oil, making it easier for growth-oriented technology stocks to reclaim leadership and the major averages to recover a portion of yesterday's losses.

U.S. Treasuries rebounded from two days of losses on Wednesday with relative strength in shorter tenors pressuring their yields from highest settlement levels of the year while longer tenors lagged but still ended in positive territory. The 2-year note yield settled down seven basis points to 4.19%, and the 10-year note yield settled down two basis points to 4.59%.

• Russell 2000: +19.5% YTD
• S&P Mid Cap 400: +14.3% YTD
• Nasdaq Composite: +12.3%
• S&P 500: +10.2% YTD
• DJIA: +9.3% YTD

Reviewing today's data:

• June NFIB Small Business Optimism 97.4 (Briefing.com consensus 95.6); Prior 95.3
• June CPI -0.4% (Briefing.com consensus -0.1%); Prior 0.5%, June Core CPI 0.0% (Briefing.com consensus 0.2%); Prior 0.2%
  • The key takeaway from the report is the softening in core inflation and the added softening in super core inflation, which excludes food, energy, and shelter. That component was up just 2.1% year-over-year. Inflation has not been slayed, but this report should be enough to keep the FOMC on hold at its July 28-29 meeting.