Market Wrap US-Europe 14 July: Stocks Shake Off the Oil Shock as US Consumer Prices Fall 0.4 Percent, Goldman Jumps 9 Percent and IBM Craters 25 Percent

By The Edge Research Team

Wall Street closed higher on the coolest monthly US inflation print in six years and a rebound in the chip complex, and the day’s real drama played out inside the indexes. The S&P 500 rose 0.38 percent to 7,543.59 and the Nasdaq 0.90 percent to 26,107.01, while the Dow closed just 0.02 percent higher at 52,508.27, held back by IBM’s 25.21 percent collapse, its worst day since at least October 1987, on the same session Goldman Sachs jumped 9.00 percent on a second-quarter blowout. Europe closed flat to higher, the FTSE 100 up 0.30 percent at 10,529.39.

The macro backdrop did the lifting. June US consumer prices fell 0.4 percent on the month, the largest one-month decrease since April 2020, on a 9.7 percent drop in gasoline, with core prices unchanged on the month and headline inflation still running at 3.5 percent on the year, per the Bureau of Labor Statistics, a print covered in detail in our commodities wrap today. Ninety minutes later, Chair Kevin Warsh used his first House testimony to say the committee has “no tolerance for persistently elevated inflation” and confirmed June’s hold at 3.50 to 3.75 percent, per the Federal Reserve’s published remarks. The 10-year Treasury yield eased about 3 basis points to 4.59 percent and the VIX fell 3.73 percent to 16.52, a second day of calm even as Brent held 85 dollars.

Second-quarter earnings season opened with the banks split by the same volatility that has defined the past month. Goldman Sachs earned 20.98 dollars a share on revenue of 20.34 billion dollars, far above the 14.48 dollar and 16.13 billion dollar consensus per CNBC citing LSEG, a beat of about 45 percent on earnings and 26 percent on revenue, our calculation, and closed 9.00 percent higher. JPMorgan rose 2.50 percent and Bank of America 1.88 percent, with Bank of America’s chief executive telling CNBC the jump in equity trading revenue owed much to the AI trade and Asia picking up. Citigroup fell 5.29 percent despite posting its best quarterly revenue in a decade at 24.77 billion dollars, and Wells Fargo lost 2.71 percent, a reminder that beating estimates is not the same as beating positioning, our reading.

IBM supplied the crater. The company’s preliminary second-quarter results showed adjusted earnings of 2.93 dollars a share on revenue of 17.2 billion dollars, short of the 3.01 dollar and 17.86 billion dollar consensus per CNBC citing FactSet, and the stock fell 25.21 percent to 217.07 dollars, its worst day since at least October 1987. The miss itself was small, about 2.7 percent on earnings and 3.7 percent on revenue, our calculation, yet it cost the stock a quarter of its value, evidence that positioning and confidence mattered more than the arithmetic of the shortfall. Chief executive Arvind Krishna said clients moved to “shift their quarterly capex spend toward servers, storage, and memory purchases” ahead of expected price increases, squeezing the software and infrastructure lines, the clearest company-level print yet of the memory-and-hardware repricing that has whipsawed the chip complex this week, our reading, even as Nvidia rose 4.1 percent and the chip complex led the Nasdaq’s recovery. Inside the price-weighted Dow, Goldman’s 94.09 dollar gain nearly offset IBM’s 73.16 dollar fall, which is why the blue-chip average closed the day flat, our reading of the session.

Europe’s close was quiet by comparison. The FTSE 100 added 0.30 percent, the Euro Stoxx 50 0.15 percent to 6,280.19, the DAX 0.13 percent to 25,147.03 and the CAC 40 0.03 percent to 8,366.85, a flat-to-higher board that took the soft US inflation print as relief without finding a catalyst of its own.

In currencies and crypto, the dollar gave ground after the inflation data: the euro rose 0.33 percent to 1.1419 and sterling 0.31 percent to 1.3387, the yen firmed 0.14 percent to 162.20 per dollar, the Kuwaiti dinar held at 0.3077, and the Egyptian pound weakened 0.96 percent to 50.67 to the dollar. Bitcoin jumped 3.84 percent to 64,458 dollars, and gold rose 1.42 percent to 4,062.70 with Brent up 2.28 percent at 85.20 in late New York trade.

Further east, Tuesday’s closes from our MENA-Asia wrap remain the reference: TASI fell 0.80 percent in its biggest daily decline since the escalation began, Dubai lost 1.28 percent and Cairo 0.59 percent while Amman jumped 1.02 percent, and Asia rebounded from Monday’s crash with Shenzhen up 2.77 percent, the Kospi up 0.73 percent and the Nikkei up 0.74 percent. The Qatar Stock Exchange remains suspended and resumes on Sunday.

Why it matters: The first day of earnings season put numbers on both sides of the AI trade: the volatility and AI-driven flows that fattened trading desks at Goldman and Bank of America are the same forces that blew up IBM’s quarter through the memory supply squeeze, and the market rewarded and punished accordingly. For the Gulf, the combination that matters is a US consumer inflation print falling on pre-blockade energy prices while the Fed plants a no-tolerance flag, because the rate path that follows sets the cost of the dollar peg across the region just as oil revenues are repricing higher.

Outlook: Wednesday stacks Warsh’s Senate testimony against US producer prices and China’s second-quarter GDP, with more big-bank earnings through the week and the Bank of Korea deciding Thursday. The open question from today is whether the June inflation reprieve survives its first month of blockade-priced energy, and whether the IBM warning is a company story or the first crack the memory squeeze puts in the wider earnings season.

Table – US and Europe, 14 July closes, ranked by change:

Table – MENA and Asia equities, Tuesday 14 July closes, for reference, ranked by change:

Table – Commodities, rates, volatility, FX and crypto, 14 July:

Price basis: US and Europe index closing prints and CNBC quotes pulled just after the New York close, about 20:10 UTC on 14 July; commodity and FX figures are late-session quotes, not settlements.

Sources: CNBC; US Bureau of Labor Statistics; Federal Reserve.

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