U.S. equity markets closed higher on Thursday as investors cheered better-than-expected inflation data, even as geopolitical tensions in the Middle East continued to dominate headlines. The NASDAQ led gains with tech stocks surging, while the Dow barely budged amid mixed signals from ongoing U.S.-Iran developments.
Market Performance: Tech Takes the Lead
The S&P 500 (SPY) climbed 0.55% to close at $754.60, extending its recent winning streak as cooling inflation renewed hopes for potential Federal Reserve policy easing later this year. The tech-heavy NASDAQ (QQQ) outperformed with a 0.84% gain to $735.60, buoyed by optimism around upcoming earnings from major software players.
Meanwhile, the Dow Jones (DIA) managed only a modest 0.03% uptick to $507.05, held back by industrial stocks sensitive to global trade disruptions and energy price volatility stemming from Middle East uncertainty.
Notably, bears have been loading up bets against small-cap stocks ahead of upcoming economic releases, suggesting some market participants remain skeptical about the durability of this rally.
Inflation Data Delivers Welcome Surprise
The day’s headline story came from the latest Consumer Price Index report, which showed inflation continuing to moderate faster than Wall Street anticipated:
- CPI: Rose to 102.8 from 102.44 in the previous reading
- Month-over-Month Inflation: Came in at 0.4%, well below the 0.6% forecast and significantly cooler than last month’s 1.1% reading
- Year-over-Year Inflation: Dropped to 4.2%, beating expectations of 4.4% and down from 4.6% previously
This represents the strongest evidence yet that the Fed’s prolonged tight monetary policy is finally gaining traction. Markets will be closely watching Fed Governor Logan’s speech later today for any hints about how this data might influence upcoming policy decisions.
Global Economic Picture: Mixed Signals
Beyond U.S. borders, the economic data painted a nuanced picture:
Australia: The RBA’s trimmed mean CPI came in exactly as expected at 0.3% MoM and 3.4% YoY, suggesting the Reserve Bank of Australia’s inflation fight remains on track. The weighted median CPI held steady at 0.2% MoM.
European GDP: Mainland GDP growth matched forecasts at 0.3% QoQ, down slightly from the previous quarter’s 0.4%, indicating the European economy continues to expand, albeit at a modest pace.
Brazil: The IPCA mid-month CPI came in hotter than expected at 0.62% MoM versus the 0.53% forecast, with year-over-year inflation accelerating to 4.64%—a reminder that inflation battles vary significantly across emerging markets.
One concerning data point: unemployment figures showed some deterioration, with one reading hitting 11.6% versus the prior 11.1%, while another measure improved to 5.8% from 6.3%—highlighting the uneven nature of labor market conditions globally.
Earnings Roundup: Dollar Tree Shines, EV Makers Struggle
Corporate earnings delivered mixed results, with discount retailer Dollar Tree (DLTR) emerging as the day’s standout performer, posting EPS of $1.74 versus estimates of $1.58—a clear beat that suggests consumer resilience at the value end of the market.
However, several companies disappointed:
- Futu Holdings (FUTU): Massive miss with EPS of $6.03 versus expectations of $22.53
- XPeng (XPEV): Reported a loss of $1.83 per share, nearly double the expected $0.98 loss, underscoring continued challenges in the EV sector
- Photronics (PLAB): Came in at $0.42 versus $0.55 expected
- Arbe Robotics (ARBE): Slight miss with a loss of $0.08 versus expected loss of $0.07
After the bell, investors await results from tech heavyweights including Dell, Autodesk, Okta, MongoDB, and Asana—reports that could set the tone for Friday’s trading.
Geopolitical Crosscurrents: Oil and Gold React
Oil prices settled mixed as traders struggled to interpret conflicting reports about a potential U.S.-Iran ceasefire deal. Iran’s state TV reported a draft agreement would reopen Strait of Hormuz shipping and end the naval blockade, while President Trump stated the U.S. is “not satisfied yet” with the deal’s terms.
Fresh U.S. strikes on Iranian military sites and drones added to the uncertainty, while South Korea reported an Iranian missile was likely involved in an attack on a ship in the Strait of Hormuz.
Gold dropped to a two-month low as war-driven inflation concerns paradoxically fueled rate-hike bets, making the non-yielding metal less attractive.
Looking Ahead
With JPMorgan CEO flagging potential M&A opportunities of up to $20 billion and expenses climbing, the banking sector remains in focus. Investors should monitor Fed Governor Logan’s upcoming remarks for policy guidance, while keeping a close eye on Iran developments that could quickly reverse today’s gains.
The improving inflation trajectory offers a silver lining, but with unemployment ticking higher in some regions and geopolitical risks elevated, caution remains warranted heading into month-end.
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