Banking Bonanza. It was a jam-packed day for the markets: earnings season started strong, oil futures fluctuated, Federal Reserve Chairman Kevin Warsh testified in front of lawmakers, and the latest June inflation report delivered a cooler-than-expected reading that should make policymakers hold off on raising interest rates—for now.

Stock pops from stellar bank earnings on Tuesday battled with IBM’s drop after a dismal showing, creating a tug-of-war in the Dow Jones Industrial Average for much of the day until the index managed to pull off a late-breaking gain.

The Dow closed just above the flatline at 0.02%. The Nasdaq Composite was up 0.9% and the S&P 500 finished the day up 0.4%.

JPMorgan Chase, Bank of America, Citigroup, Wells Fargo and Goldman Sachs all reported earnings that beat expectations and delivered strong revenues from equities trading. My colleagues Rebecca Ungarino and Andrew Welsch provided a play-by-play of all the action here.

Meanwhile, IBM’s stock tanked more than 25% after releasing preliminary results that fell far short of expectations. CEO Arvind Krishna blamed the revenue shortfall on a sudden change in spending priorities, explaining that clients diverted purchases away from IBM’s products to AI hardware and memory chips.

Oil prices surged earlier today, but backed off their highs after President Donald Trump dumped plans to charge a 20% fee for ships traveling through the Strait of Hormuz.

And finally, Fed Chairman Warsh testfied in front of the House Financial Services Committee as part of his mandate to deliver a monetary policy report. Warsh didn’t provide much guidance on where the Fed was heading, but he did send a clear message that the central bank would deliver price stability.

“The longer that prices have been above the inflation target, it’s usually a bit harder to dislodge them and get them lower,” Warsh said. “Our job, my commitment to you, is to take sticky prices and to unstick them.”

Warsh will testify in front of the Senate tomorrow. You can follow the live coverage here.

The Hot Stock: CrowdStrike Holdings +12.1%
The Biggest Loser: IBM -25.2%

Best Sector: Information Technology +1.3%
Worst Sector: Healthcare -1.9%

The June inflation data proved much cooler than expected, with even non-energy categories posting softer price growth. That all but guarantees the Fed will not raise interest rates at the end of the month.

But one month of lower inflation is not enough to reverse course entirely, and policymakers will still be watching the longer-term trends, especially with the Iran war heating up again. Both Warsh and Chicago Fed President Austan Goolsbee said as much today following the Consumer Price Index data release on Tuesday.

“One month is no months. You never want to overreact to one month. If we got several months like this, I’d be feeling better,” Goolsbee noted.

Headline inflation posted a big monthly decline of 0.4% in June, sending annual growth tumbling to 3.5%, according to the data released by the Bureau of Labor Statistics this morning. While that’s still significantly higher than the pre-war rate of 2.4% (and well above the Fed’s 2% inflation target), it’s much cooler than May’s 4.2% headline reading.

The softer print was largely driven by a huge drop in gasoline prices during June. Prices at the pump fell from a peak of $4.40 in mid-May to an average nationwide low of $3.70 per gallon, according to data from the U.S. Energy Information Administration. That sent the CPI’s overall energy index down 5.7% in June—the largest monthly decline since April 2020.

But the evolving situation in the Middle East could make oil prices more volatile in the next CPI inflation report. “A negative monthly headline print is gasoline doing the work, not persistent disinflation taking hold—and with the ceasefire potentially unraveling, energy prices are again on the rise,” writes Phil Neuhart, head of market and economic research at First Citizens Bank.

Core inflation, arguably even more important because it strips out the more volatile food and energy components, was surprisingly flat on the month and posted a 2.6% year-over-year gain. That reversed three straight months of that number trending higher.

The details behind the benign core reading should provide some comfort for Fed officials, showing little evidence that inflationary pressures are broadening out. Tariffs provided little boost to goods inflation, with even apparel prices tumbling last month. Shelter inflation, meanwhile, slowed to its weakest monthly pace since 2021. AI-related price pressures were also minimal.

There were some signs oil is affecting the prices of other goods, but not enough to substantially boost core inflation. Together, those details should help Fed policymakers justify keeping rates steady in July. In fact, odds of a rate hike moved dramatically lower after the June data release.

ASML Holding, Bank of New York Mellon, BlackRock, Cintas, Elevance Health, J.B. Hunt Transport Services, Johnson & Johnson, Morgan Stanley, M&T Bank, PNC Financial Services Group, Progressive, and United Airlines Holding release earnings tomorrow.

The BLS releases the Producer Price Index for June. Consensus estimate is for a 6.2% jump from a year earlier. The core PPI is expected to rise 5.2% year over year. This compares with increases of 6.5% and 4.9%, respectively, in May.

The Fed releases the beige book for the fifth of eight times this year. The report gathers anecdotal information on current economic conditions from the 12 regional Federal Reserve banks.

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