CPI Cools. Chips Rebound. Banks Beat. The Relief Print Oil Could Not Fully Clear.

June CPI fell 0.4%, the biggest monthly decline since April 2020. Annual inflation cooled to 3.5%, below the 3.8% forecast and down from 4.2% in May. Core CPI was flat on the month. Annual core inflation slowed to 2.6%, also below expectations.

Markets responded immediately.

The Nasdaq gained 1%. The S&P 500 rose 0.4%. The Dow finished near flat after IBM (IBM) erased much of the index's gains with a record 25% collapse.

Treasury yields fell as traders sharply reduced near-term rate hike expectations. July hike odds dropped to about 17%, though September still carries roughly a 63% probability.

The relief came from energy. Gasoline prices fell almost 10% in June, pulling the energy index down 5.7%.

That is the surface.

Underneath, the market is already looking past June. Oil remains well above where it finished the month. The U.S. expanded strikes on Iran. The naval blockade returned. Inflation improved, but the next inflation story may already be building.

The Signal

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President Trump abandoned his proposed 20% protection fee for ships moving through the Strait of Hormuz after criticism from the shipping industry and international regulators. Instead, Gulf states will increase trade and investment with the U.S.

But the military picture kept prices supported.

The U.S. launched new strikes against Iranian targets and formally reinstated its naval blockade Tuesday afternoon. Iran said it attacked two supertankers. ADNOC confirmed two of its tankers were hit, leaving one mariner dead.

WTI settled near $79.34. Brent closed around $84.73 after briefly trading even higher earlier in the session.

June inflation reflected cheaper oil.

July is reflecting renewed conflict.

Energy Signal

The toll proposal disappeared. The blockade did not. Oil is still carrying a geopolitical premium.

Headline CPI cooled to 3.5%. Core inflation eased to 2.6%. Shelter rose only 0.1%. Transportation services, apparel and used vehicles all declined.

Markets viewed the report as confirmation that inflation slowed before the latest Middle East escalation.

Fed expectations shifted quickly.

Odds of a July hike dropped from roughly 42% to about 17%. September remains the market's base case.

The question now is whether July's higher oil prices reverse June's progress.

Warsh continues running a data-dependent Fed with little forward guidance. One softer report helps. It does not settle the debate.

Macro Signal

June inflation softened. July energy prices now determine whether that relief lasts.

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JPMorgan (JPM), Bank of America (BAC), Citigroup (C), Goldman Sachs (GS) and Wells Fargo (WFC) all beat expectations.

JPMorgan earned $6.14 per share on $52.42 billion of revenue. CEO Jamie Dimon said every major business produced record revenue while business investment remained healthy.

Goldman Sachs delivered the biggest surprise. EPS reached $20.98 while equities trading revenue surged 72% and investment banking fees jumped 55%. CEO David Solomon said the firm's deal backlog is the strongest in five years.

AI remained central.

Dimon said AI has already reduced staffing by as much as 40% in some roles. Solomon argued AI will improve worker productivity rather than replace employees.

The technology story split in two.

Semiconductor stocks rebounded after Monday's selloff. The SMH ETF gained about 2%.

IBM did not participate.

The company plunged 25%, its worst trading day on record, after missing expectations and warning that customers shifted spending toward AI hardware instead of software and infrastructure.

SK Hynix (SKHY) remained one of the hottest AI trades. Shares jumped more than 27%, but early options activity suggested much of the speculation has already shifted into leveraged ETFs rather than the stock itself.

Capital Signal

Banks showed resilience. Chips recovered. IBM showed how quickly AI spending is reshaping enterprise technology budgets.

BTC climbed back above $64,000 after the CPI report reduced fears of another immediate Fed hike.

The move was helped by improving ETF demand. Spot Bitcoin ETFs ended their eight-week outflow streak, giving the market its first sustained institutional support in more than two months.

Analysts now watch three levels.

A move above $66,000 could open the path toward $70,000 and possibly $75,000 if macro conditions continue improving.

But the bigger picture has not changed.

Warsh remains data dependent. Producer prices arrive next. Oil remains elevated. Any renewed escalation around Hormuz could quickly revive inflation concerns.

Regulation also remains active.

The CFTC ordered Kalshi to continue honoring trades placed by Michigan residents, escalating the legal battle between federal regulators and state governments over prediction markets.

The Verdict

Bitcoin finally received the macro catalyst it needed. Now it needs ETF demand and softer inflation data to keep the recovery alive.

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Tuesday delivered the relief investors had been waiting for.

Inflation cooled. Bank earnings beat expectations. Chip stocks bounced. Bitcoin reclaimed $64,000.

But the market did not receive an all-clear.

Oil remains elevated because the fighting around Hormuz continues. The U.S. blockade is back. IBM showed AI spending is becoming increasingly selective, rewarding hardware while pressuring software.

June belongs to lower inflation.

July already belongs to higher oil.

The market now has to decide which story matters more.