The Bureau of Labor Statistics reported Wednesday that its Producer Price Index for final demand fell 0.3% in June, the first monthly decline since August 2025 and a miss against the Dow Jones consensus for no change. It was the second straight friendly inflation print, following Tuesday’s Consumer Price Index, which fell 0.4% for the month and brought annual inflation down to 3.5%. Stocks opened higher on the news even as U.S. Central Command confirmed another overnight wave of strikes on Iran and Washington reinstated its naval blockade of Iranian ports near the Strait of Hormuz. President Donald Trump told Fox News that strikes will continue and that power plants and bridges could be next unless Tehran returns to talks. Federal Reserve Chairman Kevin Warsh, who told Congress on Tuesday that the committee has no tolerance for persistently elevated inflation, now faces two data points arguing the other way.
Where the indexes stand
The Dow Jones Industrial Average opened at 52,736.39, up 228.12 points, or 0.43%. The S&P 500 rose 32.75 points to 7,576.34, also up 0.43%, building on Tuesday’s close of 7,543.59. The Nasdaq Composite led at 26,271.95, up 164.94 points, or 0.63%. The Russell 2000 added 3.12 points to 2,967.89, a gain of 0.11%.
Inside the PPI report, gasoline prices dropped 12.0% and accounted for nearly two-thirds of the decline in final demand goods, which fell 1.4% — the steepest drop since July 2022. Energy prices overall fell 6.4% and food slipped 0.6%. The core measure excluding food and energy rose 0.2%, short of the 0.3% forecast. Final demand less food, energy and trade services rose just 0.1% after jumping 0.8% in May. May’s headline reading was also revised sharply lower, to 0.6% from an initially reported 1.1%. On an annual basis the index still shows 5.5% wholesale inflation.
Chris Rupkey, chief economist at Fwdbonds, said the Fed’s fight with inflation is far from finished but that odds of rate hikes should keep receding, since producers are not passing higher costs down to consumers as much as previously feared. Traders agreed. According to CME FedWatch, the probability of a July hike fell to 17% from 42% a day earlier. The two-year Treasury yield eased to 4.16%.
Market movers
ASML Holding set the tone. The Dutch lithography maker reported second-quarter net sales of €9.3 billion and net income of €2.9 billion, with a gross margin of 54.0% and basic earnings of €7.59 a share — both sales and margin above its own guidance. Chief Executive Christophe Fouquet raised the 2026 outlook to €43 billion to €45 billion in net sales from a prior range of €36 billion to €40 billion, and guided third-quarter sales to €11.0 billion to €12.0 billion. The company also said it plans to lift production capacity for chipmaking equipment by 30%, easing worries about supply bottlenecks. Shares rose about 3.6% before the bell after sliding 11% earlier in July.
Morgan Stanley beat on both lines, earning $3.46 a share on revenue of $21.35 billion against forecasts of $2.94 and $19.64 billion. A year ago the firm earned $2.13 on $16.8 billion. Chairman and Chief Executive Ted Pick credited active markets and execution across all three regions. Shares climbed about 1%.
International Business Machines remains the wound. The company shed more than $50 billion in market value Tuesday on a revenue warning — its worst single-day drop since 1987 — after guiding to second-quarter earnings of $2.93 a share on revenue of $17.2 billion, both below consensus. Oppenheimer cut IBM to Perform from Outperform Wednesday. Merck traded higher on positive trial data for a lung cancer combination treatment.
Elsewhere in research: Morgan Stanley upgraded CAVA Group to Overweight from Equal Weight and raised its target to $90 from $86, while cutting TransDigm Group to Equal Weight with a $1,345 target, down from $1,680, and Travelers to Underweight with a $290 target. Guggenheim lifted Digital Realty Trust to Buy with a $200 target. UBS downgraded Allstate to Neutral, raised its Advanced Micro Devices target to $700 from $670, and reiterated SpaceX at Buy ahead of the Starship test flight targeted for Thursday at 6:45 p.m. ET. Raymond James reiterated Nvidia at strong buy. Citizens started FedEx at Outperform with a $375 target.
Commodities and volatility
Oil rose for a third session. West Texas Intermediate August futures gained 0.64% to $79.85 a barrel, and Brent September futures added 0.58% to $85.22. Brent had already surged 11% over the prior two sessions. Saul Kavonic, senior energy analyst at MST Marquee, said expectations of a rapid reopening of Hormuz were premature and that the reimposed blockade puts the conflict back on an escalating path. Trump dropped his proposed 20% transit fee on cargo crossing the strait, saying Gulf investment into the United States would more than replace it.
Gold slipped $6.30 to $4,063.40. The Cboe Volatility Index fell 1.51% to 16.25.
Traders now turn to results from Progressive, Johnson & Johnson, United Airlines and BlackRock. The open belongs to cooling inflation. The close will belong to whichever force is louder by 4 p.m. — softer prices at the factory gate, or harder headlines out of the Persian Gulf.
JBizNews Desk | New York
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