Stock market today: Nasdaq pops on Nvidia boost, while Dow slides after CPI inflation data, bank earnings

US equities saw mixed performance as Nvidia and other chip stocks surged following the Trump administration's approval for resuming AI chip sales to China, a significant policy reversal. This positive sentiment was counterbalanced by June's Consumer Price Index accelerating to 2.7% year-over-year, indicating tariff-driven price increases and pushing Treasury yields, including the 30-year, above 5%. Early bank earnings presented a mixed picture, with Citi and JPMorgan outperforming expectations while Wells Fargo revised down its net interest income forecast. These market dynamics unfold amidst escalating tariff threats from President Trump and his continued pressure on the Federal Reserve regarding monetary policy.

Analysis

The market is exhibiting a distinct divergence, with the tech-heavy Nasdaq Composite (^IXIC) climbing nearly 0.7% while the Dow Jones Industrial Average (^DJI) declined 0.6%. This split is driven by two primary, conflicting narratives. The primary catalyst for tech sector strength is a significant US policy reversal, signaling imminent approval for Nvidia (NVDA) to resume sales of its AI chips to China. This news propelled Nvidia shares over 4%, lifted the broader semiconductor sector (AMD, TSM), and caused US-listed Chinese tech firms like Alibaba (BABA) and Baidu (BIDU) to jump 6.4% and 7.8% respectively, as their AI infrastructure development relies on this hardware. Counterbalancing this optimism are mounting macroeconomic headwinds. The June Consumer Price Index accelerated to 2.7% year-over-year, up from 2.4% in May, indicating that tariff policies are beginning to manifest as price increases. This inflationary pressure pushed the 10-year Treasury yield to nearly 4.5% and the 30-year yield above 5% for the first time in six weeks. The kick-off to earnings season provided a mixed picture for financials; while Citigroup (C) and JPMorgan (JPM) beat earnings expectations, Wells Fargo (WFC) fell after cutting its full-year net interest income forecast, highlighting profitability pressures in the current rate environment. A separate corporate development saw MP Materials (MP) soar over 22% on a $500 million rare earths supply deal with Apple (AAPL), underscoring a strategic push towards securing domestic supply chains amidst ongoing trade uncertainty.

Key Decisions for Investors

• Given the US policy reversal on AI chip exports to China, investors should consider increasing exposure to the semiconductor value chain, including leaders like Nvidia (NVDA) and direct beneficiaries such as Chinese cloud providers Alibaba (BABA) and Baidu (BIDU).
• The acceleration in CPI to 2.7% and the corresponding rise in Treasury yields suggest persistent inflationary pressure, which could constrain the Federal Reserve's policy options and negatively impact rate-sensitive sectors; monitor bank profitability closely, as evidenced by Wells Fargo's trimmed forecast for net interest income.
• The significant stock reaction of MP Materials following its deal with Apple highlights a premium on companies central to supply chain onshoring efforts, suggesting an opportunity to identify and invest in domestic firms with critical technological or material inputs.
• The clear divergence between the Nasdaq's AI-driven rally and the Dow's inflation-driven slump warrants a portfolio review to ensure proper balance between secular growth themes and cyclical sectors exposed to macroeconomic and trade policy risks.