IBM’s earnings disappointment has turned into a historic rout. The stock fell 25% less than an hour into trading, worse than its 23% Black Monday drop in 1987, putting shares on track for what could be Big Blue’s worst trading day ever.
Fed Chair Kevin Warsh wants to see inflation in the rearview mirror. He vowed to make elevated inflation a “thing of the past” and said the Fed is committed to getting policy right, while also pointing to the AI investment boom as a potential long-term tailwind for economic productivity and growth.
Inflation is running cooler than expected, giving the Nasdaq a fresh tailwind. June CPI rose 3.5% from a year ago, below expectations for a 3.8% increase, as easing energy prices helped cool consumer prices last month.
Treasury yields fell across the curve, with the 10-year yield down 6 basis points to 4.553%. The 2-year yield, which is more tied to Fed policy expectations, dropped 8 basis points to 4.181%, while the 30-year yield slipped 3 basis points to 5.064%.
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Technology stocks are in relief mode as softer inflation gave Nasdaq futures room to recover from yesterday’s chip-led sell-off. Nasdaq-100 futures jumped 1.3%, while S&P 500 futures rose 0.4%. Dow futures slipped 64 points, or 0.1%, as rising oil prices and a busy earnings calendar kept the broader market more cautious. A cooler June CPI reading than expected is helping to boost sentiment, offsetting interest rate worries for the moment and overshadowing a disappointing quarter from a tech stalwart.
The Nasdaq’s strength was led by a rebound in semiconductors after Monday’s sell-off. The VanEck Semiconductor ETF rose more than 2% in premarket trading, with Applied Materials (Nasdaq: AMAT) up more than 4% and Lam Research (Nasdaq: LRCX), STMicroelectronics (Nasdaq: STM), Teradyne (Nasdaq: TER), and Micron (Nasdaq: MU) all gaining more than 3%. IBM (NYSE: IBM) was the early weak spot, sliding nearly 21% after preliminary Q2 adjusted earnings of $2.93 per share missed the FactSet consensus of $3.01.
Financials were less helpful. JPMorgan Chase (NYSE: JPM), Wells Fargo (NYSE: WFC), Bank of America (NYSE: BAC), and Citigroup (NYSE: C) all traded lower after reporting Q2 results, while Goldman Sachs (NYSE: GS) bucked the trend with an earnings beat that pushed shares up more than 3%. The setup leaves today’s market split between two forces: cooler inflation helping tech and chips recover, while earnings and oil keep the broader tape from looking fully risk-on.
Here’s a look at where things stand as of pre-morning trading:
Dow Futures: 52,678 Down 0.17%
Nasdaq Futures: 29,831 Up 1.21%
S&P Futures: 7,588 Up 0.33%
IBM’s (Nasdaq: IBM) Q2 update fell short of the performance investors have come to expect. IBM shares fell 15% after prelim Q2 results showed revenue rising just 1% to $17.2 billion, with software growth offset by flat consulting and a 7% drop in infrastructure. Non-GAAP EPS rose 5% to $2.93, but the margin picture was mixed enough to knock the stock off its recent AI-infrastructure pedestal. IBM CEO Arvind Krishna conceded, “This quarter we faltered.”
KeyBanc gave the AI chip trade another shot of confidence. Analysts raised price targets across AMD (Nasdaq: AMD), Arm (Nasdaq; ARM), Marvell (Nasdaq: MRVL), Micron (Nasdaq: MU), and NVIDIA (Nasdaq: NVDA) after Asia supply-chain checks pointed to sustained data-center demand. The firm cited tight memory supply, stronger DRAM and NAND pricing, and ongoing AI infrastructure spending, keeping the Nasdaq’s chip leadership story front and center.
Nebius (Nasdaq: NBIS) added another long-term AI infrastructure win, agreeing to sell more than $1 billion in computing capacity to Reflection AI through 2029, according to Bloomberg. The deal keeps NBIS in the middle of the AI data-center trade, where demand for leased GPU capacity is still running ahead of supply.
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Gerelyn Terzo is the author of dividend investing handbook "Dividend Investing Strategies: How to Have Your Cake & Eat It Too." A veteran financial journalist, she covers agri-finance for outlets like Global AgInvesting and the broader stock market and personal finance for 24/7 Wall Street. She began at CNBC and later helped launch Fox Business in New York. Gerelyn currently resides in Woodland Park, Colorado and dabbles in nature photography as a hobby.
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