U.S. markets turned mixed on Tuesday after new inflation data surprised to the upside, fueling concerns that the Federal Reserve may hold off on cutting interest rates. The S&P 500 dropped around 0.4%, while the Dow Jones Industrial Average fell by more than 430 points, or roughly 1%. The Nasdaq Composite, however, edged up about 0.2%, notching a fresh all-time high, powered by a nearly 4% rally in Nvidia shares.
The rally in tech stood in stark contrast to broader market weakness after the Consumer Price Index (CPI) for June showed a 2.7% year-over-year increase, up from 2.4% in May, as reported by Reuters. The hotter-than-expected reading sent Treasury yields sharply higher, with the 10-year yield climbing to around 4.48%, reflecting investor concerns that the Fed may keep interest rates elevated longer than anticipated.
As noted by AP News, the inflation surprise weighed on sectors sensitive to interest rates—such as real estate, utilities, and financials—which broadly declined. Meanwhile, technology stocks were a bright spot in the session, led by Nvidia’s surge.
The rally in Nvidia came after reports that the U.S. government approved new export licenses for the company’s H100 AI chips, easing some restrictions tied to advanced chip sales to China. The development boosted investor sentiment around AI hardware exports and lifted semiconductor peers including AMD and Super Micro. The news was confirmed in live markets coverage by The Wall Street Journal.
Market expectations for a rate cut in September have cooled sharply. Boston Fed President Susan Collins said Tuesday that while inflation is moderating, it remains too high for policymakers to ease up yet. According to Reuters, investors are now split on whether the Fed will cut rates at all this year, as hawkish commentary and firm data suggest a “higher for longer” scenario could play out.
Despite the macroeconomic headwinds, enthusiasm for AI and large-cap tech continues to shield the Nasdaq from broader volatility. As reported by MarketWatch, the Nasdaq’s record close highlights a growing divide between sectors: tech names with strong balance sheets and secular demand strength are being treated by investors as relative safe havens.
With fresh inflation uncertainty and Fed ambiguity looming, market participants now look ahead to Fed Chair Jerome Powell’s remarks later this week, which could further clarify the central bank’s policy stance. Until then, elevated volatility is likely to persist—particularly outside the tech sector.
