The S&P 500 Waffles as Chipmaker Losses Offset Positive Bank Results

Stocks swung between modest gains and losses on Wednesday as investors weighed encouraging inflation data against weakness in semiconductor stocks and mixed earnings reports from major banks.

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The S&P 500 Index hovered near flat, dipping less than 0.1% as of mid-morning in New York. The benchmark index is now just 0.6% away from reaching a new record high. Meanwhile, the tech-heavy Nasdaq 100 retreated by 0.4%, giving back some of Tuesday’s momentum when it closed at an all-time high.

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Wednesday’s decline came as U.S.-listed shares of ASML Holding NV tumbled nearly 10%, after the semiconductor equipment manufacturer offered a more cautious outlook for growth next year, citing trade headwinds.

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The slump in ASML dragged down the broader chip sector. The Philadelphia Semiconductor Index, which includes heavyweights like Nvidia Corp., Advanced Micro Devices Inc. (AMD), and Micron Technology Inc., fell by 1.4%. Despite positive inflation data, the weakness in this crucial segment held back broader equity gains.

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On the economic front, there was some relief as wholesale inflation remained relatively unchanged in June. The cooling producer price index (PPI) offered signs that inflation pressures continue to subside, fueling hopes that the Federal Reserve may not need to maintain restrictive monetary policy for much longer. Still, traders are closely watching corporate earnings to gauge the ongoing impact of the Trump administration’s tariff policies.

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In the banking sector, the earnings picture was mixed. Goldman Sachs rose 0.5% after reporting a historic second quarter for its stock trading division, which generated record-setting revenue. Bank of America shares were little changed, although the firm also posted its best-ever second quarter for trading amid continued market volatility. However, Morgan Stanley fell 2.2%, despite strong trading results. The bank’s overall report failed to impress investors, adding to a cautious tone across financials.

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The KBW Bank Index, which tracks major U.S. lenders such as JPMorgan Chase and Citigroup, recovered 0.3% following a sharp drop in the prior session. Tuesday’s weakness came after a softer-than-expected consumer price index (CPI) report cooled optimism that the Fed might cut rates in the near term.

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"Disinflation is evident, but it won’t be enough to shift the Fed’s current stance in the short run," said Jamie Cox, managing partner at Harris Financial Group. "Unless there’s a clear deterioration in the labor market, don’t expect a meaningful move lower in rates — and frankly, that’s healthy for the economy."

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Investors are also keeping an eye on multiple Federal Reserve officials scheduled to speak on Wednesday, hoping for further clues about the path of monetary policy. Additionally, the Fed’s Beige Book—a summary of economic conditions across the central bank’s 12 districts—will be released later in the afternoon and could shed light on how businesses are coping with current economic challenges.

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On the trade front, President Donald Trump signaled that pharmaceutical products could face new tariffs by the end of the month, with similar measures on semiconductors potentially to follow. These comments added to concerns that trade tensions may persist, even as some investors have downplayed the long-term effects of tariffs.

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UBS strategists warned that equity investors may be underestimating the risks. They noted that most see tariffs as mere bargaining tools rather than enduring economic threats. As a result, the firm placed its year-end target of 5,300 for the S&P 500 under review.

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In contrast to the subdued broader market, crypto-related stocks enjoyed notable gains. Bitcoin prices rose following Trump’s announcement that the House of Representatives is expected to pass the GENIUS Act, a bill supporting stablecoins. After a procedural hiccup on Tuesday, the bill is likely to move forward. Circle Internet Group Inc., a major player in the stablecoin space, saw its shares jump 7.9%, while Galaxy Digital Holdings climbed 7.2%.

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In individual stock news, Johnson & Johnson advanced 4.7% after the healthcare giant raised its full-year sales outlook, boosting investor sentiment. Brighthouse Financial Inc. surged 10% following a report from The Wall Street Journal stating that investment firm Aquarian is in exclusive talks to acquire the annuities and life insurance provider, according to sources familiar with the matter.

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In sum, while encouraging inflation data and a few standout corporate stories offered some support, ongoing pressure from trade uncertainties and weakness in semiconductor stocks capped any potential market rally. Investors continue to tread cautiously, parsing every economic data point, Fed statement, and earnings report for guidance in a market that remains near record highs but faces no shortage of headwinds.

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