• Commodities: Crude prices popped yesterday in their largest single-day gain since 2020 after President Trump declared the US would charge a 20% toll on ships transiting the Strait of Hormuz. Prices dropped when the President backtracked this morning, but rose again when the US launched strikes against Iran just before a new blockade was set to start.
• Bonds: Treasury yields fell after CPI came in lower than expected (more on that later).
• Stocks: Lower CPI and higher oil prices sent markets on a wild ride today, though gains in the tech and financial sectors were enough to power all three major indexes higher.

Earnings

Morning Brew Inc, Photos: Getty Images, IBM

Just a few weeks ago, IBM was basking in praise from President Trump. Today, it’s back in the spotlight, but for all the wrong reasons.

The software giant reported preliminary quarterly earnings that missed Wall Street’s expectations on both revenue and profit. The biggest disappointment came from its infrastructure business, where revenue fell 7% as demand for the company’s flagship z17 mainframes—designed to power enterprise computing—came in weaker than expected.

Another culprit was a shift in customer spending: IBM said clients redirected capital toward chips, servers, and memory, leaving less budget for its own products. “These conditions require our teams to execute perfectly, and this quarter we faltered. We did not adapt and move quickly enough, and numerous large deals failed to close on the timelines we expected, driving the majority of our shortfall,” CEO Arvind Krishna wrote in a letter to shareholders.

Shares fell 25.21% following the report, marking the stock’s worst trading day on record.

Memory mayhem

IBM’s results are the latest sign that the AI memory boom is reshaping spending across the tech industry.

Soaring memory prices first collided with tight supply, squeezing hardware makers like Dell and Apple, forcing them to either raise prices or absorb higher component costs. Now, it’s beginning to influence enterprise technology spending, with customers prioritizing memory and other critical infrastructure over software and systems purchases.

IBM’s software peers fell in tandem: Microsoft slipped 1.55%, Workday lost 3.49% and Salesforce declined 2.14%. IT services companies were hit as well, with Accenture and Cognizant Technology Solutions both moving lower.

The AI advantage

Another question hanging over IBM has been whether generative AI will eventually replace parts of its software business. But the company argues that instead, AI is becoming a tailwind: IBM has embedded AI capabilities across its software portfolio, and executives say growing AI adoption is actually increasing demand for IBM’s infrastructure software.

Analysts seem to be divided on where IBM goes from here. Citi stuck with its Buy rating, pointing to resilient Red Hat growth as a bright spot. Bank of America also reiterated its Buy rating, though it lowered its price target and said investors should expect IBM to trim its full-year outlook. HSBC was more pessimistic, downgrading the stock to Reduce and warning that rivals like IonQ could be gaining an edge in the fast-growing quantum computing market.

With Wall Street split, investors will be looking to IBM’s earnings call on July 22 for a clearer picture of where the business is headed next.—SY

      

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Stocks

🟢 What’s up

• CleanSpark surged 8.62% after securing a 20-year datacenter lease expected to generate $6.6 billion in contracted revenue.
• CrowdStrike gained 12.14% as IBM’s latest results highlighted a shift in enterprise spending.
• SK Hynix climbed 27.29% as its new leveraged ETFs encouraged heavy retail trader inflows.
• Tower Semiconductor rose 11.24% after unveiling a $3 billion expansion in Japan and raising its 2028 outlook.

🔴 What’s down

• HCA Healthcare fell 6.95% as a lower full-year profit outlook overshadowed stronger-than-expected second-quarter revenue.
• Glass-bottle maker O-I Glass tumbled 11.99% following a double downgrade from Bank of America over weakening demand and margin headwinds.
• LM Ericsson dropped 13.48% as weak quarterly revenue reinforced a cautious outlook for the wireless equipment market.
• MBX Biosciences slipped 5.75% after CEO Kent Hawryluk stepped down with immediate effect.
• Biogen sank 8.17% after the pharma company’s Phase II trial results for its new Alzheimer’s drug failed to impress.

Stocks of the day

Banking bonanza

Adobe Stock, Leon Neal/Getty Images,

Did we call it, or did we call it?

The financial titans seriously delivered this morning, with five of the six biggest banks in the country (Morgan Stanley reports tomorrow) revealing quarterly results ranging from impressive to record-breaking. Each saw revenue and profits powered to new heights by a combination of heavy trading activity and a growing number of deals and IPOs.

Here’s a quick rundown of the big numbers from the big banks:

• JPMorgan’s profits jumped 41% year over year to $21.2 billion, the highest in banking history—though it got a one-time boost from selling its stake in Visa. Shares rose 2.5% today.
• Goldman Sachs’ profits soared 78% to $6.6 billion, the bank’s best quarter in five years, with revenue from equities trading climbing 72% year over year to $7.4 billion; a Wall Street record. Shares climbed 6.93%.
• Bank of America reported a record of its own as trading revenue popped 70% to $3.62 billion: an all-time high for the company that helped boost the bank’s profit by 27% to $9.1 billion. Shares gained 1.88% this afternoon.
• Citigroup’s turnaround is in full effect, with revenue from four of the company’s five main divisions outpacing analyst expectations—including a 45% increase in equities trading revenue. Profits rose to $5.8 billion, but shares fell 5.27%.
• Wells Fargo’s profits rose 17% year over year to $6.4 billion, and while the bank is still expanding its balance sheet after enduring years of a regulatory asset cap, it enjoyed a solid 20% revenue boost for its investment banking business. But shares sank 2.71%.

Topping $49 billion in combined profits, it was clearly a very good quarter for the big banks. With retail traders pouring money into markets, giant AI startups preparing to IPO, and the US economy looking stable, don’t be surprised if profits keep climbing for the foreseeable future.—MR

Macro

Morning Brew Inc, Photo: Tom Williams/Getty Images

When Kevin Warsh learned that his first semiannual monetary policy report to Congress would be the same day that June CPI arrived, you just know he groaned in frustration. Chances were high it would be a bad inflation reading thanks to the disruption of crude oil from the Middle East—and then he’d have to explain what he’s going to do about it to the House of Representatives.

Instead, Warsh got an unexpected win: CPI fell for the first time since 2020, dropping 0.4% from May as gas prices experienced their biggest monthly plunge since 2022, bringing annual headline inflation down to 3.5%. If you exclude volatile food and energy prices, core CPI remained flat at an annual rate of 2.6%.

“The Fed’s number one objective is to get monetary policy right—or as near to it as we possibly can. That is our clear and constant aim, the star we steer by,” Warsh said in a prepared statement on Capitol Hill today. “And if we get policy right—and we will—the inflation surge of the last five years will be a thing of the past.”

Hike hype

Today’s inflation report was a step in the right direction for Warsh, and for the market. Investors have grown increasingly worried that, in order to curb inflation, the Fed will be forced to hike interest rates as soon as its next meeting on July 29. Some even see multiple rate hikes ahead—Bank of America leads the pack with three expected increases this year.

In his testimony today, Warsh specifically avoided committing to additional hikes this year even if inflation remains above the Fed’s 2% target. And the latest numbers seemed to put some of those fears to rest: The CME FedWatch tool showed that the odds of interest rates staying the same after the Fed’s next meeting rose from 58% to 83%, while the chances of a rate hike fell from nearly 42% to 16%.

That said, Warsh made it clear to Congress that the job isn’t done yet.

“While I reviewed the data that came out this morning on CPI and it was positive relative to expectations, I’m not for cherry picking,” Warsh said. “I am not going to show up and say mission accomplished, and what I’d say is there’s plenty of work to do.”

Warsh’s Capitol Hill visit will continue tomorrow when he chats with the Senate, but for today at least, the new Fed head got to enjoy a victory.—MR

      

Reader poll

News

• Move over, SK Hynix: Samsung wants its own Wall Street debut.
• Frontier Airlines is finally adding in-flight Wi-Fi, and it’s turning to SpaceX’s Starlink to do it.
• New York is putting the AI datacenter boom on ice over energy and climate concerns.
• Uber wants to expand its food-delivery empire with a reported takeover of Delivery Hero.
• United Airlines just found a new way to charge you more for your flight.
• Disney’s stock could jump 40% if it ditches streaming, says Wells Fargo.

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Calendar

Earnings announcements: We got the June CPI today, and tomorrow we’ll get a look at wholesale inflation with the June PPI report. Also, Kevin Warsh remains in the spotlight with his appearance before the Senate Banking Committee.

Economic reports: The quarterly numbers continue to roll in, with updates from ASML, Johnson & Johnson, Morgan Stanley, BlackRock, Progressive, and Bank of New York Mellon.

Everything else: England will play Argentina in an international rivalry that’s 64 years in the making.

recs

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