The Dow Jones Industrial Average lagged behind a broad rebound in semiconductor stocks on Tuesday, as traders positioned cautiously ahead of Wednesday’s consumer price index report that could reshape expectations for Federal Reserve interest rate cuts.
The blue-chip Dow ended the session roughly flat, up less than 0.1%, while the Philadelphia Semiconductor Index gained 1.8%, led by gains in Nvidia and Advanced Micro Devices. The divergence underscores a market split between defensive positioning and renewed appetite for growth stocks.
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CPI report takes center stage
The Bureau of Labor Statistics is scheduled to release January CPI data at 8:30 a.m. Eastern on Wednesday. Economists surveyed by Dow Jones expect a 0.3% monthly increase in headline inflation and a 2.9% annual rate. Core CPI, excluding food and energy, is forecast at 0.3% month over month and 3.1% annually.
A hotter-than-expected reading could push the yield on the 10-year Treasury note above 4.5%, further pressuring rate-sensitive sectors of the Dow. Conversely, a cooler number would reinforce the case for the Fed to begin cutting rates as early as May, according to CME Group’s FedWatch tool, which currently puts the probability of a quarter-point cut at that meeting at 34%.
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The BLS CPI data page provides the official release schedule and historical data.
Chip stocks find support
Semiconductor names bounced after a three-day slide that erased roughly $200 billion in market capitalization from the sector. Nvidia rose 3.2%, recovering some ground after losing 8% last week on profit-taking and concerns over export restrictions. AMD added 2.5%, and Intel climbed 1.1%.
The rebound was partly attributed to a Reuters report that the Biden administration is unlikely to impose additional sweeping export controls on chip technology to China in the near term, easing one of the sector’s biggest regulatory overhangs.
Dow components show defensive tilt
Within the Dow, defensive sectors such as healthcare and utilities outperformed, while cyclical names like Caterpillar and Boeing weighed on the index. The Dow’s underperformance relative to the Nasdaq Composite, which rose 0.8%, reflects a market still grappling with conflicting signals on inflation and growth.
Tuesday’s session also saw the Cboe Volatility Index, or VIX, hold above 15, indicating lingering unease ahead of the CPI release.
The broader market is now watching for any shift in the Fed’s language. Minutes from the January Federal Open Market Committee meeting, due out Feb. 21, will be parsed for clues on how officials view the inflation trajectory. Until then, the Dow’s next move likely hinges on Wednesday morning’s CPI print.
