U.S. markets eye inflation, bank earnings and travel upselling before open

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US markets eye inflation, earnings

Highlights

U.S. CPI posts biggest monthly drop since 2020 due to cooling energy prices, yet inflation concerns persist amid Strait of Hormuz tensions and Fed policy warnings.
IBM stock plunges 25% after reporting Q2 adjusted EPS of $2.93 on $17.2 billion revenue, both below expectations, as customer spending shifts away from software.
Morgan Stanley beats expectations with EPS of $3.46 and $21.35 billion revenue driven by nearly 70% jump in equities trading, while CrowdStrike, Okta and Netskope rally on cybersecurity demand.

Pre-market drivers and corporate updates

As reported by CNBC, government data released on Tuesday shows energy prices cool in June and help restrain overall inflation, although prices remain above year-earlier levels and face fresh risk from tensions around the Strait of Hormuz.

The consumer price index posts its largest monthly decline since 2020, helping all three major U.S. stock averages close higher in the previous session. Federal Reserve Chairman Kevin Warsh tells the House Financial Services Committee that inflation remains an unfair burden on Americans and calls for what he describes as regime change in policy.

At the same time, the conflict involving Iran keeps pressure on the inflation outlook. U.S. Central Command says its forces launch more strikes on Wednesday morning, while oil prices rise even after President Donald Trump says he will abandon plans for a 20% toll on cargo moving through the Strait of Hormuz.

IBM stands out as the session's biggest loser after the company issues weak preliminary second-quarter results. The stock falls 25% after IBM reports adjusted earnings per share of $2.93 on $17.2 billion in revenue, below FactSet analyst expectations of $3.01 per share and $17.86 billion in revenue; Chief Executive Arvind Krishna says customers are shifting spending toward memory chips and other hardware instead of software and infrastructure.

Morgan Stanley extends the strong earnings run for major banks on Wednesday morning. The bank reports record quarterly revenue and profit, with equities trading revenue jumping nearly 70%, and posts earnings per share of $3.46 on $21.35 billion in revenue, above Wall Street expectations of $2.94 per share and $19.64 billion.

Implications for investors and consumer sectors

Cybersecurity shares gain ground after Krishna says customer concern about cyber threats remains a top priority. CrowdStrike, Okta and Netskope all record double-digit percentage gains in Tuesday trading, suggesting investors continue to favor security spending even as other enterprise technology budgets shift.

Warren Buffett also signals a new phase in capital redistribution, saying he will donate nearly $6 billion in Berkshire Hathaway shares to four family-linked foundations. Buffett says his goal is to give away all of his shares within about eight years, a plan that could keep investor attention on Berkshire's ownership structure and long-term estate planning.

In the travel sector, United Airlines unveils a higher-end seating option aimed at boosting ancillary revenue. The carrier says one row on its A321XLR aircraft will feature an empty middle seat with a tray table, underscoring how airlines are expanding premium add-ons to attract higher-income travelers and lift profitability.

In our earlier article on the key market drivers for Wednesday’s session, we outlined how investors were balancing major bank earnings with fresh inflation data and testimony from the Federal Reserve’s new chair. We noted that the mix of producer price inflation readings, Fed messaging, and results from names like JPMorgan and Morgan Stanley was setting expectations for interest rates and near-term sector leadership, with financials and transport/airline stocks drawing particular attention.

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