U.S. stocks caught a break this week -- and found a window in which to exploit it over the next two weeks -- as inflation data suggest a taming of Federal Reserve rate-hike bets and the outlook from a key player in the market for artificial intelligence outpaced Wall Street's forecasts.

Those events, alongside a still-muted reaction to the escalating hostilities in the Gulf region and a series of big bank earnings that suggested a healthy economic backdrop heading into the second half of the year, have stocks moving higher. Moreover, treasury yields are holding steady and sentiment is likely to improve as the market shifts focus to the tech earnings season later in the month.

Tuesday's inflation data got the ball rolling, with the softest monthly print since the Covid-19 pandemic and annual gains that fell shy of Wall Street estimates cratering bets on a July Fed rate hike. That paved an easier path for Chairman Kevin Warsh's "no tolerance" stance on price pressures as he faces lawmakers on Capitol Hill.

Solid bank earnings -- led by a record print from Goldman Sachs that included more than $7.4 billion in stock trading gains -- added further support for the renewed market rally, which has stocks back in positive territory for the month.

Chip-machine maker ASML added heft to the trade with a second boost to its full-year sales forecast, posted overnight, tied to the surge in AI spending. Wall Street is looking at more gains to start the Wednesday session.

The collective news takes stocks past their first real test of the earnings season, while icing bets on a hawkish Fed over the summer months, as investors look again to tech to pace gains into the start of the third quarter.

It also isolates investor focus to what companies are saying -- rather than what the economy, or events around it, are doing -- according to Charlie Anderson, senior vice president at UBS Wealth Management in Bethesda, MD.

"We've gone from a market driven by macro headlines to one increasingly driven by micro fundamentals," he said. "That's a healthier environment for long-term investors because it rewards companies executing well rather than simply benefiting from liquidity."

Meantime, global investors are lining up to buy U.S. stocks, according to Bank of America's closely watched Fund Managers' Survey, "driven by optimism on macro 'boom,' AI capex, and a dovish Fed."

The survey, published Wednesday, suggests the biggest overweight to U.S. stocks since December of 2024, "uber-low" cash positions of just 3.6%, and a fading number of investors who see stagflation as a near-term risk for the global economy.

The one caveat to all of this remains the U.S. war with Iran, which has stoked global oil prices by around 20% so far this month -- with Brent crude trading north of $85 a barrel.

President Donald Trump has threatened to hit Iran "very hard" over the next few days, and told Fox News he would "knock out all of their bridges unless they get to the table and negotiate" as early as next week.

Still, with oil trading well below the $110 a barrel level that hit stocks hard in March, and weighed on equities during Russia's invasion of Ukraine in 2022, markets still have a solid path for gains heading into the tech earnings season later this month.

The three tech-focused sectors tracked by S&P Global are likely to contribute around half of the $695 billion in second-quarter earnings for the benchmark, according to LSEG data. The broader AI infrastructure complex, meanwhile, will contribute nearly two thirds of the 22% earnings growth predicated by Goldman Sachs.

The S&P 500 has been range-bound at the 7500-point mark since mid-May, after rising more than 18% from its late March low. The benchmark closed at 7543 points on Tuesday. And tech is likely to provide the next catalyst.

Write to Martin Baccardax at martin.baccardax@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

July 15, 2026 09:06 ET (13:06 GMT)

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