The Dow Jones Industrial Average barely budged at Tuesday's close, but a massive tug-of-war between two heavyweight stocks masked the market's true direction. Goldman Sachs Group (NYSE:GS) contributed as much as 477 points to the Dow during the session, while International Business Machines (NYSE:IBM) lopped off 445 points. The net effect? A near-flat finish, with the Dow rising just 28.92 points, or 0.05%, to 52,527.56.
Under the surface, the broader market painted a more upbeat picture. The S&P 500 gained 0.38%, and the Nasdaq Composite surged 0.91%, reflecting a clear risk-on tone that the Dow's price-weighted structure failed to capture. The Dow's reliance on higher-priced stocks meant that outsized moves in Goldman and IBM could sway the index dramatically, while the rest of the 28 components collectively dragged it down by roughly 93 points at one intraday point.
The divergence was stark. At the intraday check, Goldman and IBM together added just 32 points, while the Dow was off 61 points. That implies the other 28 stocks were subtracting about 93 points—illustrating how two earnings surprises can distort the headline index. The total push-pull of 922 points between the two names was nearly 15 times the Dow's final net change.
IBM's disappointing preliminary second-quarter results were the primary drag. The tech giant reported revenue of $17.2 billion, up 1% year-over-year but below the $17.86 billion analysts expected. Adjusted earnings per share of $2.93 also missed the $3.02 consensus. Infrastructure revenue fell 7%, while software grew 5%. CEO Arvind Krishna acknowledged the shortfall, telling investors, “this quarter we faltered,” and citing execution issues. He noted that customers shifted capital spending late in June to lock down hard-to-find servers and storage before prices rise, and IBM missed the timing on several large contracts. The question now is whether this is a one-time timing shift or a sign that AI infrastructure spending is cannibalizing software budgets.
Offsetting IBM's drag was Goldman Sachs, which posted blowout quarterly results. Net income soared to $6.63 billion, or $20.98 per share, crushing the $14.48 estimate. Equities trading revenue jumped 72% to a record $7.42 billion, while fixed income, currency, and commodities revenue climbed 32% to $4.59 billion. CEO David Solomon said, “Momentum has accelerated throughout our businesses.” JPMorgan Chase (NYSE:JPM) also rose after reporting profit ahead of forecasts, helping keep the Dow on firmer footing. J.P. Morgan analysts led by Kian Abouhossein called Goldman's results a “significant exceedance.”
Macro data provided a tailwind for risk assets. The June consumer-price index dropped 0.4%, the steepest monthly decline since April 2020, pulling the annual inflation rate down to 3.5% from 4.2%. Core CPI, excluding food and energy, was flat month-over-month and up 2.6% year-over-year. Gasoline prices fell 9.7%. The cooling inflation boosted expectations for Federal Reserve rate cuts, with interest-rate futures now pricing an 83.4% chance the Fed holds rates steady in July, up from 58.3% earlier in the week. “Cover, for now,” said Chuck Carlson, CEO at Horizon Investment Services, reflecting the market's relief.
However, strategists caution that the favorable inflation reading may be temporary. If oil prices climb again amid U.S.-Iran tensions, some of the energy-driven disinflation seen in June could reverse. Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder, warned that “the favorable inflation reading could be very different next month” depending on oil developments. IBM's full July 22 report will also be critical to determine whether its delayed deals were merely a timing issue or signal softer demand.
Tuesday's session was a reminder that the Dow alone can mislead. The index's price-weighted structure allowed two earnings surprises to dominate, masking a broader market that was decidedly more positive. Investors who focused solely on the Dow would have missed the strong risk appetite in the S&P 500 and Nasdaq, as well as the emerging narrative that AI spending may be reshaping corporate tech budgets. The data points suggest a nuanced market, where sector and stock selection matter more than the headline index.
