Last Updated on 15/07/2026
U.S. stocks ended Tuesday in positive territory, with the S&P 500 gaining 0.38%. The advance, however, appeared to stem largely from a sharp drop in implied volatility rather than a meaningful shift in market fundamentals. The one-day VIX slid four points to finish at 10.5 after climbing to nearly 15 on July 13.
The earlier spike in volatility was fueled by investor uncertainty ahead of the latest Consumer Price Index (CPI) data and Kevin Warsh’s testimony before the House. Once those events passed and the one-day VIX retreated rapidly following the opening bell, equities lost momentum and spent most of the session moving sideways. With implied volatility now back near subdued levels, the boost it provided to stocks appears to have largely run its course.
Treasury yields declined after the latest CPI report showed softer-than-expected inflation in both the headline and core readings, easing concerns over immediate price pressures. The move was most pronounced at the short end of the curve, with the 2-year Treasury yield dropping eight basis points to close near 4.20%.
Despite the encouraging inflation data, Fed Chair Kevin Warsh struck a more hawkish tone during his testimony before the House on Tuesday. He emphasized that inflation remains above the Federal Reserve’s target and suggested that additional policy tightening may still be necessary. His remarks raised doubts about whether financial markets have fully accounted for the possibility of further interest rate increases.
Although the 2-year yield retreated to 4.20%, it continues to hold above a key support level after breaking through previous resistance. From a technical standpoint, the yield could still climb toward the 4.35%–4.40% range. If inflation proves more persistent than expected, the Federal Reserve may ultimately need to resume rate hikes to complete its inflation-fighting efforts.
Despite the softer-than-expected CPI data, the Japanese yen showed little sign of gaining meaningful traction. The currency strengthened by only 0.12% on the day, leaving USD/JPY to settle near 162.25.
The broader outlook for the yen remains fragile, with few developments so far convincing investors to reverse their bearish stance. As a result, the prevailing trend continues to favor further weakness in the Japanese currency.
From a technical perspective, USD/JPY has been trading closely along its 10-day and 20-day simple moving averages, indicating that bullish momentum remains intact. A decisive break above the 162.50 level could pave the way for a move toward 166, a price not seen since the mid-1980s.
Nvidia’s nearly 4% gain on Tuesday stood in sharp contrast to signals coming from the credit market. The company’s five-year credit default swap (CDS) spread widened to 60.6 basis points, up from roughly 42 basis points on June 22 and above 60 basis points by July 14. Over the same period, Nvidia’s shares rebounded from a June 26 low near $192 to approximately $211.
Under normal market conditions, rising CDS spreads—which reflect increasing perceived credit risk—tend to coincide with weaker equity performance. The divergence between Nvidia’s strengthening share price and widening CDS spreads suggests a disconnect that may not persist. Either the CDS spread will narrow as credit concerns fade, or the stock could eventually adjust lower to reflect the caution being signaled by the credit market.
One possible explanation is that credit investors are pricing in risks that equity investors have yet to fully acknowledge. If that assessment proves accurate, Nvidia’s recent rally may struggle to sustain its momentum as broader market concerns begin to filter into the stock price.
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