Stock averages lower with inflation pressure from oil

Macroeconomic/ geopolitical developments

• US equity markets sold off as renewed concerns over AI spending and Chinese competition pushed technology stocks lower, with the Nasdaq falling 2.90%, the S&P 500 declining 1.55% and the Dow Jones Industrial Average dropping 0.70%. Energy stocks bucked the broader trend as oil prices surged amid rising Middle East tensions, while renewed scrutiny of AI valuations weighed on semiconductor shares.
• Renewed US Iran tensions and concerns over the Strait of Hormuz weighed on investor sentiment as oil prices surged on fears of further supply disruption. Rising energy costs revived inflation concerns and pushed investors towards more defensive areas of the market.

• US CPI data surprised to the downside in June, with headline inflation easing to 3.5% and core inflation slowing to 2.6%, reducing expectations of a near term Federal Reserve rate hike. While the report supported a prolonged pause in interest rates, renewed Middle East tensions remain a risk to the inflation outlook.

• US banks started earnings season strongly, with major lenders beating expectations and early S&P 500 results pointing to robust profit growth. TSMC and ASML then reinforced optimism around AI and semiconductor demand with standout results and upgraded forecasts.
• Alphabet, Tesla and Intel earnings will dominate the week as investors assess whether AI spending can support elevated technology valuations. With the economic calendar relatively quiet, attention will also turn to the Global Flash PMI and whether recent weakness in AI and semiconductor stocks marks a temporary pause or a wider correction.

Global financial market developments

• US and global equity averages were lower.
• US bond yields were lower, whilst and European bond yields were little changed, but slightly lower on the week
• The US Dollar Index was slightly lower on the week.
• Gold futures were little changed on the week.
• Oil futures prices rallied through the week and spiked Friday to a multi-week peak.

Key this week

Central Bank Watch: This week’s main central bank event is the ECB’s Interest Rate Decision, Monetary Policy Statement and Press Conference on Thursday.

Macro Data Watch: This week’s main macro data release is the Global Flash PMI on Friday, with Canadian CPI on Monday, UK Employment data on Tuesday and UK CPI on Wednesday also worth watching.

Earnings Watch: Second quarter US earnings take centre stage this week, with Alphabet and Tesla, two of the Magnificent Seven reporting on Wednesday, followed by Intel on Thursday.

Steve Miley (The Market Chartist)

Editor in chief

Steve Miley is the Market Chartist and has 32 years of financial market experience and as a seasoned expert now has many responsibilities. He is the founder, Director and Primary Analyst at The Mar... Continued