A volatile and negative week for US equities, with tech leading the losses. The Nasdaq fell 2.9%, the S&P 500 declined 1.6%, and the Dow Jones showed greater resilience with a 0.9% drop. The Philadelphia Semiconductor Index fell as much as 20% for the month, as the market questioned whether AI investments will translate into near-term earnings. Chinese competition further unsettled investors, with the launch of Moonshot AI's new model catching the market off guard. On the positive side, Q2 earnings season kicked off on solid footing, with major US banks delivering strong results.
On the macro and fixed income front, the latest inflation data brought some relief. A cooler-than-expected CPI print reduced bets on further Fed rate hikes, with the market now pricing approximately 45bps of additional tightening through 2027. Nevertheless, the 10-year Treasury yield rose 5bps as geopolitical risks resurfaced, with the US-Iran conflict escalating and reducing the chances of a positive ceasefire outcome. Brent crude surged 15% on the week, topping USD 85 per barrel.
Looking ahead, the market turns its attention to hyperscaler earnings — Google this week, followed by Microsoft, Meta, and Amazon the week after — as the key catalyst for equities, with a sharp focus on AI monetization and future capex intentions. Big Tech results will be an important test for whether the recent tech selloff represents a healthy correction or the beginning of a more structural reversal.
