Oil skyrocketed to over $100 a barrel as U.S. Israeli/Iranian ceasefire and negotiations stalled, with both sides attacking one another. President Trump warned: “Iran will soon feel major military punishment.” That set the stage for oil to surge, up 10% to $96.78 a barrel, with West Texas Crude following to $89.31 a barrel. Pump prices are expected to jump accordingly, after a steady decline over the past couple of months. The 10–year Treasury Note hit an 18th month high of 4.7%. Mortgage rates stayed near 6.5% with all indications movement to the 7% range is now a strong possibility. Inflation worries deepened after a May–June trend saw a leveling off as “energy prices declined after the ceasefire.” “After a “topsy–Turvey week,” as coined by the Wall Street Journal the indexes were not severely affected. The Dow Jones, for the week added 236 points with the S&P 500 gaining just a bit, 0.1%. The tech–heavy Nasdaq Composite lost 0.6%. Better than expected 2nd quarter earnings by reporting corporations gave investors a piece of good news with 130 S&P 500 companies reporting a 69% jump in earnings, according to FactSet. The earnings growth rate is expected to average 37% by the time all companies report results.
Chip stocks slipped on Monday as the premier chip leader, Nvidia is deeply involved in major financing with SK Group (HYSCL) and Open AL (developer of ChatGPT) to the tune of $750 Billion for infrastructure build–out and data center projects. Added to these concerns is the threat of China’s sudden emergence of advanced chip development at lower costs hindering the abilities of U.S. related companies. Long–term investors are ‘caught’ by impacting announcements… that give worries about the future of AI stocks. Last week’s selloff demonstrated the serious concern of investors and traders, as a rotation away from hot chip stocks and related techs swayed the sectors downward. The quagmire gets thicker as competition grows. Many analysts and strategists believe that the Chinese chip news will dissipate in time. Most stocks in the PHLX Semiconductor Index closed lower Monday, down 2.2%, affected by the Chinese AI news. Oil regressed as comments by President Trump of easing attacks drove oil down 8.7% to the $89 a barrel range.
Tuesday’s market bounced positive as oil prices dropped again. Quarterly earnings continued to come in strong, nullifying the soft selloff of chip makers. A new round of diplomacy with Iran gave investors renewed optimism as President Trump said: “There’s a good chance that something good could happen, and if it does, good.” Semiconductor stocks continued to decline as the PHLX index lost 3% on Tuesday. West Texas Crude slid downward now trading at near $84 a barrel, as Brent Crude leveled at $89 a barrel. The Dow Jones Industrial Average gained 527 points Tuesday, while both the S&P 500 and Nasdaq struggled, finishing near flatline. “Value stocks are out performing growth,” according to The Wall Street Journal. Investors and traders have been ‘discreetly’ pivoting out of pricy techs, AI, chip stocks, and ‘high–flyers’ into value companies with proven growth records and increasing dividends in the Russell 2000 and the Dow Jones indexes.
Federal Reserve Chair, Kevin Warsh, announced Wednesday there would “be no change in interest rates.” Stocks, across-the-board dived, with the Dow Jones Industrial Average finishing down 1100 points, or 2.2%. Both the S&P 500 and Nasdaq lost 1.5% and 1.7% respectively. The Nasdaq Composite led the indexes upward on Thursday up 679 points or 2.78% higher as technology issues were the investor’s focus. The Dow Jones followed, up 613 points.
RUMBLINGS ON THE STREET
Mark Flemming, chief economist PNC, WSJ – “Given what’s happened in just recent days with the 10–year Treasury, I think mortgage rates will get close to 7% in the coming weeks.
Conor Cunningham, an analyst with Melius Research, WSJ – “Even in an environment of strong demand and cost controls, fuel volatility can erode thin margins to negative territory quickly.”
Michael Antonelli, market strategist at Baird, WSJ – “Everyday we walk in the door and say what is AI worth. And that changes based on how the headlines change based on the wind.”
