Chips, Crude, & Crosscurrents

Last Week

Back in 1968, on the hilarious Rowan & Martin’s Laugh-In, Goldie Hawn and others delivered the classic line “sock it to me”. Tech investors were laughing early in the week as the SOXX (iShares Semiconductor ETF) enjoyed its largest one-day gain in over a month, but crying by Friday as those gains evaporated. The debate continues to heat up over whether tech spending will generate adequate returns on investment, as companies leverage their balance sheets to make massive capital expenditures. Rising oil prices also created a headwind for equities, as tensions in the Middle East escalated, prompting renewed inflationary concerns. Wall Street’s major averages saw a second week of losses with the S&P 500 slipping 0.6%, the Nasdaq Composite shedding 2.1%, and the Russell 2000 sliding 1.1%. Declining issues outnumbered advancing issues by nearly 3-2, with the Oil & Gas sector faring the best and the Consumer sector the worst. A significant decline in Tesla and Alphabet shares contributed to the downturn.

The bond market is showing signs of inflation-related stress due to the war and new proposed tariffs, as the 10-year Treasury rate increased 14 basis points to 4.68%, its highest level since the fall of 2023. Gold rose 1%, while the Dollar strengthened fractionally. Crude oil rose dramatically (9.6%) to settle around $90.42 as of post-market Friday, after the U.S. launched airstrikes targeting Iran in retaliation for an attack in Jordan that killed two American service members.

On the Chicago Sports Scene, the White Sox are sitting in first place in the AL Central, while the Cubs have been winning more games than they are losing to remain relevant in the NL Central.

This Week

177 S&P 500 companies will be reporting second-quarter results. Earnings season has been spectacular, with composite growth at over 37%. That number includes Alphabet’s massive $98 billion gain, without which composite growth would be 25.9% (still fantastic).

The FOMC will announce its monetary policy decision on Wednesday. There is a chance the FOMC will raise rates, but we believe they will wait until the September meeting and more data before making any changes.

On Thursday, the BEA releases the personal consumption expenditures price index for June. Economists forecast the core PCE to have risen 3.3%, compared to 3.4% in May.

Developments in the Middle East could move markets dramatically, as the war rages and the bellicose rhetoric intensifies.

The stocks mentioned above may be holdings in our mutual funds. For more information, please visit www.nsinvest.com.