Last Week
Oil prices and semiconductor stocks dominated the trading headlines as the major indexes finished in the red with the S&P 500 and Nasdaq Composite down 1.6% and 2.9%, respectively. Small caps fared better, treading water, and advancing issues outnumbered declining issues by a small margin.
Oil prices hit a four-week high, rising 15%, as the geopolitical picture darkened amid intensifying attacks between Iran and the U.S. President Trump floated several possibilities, including shutting the Strait of Hormuz, charging transit fees, or requiring trade or investment agreements from Gulf states. Whether any of those proposals becomes reality remains anyone’s guess. Whereas there has been some volatility in financial markets due to developments in the war, the reaction has been modest overall.
Many prominent semiconductor stocks suffered double-digit declines during the week, including Marvell Technology, Western Digital, Seagate Technology, and Super Micro Computer. There is no doubt that there is enormous demand for chips, and the SOXX (iShares Semiconductor ETF) is still up 73% YTD despite the recent sell-off, and sports elevated multiples.
In other signs of a risk-off week, SpaceX declined 12.6%, falling below its IPO price, and South Korea’s KOSPI Index declined almost 10%. Artificial Intelligence stocks also weakened amid concerns about better technology from China.
There was good news on the inflation front as the U.S. Consumer Price Index rose less than expected and was flat from the previous month. Additionally, the June Producer Price Index was -0.3% month over month. Much of the improvement came from lower energy prices, which led to retail sales growth slowing as gas prices retreated.
Interest rates remained stable with the yield on the 10-year Treasury finishing 3 basis points lower at 4.54%. Gold retreated 2%, while the Dollar slipped fractionally.
On the Chicago Sports Scene, the White Sox had a better week than the SOXX, winning two out of three games and holding on to first place in the American League Central.
This Week
Earnings and Geopolitics will be in focus, with Alphabet and Tesla headlining the parade of 86 S&P 500 companies reporting second-quarter results. Stable interest rates and spectacular earnings growth have provided the foundation for the stock market to reach new heights.
The stocks mentioned above may be holdings in our mutual funds. For more information, please visit www.nsinvest.com.