Geopolitics Return

Key Takeaways Last Week

U.S. stocks declined as renewed concerns about AI spending and escalating U.S.–Iran fighting outweighed cooler inflation and strong bank earnings. The S&P 500 fell -1.6%, the Nasdaq declined -2.9%, the Dow lost -0.9%, and the Russell 2000 fell -0.5%. Year to date, the Russell 2000 remains the leader at +19.4%, followed by the Nasdaq at +9.8%, the S&P 500 at +8.9%, and the Dow at +8.5%.

• Technology and AI stocks led the decline as investors questioned high spending producing returns.
• Chinese AI developer Moonshot’s competitive Kimi K3 model added to concerns about lower-cost open-source competition for U.S. AI companies.
• Oil surged +15% for the week as U.S.–Iran fighting intensified and threats to Persian Gulf shipping returned.
• June CPI cooled to 3.5% year over year. Core CPI to 2.6%, reducing expectations Federal rate increase.
• Bank earnings were strong, driven by banking, trading revenue, deal activity, and healthy credit conditions. Earnings started well. FactSet said 10% of S&P 500 companies had reported Q2 results, with 88% beating EPS estimates and blended earnings growth at 24.7%.

U.S. Stock Performance – Index and Sector Moves

Financial markets weakened during the week ending 7/17/26.

The S&P 500 closed at 7,475, the Dow Jones at 52,146, the Nasdaq at 25,520, and the Russell 2000 at 2,962.

Source: Seeking Alpha

Sector performance was sharply divided:

• Energy: +4.85%
• Real Estate: +2.13%
• Consumer Staples: +1.25%
• Financials: +0.99%
• Health Care: +0.18%
• Information Technology: -3.61%
• Communication Services: -2.71%
• Materials: -1.43%
• Industrials: -1.39%
• Consumer Discretionary: -1.18%

Semiconductor, memory, communications, and AI infrastructure shares saw most of the selling pressure.

Source: Seeking Alpha

S&P 500 Weekly Leaders and Laggards Ranked

Top Performers (WTD):

1. PayPal Holdings (PYPL): +18.70%
   PayPal surged after Stripe and Advent International submitted a $60.50-per-share, takeover proposal.
2. Cintas Corporation (CTAS): +11.27%
   Cintas reported fiscal 4q revenue up 8.9%, with adjusted earnings above consensus. Strong organic growth.
3. Abbott Laboratories (ABT): +9.30%
   Abbott reported 13% reported sales growth, raised its full-year adjusted EPS guidance to $5.45–$5.60.
4. Palo Alto Networks (PANW): +8.59%
   Palo Alto Networks advanced with a cybersecurity rally as cooler inflation lowered rate pressure.
5. CrowdStrike Holdings (CRWD): +8.07%
   CrowdStrike gained with cybersecurity peers as investors rotated toward recurring-revenue software.

Bottom Performers (WTD):

1. IBM (IBM): -26.72%
   IBM posted its worst weekly loss on record after preliminary second-quarter results missed expectations.
2. Sandisk (SNDK): -19.07%
   Sandisk extended its correction as memory and AI-hardware stocks sold off.
3. Pentair (PNR): -18.40%
   Pentair cut its full-year EPS cited worsening pool-channel conditions and announced a CFO departure.
4. Ciena Corporation (CIEN): -15.95%
   Ciena declined during the broader unwind in AI networking and optical infrastructure.
5. Corning (GLW): -15.56%
   Profit-taking and valuation compression across optical networking, data-center connectivity.

Breadth & Participation

Market breadth weakened beneath the headline indexes. Information technology fell –3.61%, while real estate, energy, consumer staples, and financials advanced, illustrating a rotation away from AI and semiconductor leadership.

On Thursday, however, the S&P 500 still recorded 42 new 52-week highs and only two new lows, indicating that weakness was concentrated rather than yet becoming a full-market breakdown.

The equal-weight S&P 500 performed better than the technology-heavy Nasdaq, but breadth remained vulnerable because many of the market’s highest-valuation AI winners continued to correct.

Source: Seeking Alpha

International/Global

Global equities weakened as technology selling spread through semiconductor-heavy Asian markets. Taiwan’s market fell approximately –6.5% on Friday, while Japan declined about –4%. South Korea was closed.

Emerging markets fell approximately -5.25% for the week, versus -1.09% for developed international equities, as technology exposure and geopolitical risk pressured sentiment.

The United States and Iran exchanged additional strikes near the Persian Gulf. Renewed threats to oil infrastructure and Strait of Hormuz shipping pushed crude prices sharply higher and revived concerns about another energy-driven inflation shock.

Source: Seeking Alpha

Volatility & Risk Sentiment

Risk sentiment deteriorated as the AI selloff deepened.

VIX: approximately 18.77, up from 16.73 Thursday

Bonds, Credit & Interest Rates

Treasury yields ended the week near:

• 2-year Treasury: 4.18%
• 10-year Treasury: 4.55%
• 30-year Treasury: 5.06%
• 2-year/10-year spread: approximately +37 basis points

Source: Seeking Alpha

Economic Data, Monetary Policy & Earnings

June CPI fell 0.4% month over month and slowed to 3.5% year over year. Core CPI slowed to 2.6% year over year. Lower gasoline and energy prices drove much of the improvement.

June producer prices fell 0.3%, providing additional evidence that pipeline inflation moderate.

Fed Chair Kevin Warsh welcomed the softer inflation data but maintained a cautious stance. Market expectations for an immediate rate increase declined.

Bank earnings were generally strong. Goldman Sachs posted record quarterly profit, while JPMorgan, Bank of America, Citigroup, and Morgan Stanley benefited from investment-banking activity, trading revenue, and dealmaking. Wells Fargo’s weaker net-interest margin performance was a relative disappointment.

Commodities, Currencies & Macro Assets

WTI crude rallied much higher on renewed ME tensions and escalated fighting.

Gold: $4000
Dollar Index: $100
Bitcoin: approximately $64,400

Source: Seeking Alpha

What Matters This Week

• Google earnings and AI-search/cloud spending
• Tesla earnings, robotics spending, and automotive margins
• Intel earnings and foundry execution
• GE Vernova, Interactive Brokers, and additional industrial earnings
• U.S.–Iran fighting and Strait of Hormuz shipping
• Oil prices and the risk of renewed energy inflation
• Preliminary July manufacturing and services PMIs
• Whether chip and AI selling stabilizes or expands into the broader market Bottom Line

Bottom Line

Markets suffered their first broad weekly decline since early June as AI and semiconductor valuation concerns collided with renewed Middle East fighting and rising oil prices. Cooler CPI and PPI reduced immediate Fed-hike concerns.

The central question is whether this is another internal rotation or the beginning of a de-rating in AI infrastructure. Credit remained stable and defensive sectors advanced, but the sharp declines in IBM, SanDisk, Ciena, Corning, and other technology names showed that investors are applying a much higher standard to earnings visibility and AI returns.

Stock Talk

S&P500: Why Aren’t We Higher? What’s Holding Us Back?

 

Past performance is no guarantee of future results. Indexes are unmanaged and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges. The preceding discussion is for informational purposes only. Investing involves risk and no reference to any security listed above should be considered a buy or sell recommendation. Advisory services are provided through Oak Harvest Investment Services, LLC, a registered investment adviser.