• Global stocks pull back on tech weakness - Global markets were on the defensive today as the semiconductor pullback that began in Asia overnight spread to the U.S. The Philadelphia Semiconductor Index finished down 10% for the week, the Korean index is down 25% from its June peak, and Taiwanese equities have entered correction territory. European stocks held up better given their lower tech exposure. Renewed Middle East escalation also weighed on sentiment, as the U.S. and Iran have intensified attacks, driving oil prices 4% higher today, with WTI at $81. The energy sector was the only one higher, while technology and communication services led to the downside. On the fixed income side, bonds helped offset some of the equity volatility, as the 10-year Treasury yield fell to 4.5%.
   
• Concerns over AI spending drives profit taking - After gaining 88% in the second quarter, its best on record, the U.S. semiconductor index has led a broader tech pullback in July. The latest development is competition from open-source models in China, which are reportedly rivaling the performance of leading offerings from Anthropic and OpenAI, raising fresh concerns about the heavy pace of technology spending. More broadly, AI-related stocks have become more volatile as investors increasingly question both the pace and payoff of investments. We are seeing signs of fatigue, with end-user demand for AI becoming more price sensitive and the market starting to penalize companies that are ramping spending too aggressively. However, corporate earnings have not yet shown any slowdown in demand or spending. We view this volatility as a signal that the AI theme is likely maturing rather than breaking, which is a healthy part of how transformative investment cycles evolve. That said, after the sharp moves in many AI-related stocks, concentration risk has increased, and the technology sector now carries an outsized weight in the broader index. In our view, investors should maintain exposure to the AI theme but complement it with more diversified and differentiated sources of return, including cyclical sectors, value-style investments, and international stocks.
   
• Macro resilience and earnings strength provide support - This week’s data releases reinforced the theme of economic and earnings resilience, providing, in our view, useful perspective as investors assess the tech-driven pullback. 1) Both consumer (CPI) and producer inflation data (PPI) came in cooler than expected, providing, in our view, breathing room for the Fed to remain on hold when it meets later in the month; 2) retail sales grew at a solid pace, showcasing the consumer’s resilience; and 3) the banks kicked off earnings season by reporting stronger-than-expected results. Renewed geopolitical uncertainty and valuation pressures in technology introduce some risks, but we think solid profit trends provide support. S&P 500 earnings are expected to grow 23% year-over-year, which would mark the second consecutive quarter of earnings growth above 20%. Revenue growth is expected to reach 12%, and earnings estimates have been revised higher during the quarter, an unusual development given that estimates are typically reduced as reporting season approaches. Technology and energy have been the two primary drivers of these upward revisions. Technology is expected to deliver the highest revenue growth of all 11 S&P 500 sectors and the second-highest earnings growth rate, at 63%. Energy is also expected to contribute meaningfully, helped by higher oil prices during the quarter. Together, the two sectors are expected to drive roughly 80% of total S&P 500 earnings growth. Next week, about 10% of the S&P 500’s market capitalization is expected to report earnings, including Alphabet and Tesla.

Angelo Kourkafas, CFA;
Investment Strategy

^{Source for all data: Bloomberg.}

• Markets close modestly lower – U.S. equities moved modestly lower on Thursday, with the tech-heavy Nasdaq lagging the S&P 500 and Dow Jones. Globally, the Korean Kospi fell over 6%, weighed down by semiconductor stocks. Oil price markets declined, with WTI oil at $79, well above recent lows of around $68. Meanwhile, Treasury bond yields also ticked higher, with 10-year Treasury yield at 4.56%. Overall, we continue to see rotations underneath broader markets, with parts of technology giving back some gains after sharp moves higher. We see the theme of broadening of market leadership to continue, especially as the broader economy remains resilient, supporting both cyclical and tech parts of the market.
   
• Wholesale prices moderate in June – Headline producer price index (PPI) inflation slowed to an annual gain of 5.5%, down from a 6.0% annual gain in May, and declined 0.3% on a monthly basis in June. Leading the monthly decline in headline prices was a 1.4% decline in goods prices, driven largely by a fallback in energy prices. Encouragingly, inflationary pressures also eased outside of the energy component, with core PPI rising 0.2% for the month, below expectations for a 0.4% increase. Combined with Tuesday's softer-than-expected consumer price index (CPI) report, we believe the June inflation data suggest that the pickup in headline inflation since February is not becoming entrenched beyond categories directly affected by higher energy prices. With this data in hand, we expect Fed policymakers to take a patient approach to further policy adjustments in the near term. Bond markets are pricing in a hold at the July 29 meeting, along with roughly even odds of a rate hike versus a hold in September. In our view, if inflation continues to moderate, the bar for an additional rate hike remains high. As a result, our base case calls for the Fed to remain on hold in the near term.
   
• Earnings season in full swing – S&P 500 earnings season began in earnest this week, with large banks reporting earnings. Banks like J.P. Morgan, Citibank, and Goldman Sachs all beating expectations, and most are seeing upside from investment banking and trading activity. More broadly, the expectation for second quarter earnings is for growth of 23% year-over-year, up from about 14% at the start of the year. The upward revisions have largely been driven by energy and technology sectors, both of which will report earnings in the weeks ahead. Next week on July 22, investors will hear from Alphabet and Tesla, followed by Meta, Microsoft, Amazon, and Apple the following week. In our view, the key factors to listen for are what the pace of capex spending will be in the year ahead, and whether the firms are seeing a return on AI investments. As we are entering year 4 of a tech-lead bull market, we believe it is prudent to have exposure to a diverse set of investments, across tech and non-tech parts of the market. Read our full Quarterly Market Outlook and guidance here: https://www.edwardjones.com/us-en/market-news-insights/stock-market-news/quarterly-market-outlook

Mona Mahajan;
Investment Strategy

^{Source for all data: Bloomberg.}

• Stocks edge higher on softer inflation data – U.S. equity markets closed higher on Wednesday following a producer price index (PPI) report that came in below expectations for June. From a leadership perspective, consumer discretionary and communication services led markets higher, each gaining over 1%. Overseas, Asian markets closed higher overnight, led by a rebound in South Korea’s KOSPI Index, while European markets closed slightly lower. Bond yields declined following the inflation report, with the 10-year Treasury yield closing at 4.55% and the 2-year Treasury yield at approximately 4.14%. The decline in yields likely reflected easing concerns that the Fed will need to tighten monetary policy in the near term to combat inflation. In commodity markets, oil prices edged higher as investors continue to monitor renewed tensions in the Middle East.
   
• Wholesale prices moderate in June – Headline producer price index (PPI) inflation slowed to an annual gain of 5.5%, down from a 6.0% annual gain in May, and declined 0.3% on a monthly basis in June. Leading the monthly decline in headline prices was a 1.4% decline in goods prices, driven largely by a fallback in energy prices. Encouragingly, inflationary pressures also eased outside of the energy component, with core PPI rising 0.2% for the month, below expectations for a 0.4% increase. Combined with yesterday’s softer-than-expected consumer price index (CPI) report, we believe the June inflation data suggest that the pickup in headline inflation since February is not becoming entrenched beyond categories directly affected by higher energy prices. With this data in hand, we expect Fed policymakers to take a patient approach to further policy adjustments in the near term. Bond markets are pricing in a hold at the July 29 meeting, along with roughly even odds of a rate hike versus a hold in September. In our view, if inflation continues to moderate, the bar for an additional rate hike remains high. As a result, our base case calls for the Fed to remain on hold in the near term.
   
• Consumer check-in ahead – In addition to key inflation data, this week will also provide insight into the health of the consumer. Retail sales for June will be released tomorrow morning and are expected to show a monthly increase of 0.3%, while control-group retail sales—which exclude spending in more volatile categories such as gasoline stations, motor vehicle and parts dealers, building materials, and food services—are expected to rise by 0.4%. Consumer spending has remained solid through the first half of the year, with households likely supported by elevated tax refunds this spring, along with favorable labor-market conditions, helping offset the impact of higher oil prices. While households will not have the benefit of tax refunds to help support spending in the second half of the year, we believe steady labor-market conditions—characterized by moderate hiring growth and low levels of layoffs—will continue to help support household spending and broader economic activity over the remainder of the year.

Brock Weimer, CFA;
Investment Strategy

^{Source for all data: FactSet.} 

• Markets close higher on cooler-than-expected CPI report – U.S. equity markets advanced on Tuesday after the June consumer price index (CPI) report showed inflation cooling more than expected. Bond yields declined in response, with the 10-year U.S. Treasury yield near 4.58%, as markets appeared to reassess whether softer inflation may give the Federal Reserve more flexibility to hold interest rates steady in the near term. International equity markets also finished mostly higher across Asia and Europe. In energy markets, WTI oil prices rose to near $80 per barrel amid renewed tensions in the Strait of Hormuz. Meanwhile, the U.S. dollar weakened against major currencies, consistent with lower Treasury yields.
   
• CPI report shows inflation pressures easing –Headline CPI inflation slowed to 3.5% year-over-year in June, below forecasts for a more modest decline to 3.9%. The moderation was broad-based, with price pressures easing across several major categories, including shelter, food, energy and transportation. Core CPI, which excludes the more volatile food and energy components, cooled to 2.6% year-over-year, compared with expectations that it would remain unchanged at 2.9%. The breadth of the slowdown is particularly encouraging to us because it suggests that disinflation is extending beyond a narrow range of categories. We believe these readings should help alleviate concerns that elevated inflation is becoming entrenched and give the Fed greater flexibility as it evaluates incoming data. However, a single favorable report is unlikely to change the direction of monetary policy. The Fed will likely look for confirmation in upcoming inflation, employment and wage data. Attention now turns to the June producer price index (PPI) report – to be released Wednesday - which is expected to show headline wholesale inflation cooling modestly but remaining elevated at 6.4% year-over-year.
   
• Major banks kick off earnings season with solid results – Several major banks opened second-quarter earnings season this morning with stronger-than-expected results. Bank of America, CitiGroup, Goldman Sachs, J.P. Morgan, and Wells Fargo each exceeded analysts' earnings-per-share and revenue estimates. These results help provide an encouraging start to a season in which S&P 500 companies are forecast to deliver year-over-year earnings growth of 21%. Energy companies are expected to post the strongest growth, benefiting from higher oil prices during the quarter, followed by the technology and materials sectors. Earnings gains are also forecast to be broad-based, with 10 of the 11 sectors expected to report year-over-year increases. If realized, we believe wider participation could help reduce the market's reliance on a small group of mega-cap companies and help reinforce the benefits of portfolio diversification.

Brian Therien, CFA;
Investment Strategy

^{Source for all data: FactSet.} 

• Stocks close lower with geopolitical tensions in focus – U.S. equity markets closed lower on Monday, as escalating tensions between the U.S. and Iran sent oil prices higher and weighed on investor sentiment. Over the weekend, the U.S. carried out additional military strikes against targets in Iran, while Iran responded by launching strikes against U.S. facilities in several Gulf countries. President Trump also announced Monday that the U.S. would reinstate its blockade on Iranian shipping, contributing to a further rise in oil prices and bond yields as geopolitical tensions re-escalated. From a market-leadership perspective, defensive sectors—including utilities and consumer staples—outperformed, as did the energy sector. Technology was a notable laggard, weighed down by weakness among semiconductor companies as investors continue to reassess whether the robust pace of spending on components needed for the AI buildout can be sustained. Technology weakness was particularly acute overseas, with South Korea’s KOSPI Index—which is heavily weighted toward semiconductor companies—falling nearly 9% overnight. Looking ahead, investors face a week packed with corporate earnings reports and economic data, with all eyes on bank earnings and the June consumer price index (CPI) report tomorrow.
   
• Price check ahead – Inflation will be front and center for investors this week, with June consumer price index (CPI) data due tomorrow. Headline CPI is expected to post a modest monthly decline, likely driven by a fall in oil prices, while rising 3.8% on an annual basis. Core CPI, which excludes food and energy, is expected to increase 0.3% for the month and 2.9% from a year ago. The run-up in prices over recent months has led investors to recalibrate their expectations for Federal Reserve interest-rate policy. Bond markets are now pricing in one Fed rate hike by the end of this year and an additional hike in 2027. While we acknowledge that upside risks to inflation have increased—particularly amid ongoing uncertainty in the Middle East—we believe the current backdrop warrants a patient approach from the Fed, and we expect it to remain on hold in the near term. Core goods prices posted their lowest reading in more than a year in May, while recent home-price data point to further shelter disinflation ahead. Additionally, labor-market conditions have come into better balance and, in our view, are no longer a meaningful source of inflationary pressure. The number of job openings is now only slightly higher than the number of unemployed workers, compared with 2022, when job openings were nearly double the number of unemployed workers. Although geopolitical uncertainty remains a risk, our base case is that oil prices will remain well below their March peak of more than $100 per barrel. Against this backdrop, we believe the Fed can remain patient and keep rates on hold in the near term.
   
• Second-quarter earnings preview – In addition to inflation data, corporate earnings will be in focus for investors, with Bank of America, JPMorgan Chase, Goldman Sachs, Wells Fargo, and Citigroup all scheduled to report results tomorrow, kicking off the second-quarter earnings season. For the quarter, analysts expect the S&P 500 to post year-over-year earnings growth of 22%, driven by strong profit growth in the technology and energy sectors. Technology earnings are expected to grow by roughly 61% from a year ago, bolstered by continued spending related to the AI buildout. Meanwhile, energy earnings are expected to more than double, benefiting from higher oil prices during the second quarter. For the full year, S&P 500 earnings are expected to grow by 24%. If realized, that would mark the strongest annual profit growth since 2014, excluding the post-pandemic recovery period. We continue to believe the economic environment remains supportive of equities, underpinned by stable labor-market conditions and resurgent manufacturing activity. In our view, these conditions should support solid earnings growth over the coming quarters and provide a favorable environment for equity markets.

Brock Weimer, CFA;
Investment Strategy

^{Source for all data: FactSet.}