Equities Decline as Semiconductor Slump Intensifies Market Weakness

The S&P 500 Index ($SPX) (SPY) declined -1.06%, the Dow Jones Industrial Average ($DOWI) (DIA) fell -0.12%, and the Nasdaq 100 Index ($IUXX) (QQQ) dropped -2.23%. September E-mini S&P futures (ESU26) were down -0.95%, while September E-mini Nasdaq futures (NQU26) fell -2.12%. The broad market selloff pushed major indices to multi-week lows, with the S&P 500 at its lowest level in a week, the Dow approaching a 2.5-week trough, and the Nasdaq 100 falling to a five-week nadir. Foreign markets mirrored declines, with China’s Shanghai Composite down -3% and Japan’s Nikkei dropping -4%, as concerns over AI-driven valuations sparked selling across Asian exchanges following China’s Moonshot AI unveiling.

U.S. housing data presented mixed signals: June housing starts rose 19.0% to 1.427 million, surpassing forecasts, yet building permits fell 3.0% to 1.367 million, missing expectations. Manufacturing output was flat, while import prices excluding petroleum rose 0.5% month-over-month. Geopolitical tensions escalated as the U.S. conducted sixth consecutive airstrikes on Iran, targeting infrastructure and military assets. Iran retaliated with attacks on U.S. installations in the Persian Gulf region, prompting defensive maneuvers by Kuwaiti forces. Oil prices surged over 2% to $78.50 per barrel, while flows through the Strait of Hormuz contracted to 3.9 million barrels daily from prior levels of 8.5 million.

Market sentiment faced headwinds from a $77.6 billion insider sell-off in U.S. equities during the first half of the year, the second-highest on record. Meanwhile, AI-driven Q2 earnings momentum persisted, with projected earnings growth averaging +23%, second only to the prior quarter’s +30%. Semiconductor and AI infrastructure stocks accounted for nearly 60% of the S&P 500’s projected earnings growth.

Interest-rate markets priced in a 10% probability of a 25 basis-point hike at the July 28–29 Federal Open Market Committee meeting. Globally, the Euro Stoxx 50 slipped -1.30%, China’s Shanghai Composite hit a 10.5-month low before closing -3.05%, and Japan’s Nikkei-225 retreated -4.03%.

Treasury bonds rallied, with September 10-year notes up 8 ticks and yields falling to 4.515%. The safe-haven demand reflected equity weakness, though gains were tempered by strong housing data and rising oil prices. European bonds followed suit, with German bunds and U.K. gilts declining slightly.

Tech and semiconductor stocks led market downturns. The iShares Semiconductor ETF (SOXX) fell over 3%, with Applied Materials (AMAT), Advanced Micro Devices (AMD), ARM (ARM), Intel (INTC), and Lam Research (LRCX) each down >6%. AI-heavyweights like Nvidia (NVDA) dropped 4%, while Alphabet (GOOGL), Meta (META), and Tesla (TSLA) also declined over 3%. Bitcoin-correlated assets, including MARA Holdings (MARA) and Coinbase (COIN), fell 4–6%. Cybersecurity stocks bucked the trend, with Okta (OKTA), Zscaler (ZS), and CrowdStrike (CRWD) advancing 2–3%.

Corporate earnings highlighted mixed outcomes: Netflix (NFLX) dropped 10% after revenue projections fell short, while Travelers (TRV) surged 7% following upbeat premium results. Intuit (ISRG) and Autoliv (ALV) declined post-earnings, as did STAAR Surgical (STAA). Construction Partners (ROAD) and Jazz Pharmaceuticals (JAZZ) rose on index inclusion and analyst coverage, respectively.

Earnings Calendar
Fifth Third Bancorp (FITB), Regions Financial Corp (RF), Truist Financial Corp (TFC)

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